A-22196, APRIL 26, 1928, 7 COMP. GEN. 683

A-22196: Apr 26, 1928

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THE GENERAL RULE IS THAT PAYMENT OF DEATH BENEFITS UNDER THE CONVERTED POLICY SHALL BE MADE IN FAVOR OF THE ESTATE OF THE INSURED UNDER THE STATUTE. WHERE NO SUCH DESIGNATION IS MADE. IS TO BE CONSIDERED UPON THE FACTS AND CIRCUMSTANCES DISCLOSED AND THE APPARENT INTENT OF THE INSURED. IN THE ABSENCE OF WHICH PAYMENT IS TO BE MADE TO THE PERSON OR THE ESTATE OF THE INSURED IN FAVOR OF WHICH THE TENTATIVE SETTLEMENT WAS APPROVED. REQUESTING DECISION OF THE QUESTION WHETHER DEATH BENEFITS UNDER THE CONVERTED POLICY APPLIED FOR AND ISSUED ON THE BASIS OF AN INFORMAL APPLICATION WHEREIN NO DESIGNATION OF A BENEFICIARY WAS MADE. SHOULD BE PAID TO THE WIDOW OF THE INSURED WHO WAS THE DESIGNATED BENEFICIARY UNDER THE TERM INSURANCE.

A-22196, APRIL 26, 1928, 7 COMP. GEN. 683

VETERANS' BUREAU - INSURANCE - CONVERSION - BENEFICIARIES IN THE ABSENCE OF A SPECIFIC DESIGNATION OF A BENEFICIARY UPON CONVERSION OF TERM INSURANCE, THE GENERAL RULE IS THAT PAYMENT OF DEATH BENEFITS UNDER THE CONVERTED POLICY SHALL BE MADE IN FAVOR OF THE ESTATE OF THE INSURED UNDER THE STATUTE, RATHER THAN TO THE DEATH BENEFICIARY DESIGNATED BY THE INSURED UNDER THE TERM INSURANCE. EACH CASE OF AN INFORMAL APPLICATION FOR CONVERSION OF TERM INSURANCE NOT ON THE FORM PROVIDED FOR THAT PURPOSE WHICH INCLUDES A SPACE FOR DESIGNATION OF A BENEFICIARY, WHERE NO SUCH DESIGNATION IS MADE, IS TO BE CONSIDERED UPON THE FACTS AND CIRCUMSTANCES DISCLOSED AND THE APPARENT INTENT OF THE INSURED, AND TENTATIVE SETTLEMENT MADE ACCORDINGLY, ALL INTERESTED PARTIES TO BE NOTIFIED AND GIVEN A REASONABLE TIME TO INSTITUTE SUIT TO DETERMINE THE LAWFUL BENEFICIARIES, IN THE ABSENCE OF WHICH PAYMENT IS TO BE MADE TO THE PERSON OR THE ESTATE OF THE INSURED IN FAVOR OF WHICH THE TENTATIVE SETTLEMENT WAS APPROVED.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, APRIL 26, 1928:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF MARCH 20, 1928, SUBMITTING THE WAR-RISK INSURANCE CASE OF ALLEN GABRIEL STAHL, DECEASED, XC-764074, AND REQUESTING DECISION OF THE QUESTION WHETHER DEATH BENEFITS UNDER THE CONVERTED POLICY APPLIED FOR AND ISSUED ON THE BASIS OF AN INFORMAL APPLICATION WHEREIN NO DESIGNATION OF A BENEFICIARY WAS MADE, SHOULD BE PAID TO THE WIDOW OF THE INSURED WHO WAS THE DESIGNATED BENEFICIARY UNDER THE TERM INSURANCE, OR TO THE ESTATE OF THE INSURED UNDER THE GENERAL RULE APPLICABLE IN CASE OF CONVERTED POLICIES BASED ON FORMAL APPLICATIONS FOR CONVERSION WHEREIN NO DESIGNATION OF A BENEFICIARY WAS MADE IN THE SPACE PROVIDED FOR THAT PURPOSE.

