Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, June 11, 2018

Supreme Court Reverses Appeals Court, No Contracts Clause Violation

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-06-12/fb57a69d-de8f-453f-af13-45a2efd328a9.pngMark Sveen married Kaye Melin in 1998, and named her as beneficiary on his revocable life insurance policy with his two children from his prior marriage named as contingent beneficiaries. The couple subsequently divorced in 2007, and Sveen passed away without changing his designated beneficiary. When Melin filed with the insurance company, Metlife, for the policy proceeds, she hit a significant snag: Minnesota had passed a revocation-on-divorce statute in 2002, after the purchase of the insurance policy but before Sveen's death. Metlife filed an interpleader to determine if the statute would be applied retroactively, in essence passing over Melin for the distribution of the policy and paying the contingent beneficiaries.

The trial court granted summary judgement for the Sveen children, but the Eighth Circuit reversed for Melin, claiming that retroactive application of the Minnesota statute violated the decedent's constitutional rights under the Contracts Clause. Melin argued that the state cannot change the contractual obligation of Metlife to pay out the designated beneficiary, as that was the intent at the creation of the contract and the constitution prohibits States from "impairing the obligations of contracts."

The Supreme Court of the United States reversed the ruling of the Eight Circuit, finding that the to determine when a law “crosses the constitutional line,” the court first examines whether the law substantially impairs the relationship created by the contract. Here the relationship was between Metlife and Sven, not between Metlife and Melin. The statute does not 'change' the beneficiary, but rather tries to interpret the policy holder's intent after the divorce.

See Amy Howe, Opinion Analysis: Court Rejects Constitutional Challenge to State Law on Insurance Policies After Divorce, Scotusblog.com, June 11, 2018; see also Sveen et al. v. Melin, 584 U. S. ____ (2018).

http://lawprofessors.typepad.com/trusts_estates_prof/2018/06/supreme-court-reverses-appeals-court-no-contracts-clause-violation.html

Current Events, Estate Planning - Generally, New Cases | Permalink

Comments

Post a comment