A-25451, JANUARY 8, 1929, 8 COMP. GEN. 350

A-25451: Jan 8, 1929

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VETERANS' BUREAU - INSURANCE - INCONTESTABILITY A CONVERTED POLICY OF INSURANCE ISSUED WITHOUT PROPER ACTION HAVING BEEN TAKEN TO REINSTATE THE TERM INSURANCE WAS UNLAWFULLY ISSUED AND DOES NOT BECOME INCONTESTABLE AFTER SIX MONTHS FROM THE DATE OF ISSUANCE UNDER SECTION 307 OF THE WORLD WAR VETERANS' ACT. THE ADMINISTRATIVE ERROR OF THE VETERANS' BUREAU IN FAILING TO FORMALLY REINSTATE THE TERM INSURANCE FOR THE PURPOSE OF CONVERSION WILL NOT BE HELD TO RENDER INVALID THE POLICY OF CONVERTED INSURANCE. 1929: THERE HAS BEEN REFERRED TO THIS OFFICE FOR DECISION WHETHER PAYMENT THEREON IS AUTHORIZED. THERE APPEARS TO HAVE BEEN NO FORMAL REINSTATEMENT OF THE TERM INSURANCE ON THE BASIS OF WHICH THE CONVERTED POLICY ISSUED.

A-25451, JANUARY 8, 1929, 8 COMP. GEN. 350

VETERANS' BUREAU - INSURANCE - INCONTESTABILITY A CONVERTED POLICY OF INSURANCE ISSUED WITHOUT PROPER ACTION HAVING BEEN TAKEN TO REINSTATE THE TERM INSURANCE WAS UNLAWFULLY ISSUED AND DOES NOT BECOME INCONTESTABLE AFTER SIX MONTHS FROM THE DATE OF ISSUANCE UNDER SECTION 307 OF THE WORLD WAR VETERANS' ACT. IF THE INSURED HAD A RIGHT TO REINSTATEMENT OF TERM INSURANCE UNDER THE STATUTE AND REGULATIONS ISSUED PURSUANT THERETO, THE ADMINISTRATIVE ERROR OF THE VETERANS' BUREAU IN FAILING TO FORMALLY REINSTATE THE TERM INSURANCE FOR THE PURPOSE OF CONVERSION WILL NOT BE HELD TO RENDER INVALID THE POLICY OF CONVERTED INSURANCE.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JANUARY 8, 1929:

THERE HAS BEEN REFERRED TO THIS OFFICE FOR DECISION WHETHER PAYMENT THEREON IS AUTHORIZED, VOUCHER FOR $7,560.38 IN FAVOR OF CELIA SHEAR HELLMAN, ADMINISTRATIVELY APPROVED BY THE VETERANS' BUREAU, FOR THE PROCEEDS OF WAR RISK CONVERTED INSURANCE POLICY ON THE LIFE OF CLAIMANT'S SON, MAURICE HELLMAN, ISSUED EFFECTIVE JULY 1, 1927.

THERE APPEARS TO HAVE BEEN NO FORMAL REINSTATEMENT OF THE TERM INSURANCE ON THE BASIS OF WHICH THE CONVERTED POLICY ISSUED. BUT IT IS UNDERSTOOD TO BE THE VIEW OF THE VETERANS' BUREAU THAT AS THE CONVERTED POLICY WAS ACTUALLY ISSUED AND PREMIUMS PAID THEREON FOR MORE THAN SIX MONTHS, THE INSURANCE BECAME INCONTESTABLE UNDER SECTION 307 OF THE STATUTE, AND THAT THERE IS NO NECESSITY NOW TO DETERMINE WHETHER THE INSURED ACTUALLY HAD A RIGHT TO REINSTATEMENT.