THE GENERAL RULE IS TO THE EFFECT THAT IN THE ABSENCE OF A SPECIFIC DESIGNATION OF A BENEFICIARY, UPON CONVERSION, PAYMENT OF DEATH BENEFITS UNDER THE CONVERTED POLICY SHOULD BE MADE IN FAVOR OF THE ESTATE OF THE INSURED UNDER THE STATUTE RATHER THAN TO THE DEATH BENEFICIARY DESIGNATED BY THE INSURED IN THE TERM INSURANCE.

YOU REFER TO THE DECISION OF THIS OFFICE, DATED FEBRUARY 23, 1928, 7 COMP. GEN. 509, IN THE CASE OF LEROY EVANS HUNTER, DECEASED, C 262319, K- 602667, INVOLVING A CONVERSION OF TERM INSURANCE BY THE GUARDIAN OF AN INCOMPETENT VETERAN, AND WHEREIN REFERENCE WAS MADE TO THE GENERAL RULE, WHICH IT WAS UNDERSTOOD HAD BEEN APPLIED BY THE VETERANS' BUREAU IN ALL CASES OF CONVERSIONS MADE BY COMPETENT VETERANS. THE GENERAL RULE WAS APPLIED IN THE DETERMINATION OF THAT CASE FOR THE REASON THAT AN INCOMPETENT VETERAN COULD NOT MAKE ANY DESIGNATION OF A BENEFICIARY UPON CONVERSION.

YOU SUGGEST THE FOLLOWING AS A BASIS FOR AN EXCEPTION TO THE GENERAL RULE IN THE INSTANT CASE:

* * * IN A CLAIM WHERE THERE WAS A FORMAL APPLICATION FOR CONVERSION IT MIGHT WELL BE ARGUED THAT THE APPLICANT HAD EXECUTED A BLANK UPON WHICH THERE WAS SPACE FOR THE DESIGNATION OF A BENEFICIARY AND AS NO ENTRY WAS MADE IN SUCH SPACE IT MAY BE ASSUMED THAT BY THUS IGNORING THE QUESTION OF BENEFICIARY, THE VETERAN EVINCED AN INTENTION TO PERMIT HIS ESTATE TO TAKE THE CONVERTED INSURANCE AND NOT TO CONTINUE OVER INTO THE NEW CONTRACT THE OLD DESIGNATION FOR THE TERM INSURANCE. WHERE, HOWEVER, AN INFORMAL APPLICATION IS ALL THAT IS BEFORE THE BUREAU, AS IN THE STAHL CASE, IT WOULD SEEM THAT IN THE MIND OF THE APPLICANT THERE WAS NO PARTICULAR CONTEMPLATION OF THE QUESTION OF THE BENEFICIARY. THIS WOULD BE ESPECIALLY TRUE WHERE A VETERAN HAD CONTINUED HIS TERM INSURANCE UP TO THE TIME LIMIT FOR SUCH INSURANCE AND WHERE THE CONVERSION AUTOMATICALLY BECOMES NECESSARY IF THE VETERAN DESIRED CONTINUED PROTECTION UNDER ANY FORM OF WAR-RISK INSURANCE.

THE GENERAL RULE IS UNQUESTIONABLY THE CORRECT ONE TO INSURE A PROPER ACQUITTANCE OF THE GOVERNMENT UNDER THE POLICY. SUCH RULE IS NOT BASED SO MUCH ON THE FORM OF THE APPLICATION FOR CONVERSION AS ON THE PRINCIPLE THAT THE TERM AND CONVERTED INSURANCE ARE SEPARATE AND DISTINCT CONTRACTS REQUIRING SEPARATE AND DISTINCT DESIGNATION OF BENEFICIARIES. ACCORDINGLY, IT MAY NOT BE HELD, BROADLY, THAT SAID RULE IS NOT APPLICABLE TO CASES IN WHICH THERE IS AN INFORMAL RATHER THAN A FORMAL APPLICATION FOR CONVERSION. THERE MIGHT BE CONFLICTING INTERESTS EVEN UNDER AN INFORMAL APPLICATION FOR CONVERSION, WHICH WOULD NOT BE PROPERLY DETERMINED IF PAYMENT WERE MADE BY THE BUREAU IN THE FIRST INSTANCE TO THE PERSON DESIGNATED UNDER THE TERM INSURANCE AND IN THE ABSENCE OF A COURT DETERMINATION OF THE LAWFUL BENEFICIARY.

