138 S. Ct. 1815 (2018)
Mark Sveen and Kaye Melin married in 1997. The next year, Sveen purchased a life insurance policy naming Melin as the primary beneficiary and designating his two children from a prior marriage, Ashley and Antone Sveen, as contingent beneficiaries.1
The marriage ended in divorce in 2007. The divorce decree made no mention of the insurance policy, and Sveen took no action to revise his beneficiary designations.2 Minnesota had enacted its revocation-on-divorce statute in 2002, but it did not prompt any change.3
Sveen passed away in 2011. Melin and the Sveen children then made competing claims to the insurance proceeds.4 The District Court awarded the money to the Sveen children under the statute’s revocation rule.5
The Eighth Circuit reversed, holding that retroactive application violated the Contracts Clause. The Supreme Court granted certiorari to resolve a split of authority on the issue.6
Whether the retroactive application of Minnesota’s revocation-on-divorce statute to a beneficiary designation in a life insurance policy purchased before the statute’s enactment violates the Contracts Clause?7
The Contracts Clause provides that no state shall pass any law impairing the obligation of contracts.8 Courts determine whether a law violates the Clause through a two-step test.9 The first step asks whether the state law has operated as a substantial impairment of a contractual relationship. If substantial impairment is shown, the inquiry turns to whether the state law is drawn in an appropriate and reasonable way to advance a significant and legitimate public purpose.10
No. The Minnesota statute does not substantially impair pre-existing contractual arrangements because three features operate together to support rather than undermine the contractual scheme.11 First, the law reflects a policyholder’s presumed intent after divorce by revoking a former spouse’s beneficiary status on the theory that most divorcing parties would not want an ex-spouse to receive proceeds.12 Second, the statute is unlikely to disturb reasonable expectations because divorce courts have always possessed broad discretion to divide insurance policies and alter beneficiary designations in decrees.13 Third, the law imposes only a minimal paperwork burden that a policyholder can overcome at any time by filing a simple change-of-beneficiary form with the insurer.14
These elements align directly with the established facts of this case. Sveen purchased the policy in 1998 and named Melin as primary beneficiary before Minnesota enacted the statute in 2002.15 The 2007 divorce decree left the designation untouched and Sveen never submitted a change form before his death in 2011.16 Here, we may stop after step one because Minnesota’s revocation-on-divorce statute does not substantially impair pre-existing contractual arrangements.17
The retroactive application of Minnesota’s revocation-on-divorce statute does not violate the Contracts Clause.18
Related opinions on this issue
Justice Gorsuch dissented on the ground that Minnesota’s statute substantially impairs the central obligation of the life insurance contract by displacing the beneficiary designation that constitutes the whole point of the policy.19 He argued that the majority’s reasoning rests on an untenable paradox. The law is said to be necessary since policyholders are inattentive after divorce yet constitutional because the same policyholders will promptly notice and correct the statutory change. Gorsuch further observed that readily available alternatives such as requiring divorce courts to confirm beneficiary designations or directing insurers to provide notice would achieve the state’s goal without retroactively rewriting contracts.20
He concluded that the statute alters substantive obligations rather than remedies and therefore cannot be applied to policies formed before its enactment without violating the Contracts Clause.21