A-19749, DECEMBER 17, 1927, 7 COMP. GEN. 387

A-19749: Dec 17, 1927

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WHICH WAS PROMPTLY PRESENTED BY THE VETERANS' BUREAU TO THE BANK FOR PAYMENT. WHICH WAS DISHONORED BY THE BANK PRIOR TO THE DEATH OF THE INSURED FOR THE REASON THAT THERE WERE INSUFFICIENT FUNDS TO THE CREDIT OF THE INSURED TO PAY THE SEVERAL CHECKS. EVEN THOUGH THERE WERE SUFFICIENT FUNDS TO THE CREDIT OF THE INSURED IN THE BANK ON THE DATE OF THE CHECK AND DATE OF PRESENTATION TO PAY THE PARTICULAR CHECK COVERING THE PREMIUM. NO PAYMENT OF INSURANCE IS AUTHORIZED. 5 COMP. AS FOLLOWS: YOUR DECISION IS REQUESTED AS TO THE VALIDITY OF A TENDER FOR PREMIUM MADE IN THE CASE OF JOHN G. WHICH TENDER WAS MADE UNDER CIRCUMSTANCES AS HEREINAFTER STATED. CHECK FOR THE PAYMENT OF THE PREMIUM FOR THE MONTH OF JULY WAS DATED JULY 30.

A-19749, DECEMBER 17, 1927, 7 COMP. GEN. 387

VETERANS' BUREAU - INSURANCE - LAPSE FOR NONPAYMENT OF PREMIUMS A PERSONAL CHECK FOR THE MONTHLY PREMIUM ON WAR-RISK TERM INSURANCE MAILED BY THE INSURED DURING THE GRACE PERIOD, WHICH WAS PROMPTLY PRESENTED BY THE VETERANS' BUREAU TO THE BANK FOR PAYMENT, BUT WHICH WAS DISHONORED BY THE BANK PRIOR TO THE DEATH OF THE INSURED FOR THE REASON THAT THERE WERE INSUFFICIENT FUNDS TO THE CREDIT OF THE INSURED TO PAY THE SEVERAL CHECKS, INCLUDING THE PREMIUM CHECK, PRESENTED THE SAME DAY, DOES NOT CONSTITUTE PAYMENT OF THE PREMIUM UNDER REGULATIONS ISSUED BY THE VETERANS' BUREAU PURSUANT TO STATUTE, EVEN THOUGH THERE WERE SUFFICIENT FUNDS TO THE CREDIT OF THE INSURED IN THE BANK ON THE DATE OF THE CHECK AND DATE OF PRESENTATION TO PAY THE PARTICULAR CHECK COVERING THE PREMIUM; AND THE INSURED HAVING DIED WITHOUT MAKING GOOD THE DISHONORED CHECK, NO PAYMENT OF INSURANCE IS AUTHORIZED. 5 COMP. GEN. 933, DISTINGUISHED.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, DECEMBER 17, 1927:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF AUGUST 31, 1927, AS FOLLOWS:

YOUR DECISION IS REQUESTED AS TO THE VALIDITY OF A TENDER FOR PREMIUM MADE IN THE CASE OF JOHN G. ZAHN (DECEASED), C-663 196, WHICH TENDER WAS MADE UNDER CIRCUMSTANCES AS HEREINAFTER STATED.

THE INSURED HAD VALIDLY REINSTATED $5,000.00 TERM INSURANCE, EFFECTIVE OCTOBER 18, 1923, ON WHICH HE CONTINUED TO PAY PREMIUMS REGULARLY TO INCLUDE THE MONTH OF JUNE, 1926, A PERIOD OF MORE THAN 2 1/2 YEARS. CHECK FOR THE PAYMENT OF THE PREMIUM FOR THE MONTH OF JULY WAS DATED JULY 30, 1926, AND WAS APPARENTLY PROPERLY MAILED TO THE BUREAU, HAVING BEEN POSTMARKED JULY 30, 1926. THIS CHECK WAS PROMPTLY HANDLED BY THE BUREAU AND REACHED THE BANK IN MILWAUKEE, WISCONSIN, ON WHICH IT WAS DRAWN, ON AUGUST 17, 1926, AFTER HAVING PASSED THROUGH THE USUAL CHANNELS FOR CLEARANCE. IT WAS RETURNED BY THE BANK DISHONORED FOR INSUFFICIENT FUNDS.