EACH CASE OF AN INFORMAL APPLICATION FOR CONVERSION, IN WHICH NO SPECIFIC DESIGNATION OF A BENEFICIARY IS MADE, SHOULD BE CONSIDERED UPON THE FACTS AND CIRCUMSTANCES DISCLOSED, INCLUDING A CONSIDERATION OF THE APPARENT INTENT OF THE INSURED AND POSSIBLE CONFLICTING INTERESTS. ON THE BASIS OF THE FACTS AND CIRCUMSTANCES THUS DISCLOSED, TENTATIVE SETTLEMENT SHOULD BE APPROVED EITHER IN FAVOR OF THE PERSON DESIGNATED UNDER THE TERM INSURANCE, OR THE ESTATE OF THE INSURED, AS THE FACTS IN THE PARTICULAR CASE MAY SEEM TO WARRANT; AND ALL OF THE INTERESTED PARTIES THEN SHOULD BE NOTIFIED AND A REASONABLE TIME GIVEN FOR THE INSTITUTION OF SUIT UNDER SECTION 19 OF THE WORLD WAR VETERANS' ACT, TO DETERMINE THE LAWFUL BENEFICIARIES. IF, AT THE END THEREOF NO SUIT IS FILED, PAYMENT SHOULD BE MADE TO THE PERSON OR ESTATE IN FAVOR OF WHICH THE TENTATIVE SETTLEMENT WAS APPROVED.

IN THE INSTANT CASE, IT IS UNDERSTOOD THAT THE WIDOW OF THE INSURED IS BOTH THE DESIGNATED BENEFICIARY UNDER THE TERM INSURANCE AND THE DULY QUALIFIED ADMINISTRATRIX OF THE ESTATE OF THE INSURED. IT APPEARS, ALSO, THAT THERE ARE MINOR CHILDREN WHO WILL SHARE WITH HER IN ANY DISTRIBUTION OF THE ESTATE. PROBABLY THE ULTIMATE DISPOSITION WILL BE TO THE WIDOW REGARDLESS OF WHETHER PAYMENT IN THE FIRST INSTANCE BE MADE TO HER IN HER OWN RIGHT AS DESIGNATED BENEFICIARY OR IN HER CAPACITY AS ADMINISTRATRIX, BUT THIS WOULD APPEAR TO BE A MATTER FOR THE DETERMINATION OF THE COURT HAVING JURISDICTION OVER THE ADMINISTRATION OF THE ESTATE. THE CONVERTED POLICY WAS ISSUED DECEMBER 6, 1927, SUBSEQUENT TO THE DEATH OF THE INSURED, WHICH OCCURRED SEPTEMBER 14, 1927, THE BENEFICIARY BEING STATED AS FOLLOWS:

THE ESTATE OF THE INSURED, NO BENEFICIARY WITHIN THE PERMITTED CLASS HAVING BEEN DESIGNATED, * * *

THUS THE GENERAL RULE, RATHER THAN THE SUGGESTED EXCEPTION, SEEMS TO HAVE BEEN FOLLOWED BY THE BUREAU IN THIS CASE. THE ADMINISTRATRIX HAS QUALIFIED AND NO CONFLICTING INTERESTS HAVE BEEN DISCLOSED. IN THE ABSENCE OF ANY PROTEST, IT WOULD SEEM TO BE IN THE INTERESTS OF THE GOVERNMENT TO MAKE PAYMENT TO THE WIDOW AS ADMINISTRATRIX OF THE ESTATE OF THE INSURED IN ACCORDANCE WITH THE CONVERTED POLICY AS ACTUALLY ISSUED.