The US Supreme Court [official website] ruled [opinion, PDF] 8-1 Monday that a Minnesota revocation-on-divorce law—which automatically redirects life-insurance payments to secondary beneficiaries, such as children, if the primary is an ex-spouse—is not a violation of the constitution’s contracts clause.
Sveen v. Melin [docket] questioned whether a man’s ex-wife or his adult children were the rightful beneficiaries of the proceeds of his life insurance policy, and whether the Minnesota law would work retroactively, as the Minnesota statute was passed after the life insurance beneficiaries were established in this case, or if it was a violation of the contracts clause.
The court held that the result of this law “is only that the insurance money is redirected to his contingent beneficiaries, not that his contractual rights are extinguished.”
For the majority Justice Elena Kagan wrote:
[The Contracts] Clause restricts the power of States to disrupt contractual arrangements, but it does not prohibit all laws affecting pre-existing contracts. … The Minnesota statute places no greater obligation on a contracting party—while imposing a lesser penalty for noncompliance. Even supposing an insured wants his life insurance to benefit his ex-spouse, filing a change-of-beneficiary form with an insurance company is as “easy” as, say, providing a landowner with notice or recording a deed.
The contracts clause provides, “[n]o state shall … pass any … Law impairing the Obligation of Contracts.” The court held Monday that a retroactive application of Minnesota’s statute does not violate this clause. The Supreme Court reversed the decision of the US Court of Appeals for the Eighth Circuit [official website].