A-19887, SEPTEMBER 29, 1927, 7 COMP. GEN. 248

A-19887: Sep 29, 1927

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HAS THE EFFECT OF NULLIFYING THE REINSTATEMENT AND NO INSURANCE IS PROPERLY PAYABLE THEREUNDER. REQUESTING DECISION WHETHER INSURANCE WAS LAWFULLY REINSTATED IN THE CASE OF FRANK BOEHLER. YOU WILL RECALL. WAS PROVIDED FOR BY THE RECENT AMENDMENT TO THE WORLD WAR VETERANS' ACT. AT THE TIME THE VETERAN MADE APPLICATION FOR THE REINSTATEMENT AND CONVERSION OF THE INSURANCE HE WAS SUFFERING FROM A SERVICE-CONNECTED DISABILITY BUT UNDER THE RATING IN FORCE AT THE TIME OF THE APPLICATION HE WAS NOT PERMANENTLY AND TOTALLY DISABLED. WHICH REPORT INDICATED THAT THE VETERAN WAS NOT PERMANENTLY AND TOTALLY DISABLED HIS APPLICATION FOR REINSTATEMENT WAS APPROVED. THE VETERAN WAS RATED PERMANENTLY AND TOTALLY DISABLED FROM DECEMBER 13.

A-19887, SEPTEMBER 29, 1927, 7 COMP. GEN. 248

VETERANS' BUREAU - INSURANCE - REINSTATEMENT A RATING OF PERMANENT TOTAL DISABILITY MADE BEFORE THE EXPIRATION OF THE PERIOD OF SIX MONTHS IMMEDIATELY FOLLOWING THE ACCEPTANCE OF THE APPLICATION FOR REINSTATEMENT OF INSURANCE, RETROACTIVELY EFFECTIVE AS OF A DATE PRIOR TO THE APPLICATION FOR REINSTATEMENT, HAS THE EFFECT OF NULLIFYING THE REINSTATEMENT AND NO INSURANCE IS PROPERLY PAYABLE THEREUNDER.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, SEPTEMBER 29, 1927:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF SEPTEMBER 15, 1927, REQUESTING DECISION WHETHER INSURANCE WAS LAWFULLY REINSTATED IN THE CASE OF FRANK BOEHLER, C-1092515, THE FACTS IN WHICH YOU STATE AS FOLLOWS:

* * * "ON OCTOBER 30, 1926, THE VETERAN APPLIED FOR THE REINSTATEMENT OF $10,000 TERM INSURANCE WHICH HE HAD PREVIOUSLY ALLOWED TO LAPSE AND AT THE SAME TIME APPLIED FOR THE CONVERSION OF THE INSURANCE TO A FIVE-YEAR LEVEL PREMIUM TERM POLICY WITH THE UNPAID PREMIUMS TO BE CARRIED AS A LIEN.' THE FIVE-YEAR LEVEL PREMIUM TERM POLICY, YOU WILL RECALL, WAS PROVIDED FOR BY THE RECENT AMENDMENT TO THE WORLD WAR VETERANS' ACT. AT THE TIME THE VETERAN MADE APPLICATION FOR THE REINSTATEMENT AND CONVERSION OF THE INSURANCE HE WAS SUFFERING FROM A SERVICE-CONNECTED DISABILITY BUT UNDER THE RATING IN FORCE AT THE TIME OF THE APPLICATION HE WAS NOT PERMANENTLY AND TOTALLY DISABLED. THE BUREAU CALLED FOR CERTAIN ADDITIONAL INFORMATION AND UPON RECEIPT OF A REPORT FROM THE REGIONAL OFFICE HAVING JURISDICTION OF THE CLAIM, WHICH REPORT INDICATED THAT THE VETERAN WAS NOT PERMANENTLY AND TOTALLY DISABLED HIS APPLICATION FOR REINSTATEMENT WAS APPROVED. THE DATE OF THIS APPROVAL APPEARS FROM THE RECORDS AS NOVEMBER 26, 1926.

ON DECEMBER 14, 1926, THE VETERAN WAS RATED PERMANENTLY AND TOTALLY DISABLED FROM DECEMBER 13, 1926, SUBSEQUENT TO THE REINSTATEMENT, BUT UPON A REVIEW OF THE CASE THE APPEAL GROUP ON CENTRAL OFFICE CASES ON FEBRUARY 21, 1927, DECLARED THE VETERAN PERMANENTLY AND TOTALLY DISABLED FROM AUGUST 10, 1926, PRIOR TO THE APPLICATION FOR REINSTATEMENT. THE ADVISORY GROUP ON APPEALS ON MARCH 21, 1927, RATED THE DISABILITY AS PERMANENT AND TOTAL FROM OCTOBER 23, 1924, WHICH RATING HAS RECEIVED THE APPROVAL OF THE DIRECTOR.

THE LEGAL QUESTION INVOLVED APPEARS TO BE WHETHER THE RATING OF PERMANENT TOTAL DISABILITY MADE BEFORE THE EXPIRATION OF THE PERIOD OF SIX MONTHS IMMEDIATELY FOLLOWING THE ACCEPTANCE OF AN APPLICATION FOR REINSTATEMENT OF INSURANCE, RETROACTIVELY EFFECTIVE AS OF A DATE PRIOR TO THE APPLICATION FOR REINSTATEMENT, HAS THE EFFECT OF NULLIFYING THE REINSTATEMENT.

YOU DO NOT REPORT WHEN THE INSURANCE LAPSED, BUT IT WILL BE ASSUMED FOR THE PURPOSE OF THIS DECISION THAT THE LAPSE WAS PRIOR TO OCTOBER 23, 1924, THE DATE FINALLY DETERMINED AS THE EFFECTIVE DATE OF PERMANENT TOTAL DISABILITY. SEE 2 COMP. GEN. 99; ID. 292.