BY DECISION OF FEBRUARY 5, 1925, 4 COMP. GEN. 656, 658, IN THE CASE OF WALLACE V. GREEN, IT WAS HELD AS FOLLOWS:

* * * THE VALIDITY OF HIS CONVERTED POLICY DEPENDS ON THE RIGHT OF THE INSURED TO HAVE HIS TERM INSURANCE REINSTATED UNDER THE CONTROLLING REGULATIONS OF THE VETERANS' BUREAU. THAT IS TO SAY, IF HE HAD A RIGHT UNDER THE REGULATIONS TO REINSTATEMENT OF THE TERM INSURANCE ON MAY 12, 1924, WHEN MAKING APPLICATION FOR CONVERSION OF $1,000 OF INSURANCE, THE ADMINISTRATIVE ERROR IN FAILING TO FORMALLY REINSTATE THE TERM INSURANCE FOR THE PURPOSE OF CONVERSION WILL NOT BE HELD TO RENDER INVALID THE POLICY OF CONVERTED INSURANCE ISSUED TO HIM. IF, HOWEVER, HE HAD NO RIGHT TO REINSTATEMENT OF HIS TERM INSURANCE UNDER THE REGULATIONS OF THE BUREAU, THE POLICY OF CONVERTED INSURANCE BASED THEREON IS INVALID. THE REGULATIONS CONTROLLING REINSTATEMENT AND CONVERSION OF TERM INSURANCE WHILE THE INSURED IS IN THE ACTIVE SERVICE CONTAIN CERTAIN CONDITIONS WHICH MUST BE MET BY THE INSURED. THE FACTS SUBMITTED ARE NOT SUFFICIENTLY STATED TO JUSTIFY APPLICATION OF THE REGULATIONS BY THIS OFFICE.

AFTER CITING SECTION 307 OF THE WORLD WAR VETERANS' ACT RELATIVE TO INCONTESTABILITY OF WAR RISK INSURANCE, AND QUOTING FROM A PRIOR DECISION GIVING A GENERAL CONSTRUCTION THEREOF, IT WAS FURTHER HELD THAT---

* * * IF IT BE DETERMINED THAT BECAUSE GREEN WAS NOT ENTITLED TO REINSTATEMENT OF HIS TERM INSURANCE UNDER THE REGULATIONS OF THE VETERANS' BUREAU, WHICH HAVE THE FORCE AND EFFECT OF LAW, THERE WAS NO AUTHORITY TO ENTER INTO A CONTRACT OF CONVERTED INSURANCE, THE POLICY ISSUED CONTRARY TO THE LAW AND REGULATIONS AND THE INCONTESTABILITY PROVISION WOULD HAVE NO APPLICATION TO IT.

THE PRINCIPLES ANNOUNCED IN SAID DECISION ARE FOR APPLICATION IN THE PRESENT CASE IN WHICH THE VETERAN, WHILE IN THE SERVICE, WAS GRANTED $10,000 TERM INSURANCE WHICH WAS REDUCED TO $5,000 EFFECTIVE JANUARY 1, 1919, AND PREMIUMS PAID THEREON TO INCLUDE JANUARY, 1921. ON JULY 1, 1927, HE EXECUTED APPLICATION FOR REINSTATEMENT OF $7,500 LAPSED TERM INSURANCE AND FOR CONVERSION THEREOF TO A 20-PAYMENT LIFE POLICY. REMITTED PREMIUMS IN AN AMOUNT SUFFICIENT TO PAY ONE MONTH'S PREMIUM ON THE REINSTATED TERM INSURANCE IN ACCORDANCE WITH THE REQUIREMENTS OF THE REGULATIONS, AND A SEMIANNUAL PREMIUM ON THE CONVERTED POLICY. SEPTEMBER 9, 1927, THE BUREAU APPROVED THE ISSUANCE OF A $7,500 20-PAYMENT LIFE POLICY APPARENTLY WITHOUT TAKING ANY FINAL ACTION UPON THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE. PREMIUMS ON THE CONVERTED POLICY HAVE BEEN PAID THROUGH JUNE, 1928. THE VETERAN DIED FEBRUARY 10, 1928.

