The U.S. Supreme Court is considering a life insurance beneficiary designation case that could affect how much ability states have to change the effects of insurance policies — and, possibly, many other types of contracts — retroactively.
The court today heard oral arguments in connection with Ashley Sveen et al. v. Kaye Melin and Metropolitan Life Insurance Co. (Case Number 16-1432), a case involving a Minnesota law that determines what happens to the life insurance beneficiary designation for a spouse when a couple gets divorced.
Justice Ruth Bader Ginsburg suggested that the outcome of the case could affect state laws that, for example, retroactively change the “status of adopted children to make them, for all purposes, the same as biological children.”
Justice Samuel Alito asked about “slayer statutes” — laws that block a life insurance beneficiary who kills the insured from collecting the death benefits. He wondered whether the outcome of Sveen v. Kaye could keep from states from applying slayer statutes to life insurance policies in-force before the statutes were enacted.
The justices did not talk about insurance products other than life insurance, or about life insurance matters other than life insurance beneficiary designations, but it’s possible that a ruling on Sveen v. Kaye could also affect states’ ability to change the effects of other types of contracts — such as disability insurance policies, annuity contracts or general nondisclosure agreements — that are already in force when new laws or regulations are adopted.
Shay Dvoretzky, the lawyer who appeared on behalf of Kaye Melin, acknowledged during his closing arguments that one challenge would be helping the court resolve the case in a narrow way “that wouldn’t open some of the parade of horribles that some members of the court have been concerned about.”
Mark Sveen, a home builder, bought a permanent life insurance policy in 1997 and married Kaye Melin a few months later. In 1998, he named her to be his primary beneficiary.
In 2002, Minnesota tried to prevent the kinds of life insurance benefits problems families affected by divorce often face by adopting a “revocation on divorce” law. The law states that, when two spouses divorce, the divorce cancels all of the couple’s beneficiary designations for non-probate assets, such as life insurance policies and retirement accounts, unless the divorced spouses ask to keep the designations in place.
Sveen and Melin divorced in 2007.
Sveen died in 2011, at the age of 46.
Melin said that she and Sveen had an oral agreement that he would continue to make her the beneficiary of the life insurance policy, but lawyers for Melin, and for Mark Veen’s children from another marriage, never introduced any written documents showing Mark Veen’s intentions for the life insurance policy.
Metropolitan Life, a unit of MetLife Inc., asked the U.S. District Court for the District of Minnesota to decide who should get the death benefits.