INVESTIGATION DISCLOSES THAT THE DAY THE CHECK WAS DRAWN, JULY 30, 1926, THE INSURED HAD THEN A BALANCE MORE THAN SUFFICIENT TO HAVE MET ONE MONTH'S PREMIUM ON $5,000.00 TERM INSURANCE AT HIS AGE. ON JULY 30, 1926, THE BANK BALANCE WAS REPORTED TO HAVE BEEN $103.03. ON THE DAY THAT THE CHECK WAS PRESENTED TO THE ISSUING BANK IN MILWAUKEE, WISCONSIN, I.E., AUGUST 17, 1926, THERE WAS ALSO TO THE CREDIT OF THE VETERAN THERE A BALANCE MORE THAN ENOUGH TO HAVE MET THIS PARTICULAR CHECK, BUT IN THE COURSE OF THE DAY'S BUSINESS OTHER CHECKS WERE PRESENTED AGAINST HIS ACCOUNT, THE TOTAL OF WHICH, TOGETHER WITH THAT FOR THE INSURANCE PREMIUM, EXCEEDED THE BALANCE. THE BANK THEREFORE REFUSED PAYMENT ON ALL OF THE CHECKS, WHICH THIS BUREAU UNDERSTANDS IS IN ACCORD WITH USUAL COMMERCIAL PRACTICE, INASMUCH AS THE BANK COULD NOT HAVE GIVEN PREFERENCE TO ONE CHECK AS AGAINST ANOTHER. THE VETERAN DIED ON AUGUST 20, 1926, BEFORE OPPORTUNITY WAS AFFORDED HIM TO MAKE THE CHECK GOOD.

IN CONNECTION WITH THIS CASE, BUREAU REGULATION NO. 52 (V.B.), EFFECTIVE OCTOBER 2, 1923, AND SUPPLANTING WAR RISK REGULATION 20, FEBRUARY 21, 1919, COVERING THE SAME SUBJECT, PROVIDES THAT:

"WHEN IT APPEARS BY PROOF SATISFACTORY TO THE DIRECTOR THAT THE PERSON TO WHOM INSURANCE HAS BEEN GRANTED UNDER THE WAR-RISK INSURANCE ACT, OR ANY PERSON AUTHORIZED TO ACT ON HIS BEHALF, HAS DEPOSITED IN THE MAIL WITHIN THE GRACE PERIOD ALLOWED BY REGULATIONS FOR PAYMENT OF A PREMIUM, AN ENVELOPE PROPERLY ADDRESSED TO THE UNITED STATES VETERANS' BUREAU, WASHINGTON, D.C., OR TO A DISTRICT OR SUBDISTRICT OFFICE OF THE UNITED STATES VETERANS' BUREAU, CONTAINING MONEY, CHECK, DRAFT, OR MONEY ORDER, IN PAYMENT OF THE PREMIUM, SUCH INSURANCE WILL NOT LAPSE FOR THE NONPAYMENT OF SUCH PREMIUM WITHIN THE GRACE PERIOD: PROVIDED, THAT IF TENDER IS BY CHECK OR DRAFT, SUCH CHECK OR DRAFT IS HONORED ON PRESENTATION FOR PAYMENT.'