FINAL ACTION ON THE APPLICATION FOR REINSTATEMENT SHOULD HAVE BEEN TAKEN BEFORE ISSUANCE OF THE CONVERTED POLICY BUT WHERE, AS IN THIS CASE, THE BUREAU INADVERTENTLY ISSUED A CONVERTED POLICY WITHOUT HAVING REINSTATED THE TERM INSURANCE, IT SHOULD SUBSEQUENTLY APPROVE OR DISAPPROVE THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE WHICH REINSTATEMENT WAS A PREREQUISITE TO THE ISSUANCE AND VALIDITY OF THE CONVERTED POLICY. AS STATED IN THE QUOTED DECISION, IF THE INSURED HAD THE RIGHT TO REINSTATEMENT THE ADMINISTRATIVE FAILURE FORMALLY TO REINSTATE THE TERM INSURANCE WOULD NOT BE CONSIDERED AS INVALIDATING THE CONVERTED POLICY, BUT IF THE INSURED HAD NO RIGHT TO REINSTATEMENT OF THE TERM INSURANCE, EITHER UNDER THE REGULATIONS OF THE BUREAU, WHICH HAVE THE FORCE AND EFFECT OF LAW, OR SECTION 304 OF THE STATUTE, THE CONVERTED POLICY DOES NOT BECOME INCONTESTABLE BY THE MERE PASSAGE OF SIX MONTHS' TIME DURING WHICH PREMIUMS WERE PAID, FOR THE REASON THAT THERE WAS NO JURISDICTION OR AUTHORITY TO ENTER INTO THE CONTRACT OF CONVERTED INSURANCE.

IN THE CASE HERE PRESENTED, NOTWITHSTANDING THE FAILURE OF THE BUREAU FORMALLY TO APPROVE THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE, THERE IS SUFFICIENT EVIDENCE IN THE RECORD TO INDICATE THAT THE TERM INSURANCE PROBABLY WOULD HAVE BEEN REINSTATED BY THE BUREAU UNDER ITS REGULATIONS IF ACTION HAD BEEN TAKEN ON THE APPLICATION. AT THE TIME OF APPLICATION FOR REINSTATEMENT, THE INSURED WAS GIVEN A MEDICAL EXAMINATION BY A PHYSICIAN OF THE VETERANS' BUREAU, PRESUMABLY ACTING AS THE AGENT OF THE GOVERNMENT AND WITHIN THE SCOPE OF HIS AUTHORITY, AND SAID EXAMINATION SHOWED THAT THE CLAIMANT WAS NORMAL IN ALL RESPECTS WITH THE EXCEPTION OF "RAPID HEART, UNACCOUNTED FOR," AND THE PHYSICIAN RECOMMENDED ACCEPTANCE OF THE APPLICATION, STATING THAT THE MAN WAS A FAIR RISK. THE NECESSARY PREMIUMS WERE PAID TO REINSTATE THE INSURANCE AND ALL OTHER REQUIREMENTS OF THE REGULATIONS APPEAR TO HAVE BEEN MET. UNDER DATE OF AUGUST 24, 1928, THE INSURANCE MEDICAL SECTION OF THE INSURANCE DIVISION OF THE BUREAU, CHARGED WITH THE DUTY OF DETERMINING THE INSURABILITY OF THE VETERAN, REPORTED AS FOLLOWS:

* * * HAD THIS APPLICATION BEEN REFERRED TO THE INSURANCE MEDICAL SECTION, AS STATED ABOVE, AN ATTEMPT WOULD HAVE BEEN MADE TO SECURE FURTHER INFORMATION RELATIVE TO THE HEART, BUT IF THE INFORMATION SUBMITTED IN ANSWER TO SUCH AN INQUIRY WERE THE SAME AS THAT CONTAINED IN THE REPORT OF THE JEWISH HOSPITAL, THE APPLICANT WOULD HAVE BEEN ACCEPTED AS A GOOD RISK.

IN VIEW OF THE FACTS DISCLOSED SHOWING THAT ALL ESSENTIAL ACTION TO REINSTATE THE TERM INSURANCE HAD BEEN TAKEN PRIOR TO THE ISSUANCE OF THE CONVERTED POLICY, WITH THE EXCEPTION OF THE FORMAL APPROVAL OF THE APPLICATION, AND IT APPEARING THAT THE VETERAN WAS ENTITLED TO HAVE THE INSURANCE REINSTATED, IT MAY BE CONCLUDED THAT THE CONVERTED POLICY WAS LAWFULLY ISSUED AND THAT PAYMENT OF THE DEATH CLAIM BASED THEREON IS AUTHORIZED. ACCORDINGLY, THE VOUCHER WILL BE CERTIFIED FOR PAYMENT.