SECTION 307 OF THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 627, WHICH SUPERSEDED SECTION 411 OF THE WAR RISK INSURANCE ACT, ADDED BY THE AMENDATORY ACT OF AUGUST 9, 1921, 42 STAT. 157, PROVIDES AS FOLLOWS:

ALL SUCH POLICIES OF THE INSURANCE HERETOFORE OR HEREAFTER ISSUED SHALL BE INCONTESTABLE AFTER THE INSURANCE HAS BEEN IN FORCE SIX MONTHS FROM THE DATE OF ISSUANCE OR REINSTATEMENT, EXCEPT FOR FRAUD OR NONPAYMENT OF PREMIUMS AND SUBJECT TO THE PROVISIONS OF SECTION 23. * * *

IN DECISION OF MAY 29, 1924, 3 COMP. GEN. 905, 906, SECTION 411 OF THE WAR RISK INSURANCE ACT WAS CONSTRUED AS FOLLOWS:

* * * I WOULD UNDERSTAND THE PROVISION OF THE STATUTE WITH REFERENCE TO INCONTESTABILITY AFTER SIX MONTHS TO MEAN INCONTESTABLE WITH RESPECT TO THOSE MATTERS WHICH USUALLY ARE SO INCONTESTABLE IN LIFE INSURANCE--- HEALTH CONDITION, FAMILY CONDITIONS, RELATIONSHIP, ETC.; THAT IS TO SAY, WHETHER THE INSURED APPEARS A PROPER INSURABLE SUBJECT. IT HAS RELATION TO WHAT MIGHT BE CLASSED ,DEFECTS" IN THE SUBJECT OF INSURANCE RATHER THAN DEFECTS IN THE AUTHORITY TO CONTRACT.

IT HAS BEEN HELD REPEATEDLY THAT THE EFFECTIVE DATE OF PERMANENT TOTAL DISABILITY IS A FACT FOR DETERMINATION BY THE DIRECTOR OF THE VETERANS' BUREAU BASED UPON MEDICAL OPINION AND ADVICE, 1 COMP. GEN. 31; ID. 756; 2 ID. 461; ID. 465; 3 ID. 33, AND THAT, AS TO INSURANCE AWARDS, THE DIRECTOR HAS AUTHORITY TO CORRECT A RATING RETROACTIVELY EFFECTIVE SO LONG AS VESTED RIGHTS ARE NOT DISTURBED. 2 COMP. GEN. 461, 462-3. DURING THE SIX -MONTH PERIOD FROM NOVEMBER 26, 1926, OR UNTIL MAY 26, 1927, THE INSURED, FRANK BOEHLER, HAD NO VESTED RIGHT UNDER THE REINSTATED INSURANCE AND IT WAS PERFECTLY LEGAL AND PROPER FOR THE GOVERNMENT TO QUESTION HIS HEALTH CONDITION. AFTER MAY 26, 1927, THE RIGHT OF THE INSURED UNDER THE REINSTATEMENT WOULD HAVE BECOME VESTED HAD NO ACTION BEEN TAKEN BY THE BUREAU TO DETERMINE THE INSURABLE CONDITION OF THE APPLICANT FOR REINSTATEMENT AND THE REINSTATED INSURANCE WOULD HAVE BEEN INCONTESTABLE EXCEPT FOR FRAUD, MISREPRESENTATION, OR NONPAYMENT OF PREMIUMS. SEE DECISIONS OF OCTOBER 10, 1925, AND DECEMBER 29, 1926, IN THE CASE OF ROBERT J. SWANSON, A-11260, AND DECISION OF APRIL 26, 1927, IN THE CASE OF ELMER E. TRETCHER, A-18160. BUT DURING SUCH SIX-MONTH PERIOD THE BUREAU DID TAKE ACTION FINDING THAT THE APPLICANT FOR REINSTATEMENT WAS ACTUALLY PERMANENTLY AND TOTALLY DISABLED WHEN THE APPLICATION FOR REINSTATEMENT WAS MADE AND PRIOR THERETO AS FAR BACK AS OCTOBER 23, 1924.

WHILE IT HAS BEEN HELD THAT A RETROACTIVE RATING OF PERMANENT TOTAL DISABILITY CAN NOT BE EFFECTIVE TO MATURE A POLICY BACK OF THE TIME OF THE CONVERSION OF THE INSURANCE, 1 COMP. GEN. 756, OR BACK OF THE TIME OF REDUCTION IN THE AMOUNT OF THE INSURANCE, 2 ID. 465, OR BACK OF THE SURRENDER OF THE INSURANCE FOR CASH UNDER CERTAIN CONDITIONS, 3 ID. 582, THE SAME RULE COULD NOT BE APPLIED AS TO REINSTATEMENTS, FOR THE REASON THAT AS TO CONVERSIONS, REDUCTIONS, AND SURRENDERS, THERE IS AN IMMEDIATE VESTED RIGHT EITHER IN THE GOVERNMENT OR THE INSURED WHICH MAY NOT BE DIVESTED BY SUBSEQUENTLY DISCOVERED EVIDENCE OF PRIOR HEALTH CONDITIONS, WHEREAS WITH RESPECT TO REINSTATEMENTS THE STATUTE ITSELF PROVIDES THAT NO INCONTESTABLE RIGHT VESTS UNTIL SIX MONTHS THEREAFTER.

YOU ARE ADVISED, THEREFORE, THAT THE RETROACTIVELY EFFECTIVE RATING OF PERMANENT TOTAL DISABILITY IN THIS CASE NULLIFIED THE REINSTATEMENT OF INSURANCE.