UNDER THIS REGULATION IT WOULD APPEAR THAT WHEN AN INSURED ELECTS TO TENDER A PREMIUM IN THE FORM OF A PERSONAL CHECK AND NOT BY SOME FORM OF RECOGNIZED LEGAL TENDER, THE CHECK IS ACCEPTABLE ONLY ON CONDITION THAT IT BE HONORED BY THE ISSUING BANK WHEN PRESENTED FOR PAYMENT. RELATIVE TO THE GENERAL QUESTION OF PAYMENTS BY CHECK, YOU RULED ON MAY 24, 1926, IN THE CASE OF CYRIL A. WILLIAMS (A-14316) THAT AN OPPORTUNITY MIGHT BE GIVEN TO MAKE GOOD A DISHONORED CHECK WHERE A PERIOD OF APPROXIMATELY FOUR MONTHS ELAPSED BEFORE THE CHECK WAS PRESENTED FOR PAYMENT, ON THE GROUND THAT WHILE THE APPLICANT FOR REINSTATEMENT IN THE WILLIAMS CASE MAY HAVE BEEN NEGLIGENT IN NOT KEEPING A PROPER RECORD OF OUTSTANDING CHECKS, YET ON THE OTHER HAND THE BUREAU ALSO WAS AT FAULT IN HAVING PERMITTED SO LONG A TIME TO PASS BEFORE BANKING THE CHECK. THE CLAIM HAS BEEN DISALLOWED BY THE CHIEF OF THE VETERANS' BUREAU SECTION, AUDIT DIVISION, GENERAL ACCOUNTING OFFICE, UNDER DATE OF JULY 25, 1927, ON THE GROUNDS PRINCIPALLY THAT YOUR DECISION IN THE WILLIAMS CASE WOULD NOT APPLY AND THAT, UNDER THE BUREAU REGULATIONS, A REMITTANCE BY PERSONAL CHECK IS ACCEPTABLE ONLY ON THE CONDITION OF ITS BEING HONORED UPON PRESENTATION.

IN THE CASE NOW UNDER CONSIDERATION, IT CAN NOT BE SAID THAT THE BUREAU UNDULY DELAYED THE NEGOTIATION OF THIS CHECK, WHICH WAS MAILED TO THE BUREAU UNDER DATE OF JULY 30, 1926, AND WHICH REACHED THE ISSUING BANK IN MILWAUKEE, WISCONSIN, ON AUGUST 17, 1926, AFTER HAVING BEEN CLEARED IN THE ACCUSTOMED MANNER. WHILE IT IS THE VIEW OF THE BUREAU THAT THE CHECK WAS ACCEPTED UNDER THE REGULATION ONLY ON CONDITION THAT IT BE HONORED WHEN PRESENTED FOR PAYMENT AND WHILE IT IS ALSO THE VIEW OF THE BUREAU THAT THERE WAS NO UNUSUAL DELAY, AS IN THE WILLIAMS CASE, NEVERTHELESS, IN VIEW OF THE PECULIAR CIRCUMSTANCES OF THIS CASE, ESPECIALLY THE FACT THAT THE INSURANCE HAD BEEN KEPT IN FORCE FOR SO LONG A PERIOD, IT IS CONSIDERED PROPER TO REQUEST YOUR DECISION WHETHER AN OPPORTUNITY MAY NOW BE GIVEN TO REPLACE THIS CHECK, INASMUCH AS IT IS SHOWN THAT ON THE DAY THE CHECK WAS PRESENTED FOR PAYMENT THE VETERAN HAD A BALANCE MORE THAN ENOUGH TO COVER THE CHECK, HAD NOT OTHER CHECKS BEEN PRESENTED THE SAME DAY.

SECTION 301 OF THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 624, PROVIDES THAT ,REGULATIONS * * * SHALL PRESCRIBE THE TIME AND METHOD OF PAYMENT OF THE PREMIUMS THEREON.' THUS THE REGULATION ABOVE QUOTED HAS THE FORCE AND EFFECT OF LAW AND CONSTITUTES A PART OF THE CONTRACT OF INSURANCE. SAWYER V. UNITED STATES, 10 FED.FEP. (2D) 416. THERE IS INVOLVED IN THIS CASE, THEREFORE, ONLY THE QUESTION WHETHER THERE WAS A PAYMENT OF THE PREMIUM FOR THE MONTH OF JULY, 1926, IN ACCORDANCE WITH THE REGULATION. IF NOT, THE INSURANCE LAPSED AND PAYMENT THEREOF IS NOT AUTHORIZED.

THE TERMS OF THE REGULATION CLEARLY PROVIDE THAT IF TENDER OF THE PREMIUM IS MADE BY CHECK, THERE IS NO PAYMENT OF THE PREMIUM UNLESS AND UNTIL THE CHECK IS HONORED ON PRESENTATION TO THE BANK FOR PAYMENT. THE CHECK IN THIS CASE WAS NOT HONORED BY THE BANK UPON PRESENTATION OR, APPARENTLY, THEREAFTER PRIOR TO THE DEATH OF THE INSURED WHICH WOULD PREVENT HONORING THE CHECK THEREAFTER. IN SO FAR AS THE ISSUANCE AND PAYMENT OF THE PERSONAL CHECK OF THE INSURED IS CONCERNED THE BANK WAS THE AGENT OR REPRESENTATIVE OF THE INSURED, NOT OF THE GOVERNMENT. AND EVEN IF THERE WERE IRREGULARITIES BY THE BANK RESULTING IN THE FAILURE TO HONOR THE CHECK PRIOR TO THE DEATH OF THE INSURED, RESPONSIBILITY IS NOT THAT OF THE GOVERNMENT SUCH AS TO PREVENT A FORFEITURE OF THE INSURANCE. THE FACTS SHOW THAT THE FAULT, DELAY, OR NEGLIGENCE IN THE MATTER WAS ENTIRELY WITH THE INSURED OR HIS REPRESENTATIVE, THE BANK, FOR THE REASON (1) THAT THE INSURED WAITED UNTIL THE NEXT TO THE LAST DAY OF THE GRACE PERIOD TO MAIL HIS PREMIUM CHECK; (2) THAT THE INSURED FAILED TO KEEP A SUFFICIENT BALANCE IN THE BANK TO MEET ALL HIS OUTSTANDING CHECKS; AND (3) THE CAUSE FOR FAILURE OF THE BANK TO HONOR THE CHECK ON PRESENTATION IS A MATTER BETWEEN THE INSURED AND THE BANK. THE FACTS DO NOT DISCLOSE THAT THE VETERANS' BUREAU WAS AT FAULT OR NEGLIGENT OR DILATORY IN ANY MANNER WHATEVER AS WAS DISCLOSED IN THE CASE OF CYRIL A. WILLIAMS, 5 COMP. GEN. 933, CITED BY YOU.

WHILE IT MAY BE ASSUMED THAT THE GENERAL POLICY UNDER THE WAR RISK INSURANCE LAWS, AS IN COMMERCIAL LIFE INSURANCE, IS TO PREVENT A FORFEITURE OF INSURANCE IN ALL REASONABLE CASES, THERE IS A LIMIT TO WHICH THE GOVERNMENT MAY GO IN SUCH MATTERS, AS THERE HAS BEEN EXPRESSED WITH RESPECT TO COMMERCIAL LIFE INSURANCE, PARTICULARLY RENEWABLE TERM INSURANCE THERE THE PAYMENT OF PREMIUMS IS SO VITALLY A PART OF THE CONTRACT. SEE 37 CORPUS JURIS 473, WHEREIN IT IS STATED:

* * * IN THE CASE OF RENEWABLE TERM POLICIES THE PAYMENT OF THE PREMIUM IS GENERALLY REGARDED AS A CONDITION PRECEDENT TO RENEWAL. CITING SEVERAL STATE CASES. SEE ALSO JACKSON V. MUTUAL LIFE INS. CO. OF NEW YORK, 186 FED.REP. 447.

IN 37 CORPUS JURIS 494, IT IS STATED:

* * * BUT IF A CHECK IS GIVEN AS CONDITIONAL PAYMENT ONLY AND IS NOT IN FACT PAID BEFORE THE DEATH OF INSURED, THE TRANSACTION IS NOT SUFFICIENT TO PREVENT A FORFEITURE. CITING NEILL V. UNION MUT.L.INS. CO., 7 ONT.A. 171.

THE REGULATIONS FOR PAYMENT OF PREMIUMS ON WAR-RISK INSURANCE ARE REASONABLE AND AUTHORIZE A GRACE PERIOD SIMILAR TO THAT PROVIDED IN COMMERCIAL LIFE INSURANCE. THERE EXISTS NO AUTHORITY UNDER THE CONTROLLING STATUTES PURSUANT TO WHICH THE EXPRESS TERMS OF THE REGULATIONS IN THIS CASE MAY BE CONSIDERED AS WAIVED.

YOU ARE ADVISED, THEREFORE, THAT AS THE INSURANCE IN THIS CASE LAPSED FOR NONPAYMENT OF PREMIUMS PRIOR TO THE DEATH OF THE INSURED AND THEREFORE WAS NOT IN FORCE AT THE TIME OF DEATH, NO PAYMENT THEREUNDER IS AUTHORIZED.