A-25477, JANUARY 23, 1929, 8 COMP. GEN. 387

A-25477: Jan 23, 1929

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VETERANS' BUREAU - INSURANCE - INCONTESTABILITY - ESTOPPEL 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 DATE OF ISSUANCE UNDER SECTION 307 OF THE WORLD WAR VETERANS' ACT. 1929: THERE HAS BEEN REFERRED TO THIS OFFICE FOR CONSIDERATION WHETHER PAYMENT THEREON IS AUTHORIZED A VOUCHER FOR $7. 000 WAS ISSUED TO THE ABOVE- NAMED VETERAN ON APPLICATION OF JANUARY 18. PREMIUMS UPON THIS INSURANCE WERE PAID TO INCLUDE THE MONTH OF MARCH. AT THE TIME HE EXECUTED THIS APPLICATION THE VETERAN APPEARS TO HAVE BEEN SUFFERING FROM BOTH SERVICE AND NONSERVICE CONNECTED DISABILITIES.

A-25477, JANUARY 23, 1929, 8 COMP. GEN. 387

VETERANS' BUREAU - INSURANCE - INCONTESTABILITY - ESTOPPEL 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 DATE OF ISSUANCE UNDER SECTION 307 OF THE WORLD WAR VETERANS' ACT. THE GOVERNMENT MAY NOT BE CONSIDERED AS ESTOPPED TO DENY LIABILITY UNDER A CONVERTED WAR RISK INSURANCE POLICY BECAUSE OF THE FAILURE OF ITS OFFICERS OR EMPLOYEES TO ACT PROMPTLY OR PROPERLY ON THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE ON THE BASIS OF WHICH THE CONVERTED POLICY SHOULD ISSUE OR BECAUSE OF THE WRONGFUL ACT OF THE GOVERNMENT AGENTS IN ISSUING A CONVERTED POLICY WITHOUT HAVING ACTED UPON THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JANUARY 23, 1929:

THERE HAS BEEN REFERRED TO THIS OFFICE FOR CONSIDERATION WHETHER PAYMENT THEREON IS AUTHORIZED A VOUCHER FOR $7,999.92, IN FAVOR OF MARION ARTLEY, ADMINISTRATIVELY APPROVED BY THE VETERANS' BUREAU, FOR THE PROCEEDS OF WAR RISK CONVERTED INSURANCE POLICY ON THE LIFE OF CLAIMANT'S HUSBAND, NORMAN MONROE ARTLEY, ISSUED EFFECTIVE JULY 1, 1927.

WAR RISK TERM INSURANCE IN THE AMOUNT OF $10,000 WAS ISSUED TO THE ABOVE- NAMED VETERAN ON APPLICATION OF JANUARY 18, 1918. PREMIUMS UPON THIS INSURANCE WERE PAID TO INCLUDE THE MONTH OF MARCH, 1918, WHEN THE INSURANCE LAPSED FOR NONPAYMENT OF PREMIUMS. UNDER DATE OF JUNE 30, 1927, THE VETERAN APPLIED FOR REINSTATEMENT OF $8,000 OF THE LAPSED TERM INSURANCE AND FOR THE CONVERSION OF THE SAME TO A 5-YEAR CONVERTIBLE TERM POLICY. AT THE TIME HE EXECUTED THIS APPLICATION THE VETERAN APPEARS TO HAVE BEEN SUFFERING FROM BOTH SERVICE AND NONSERVICE CONNECTED DISABILITIES. ON AUGUST 20, 1927, THE APPLICANT WAS ADVISED, CONCERNING THIS APPLICATION FOR REINSTATEMENT AND CONVERSION, THAT "WHEN AND IF APPROVED A POLICY WILL BE ISSUED. * * *.' HOWEVER, THERE APPEARS TO HAVE BEEN NO REINSTATEMENT OF THE TERM INSURANCE BY THE ADMINISTRATIVE OFFICE ON THE BASIS OF WHICH THE CONVERTED POLICY SHOULD HAVE ISSUED. NOTWITHSTANDING THIS FAILURE TO ACT ON THE APPLICATION FOR REINSTATEMENT, A UNITED STATES GOVERNMENT LIFE INSURANCE POLICY WAS ISSUED TO THE VETERAN UNDER DATE OF OCTOBER 29, 1927, EFFECTIVE AS OF JULY 1, 1927. PREMIUMS UPON THIS INSURANCE WERE REGULARLY PAID FROM THE DATE OF APPLICATION TO INCLUDE THE MONTH OF APRIL, 1928. THE VETERAN DIED APRIL 17, 1928. THEREAFTER, ON JUNE 19, 1928, THE VETERAN'S APPLICATION FOR REINSTATEMENT WAS REFERRED TO THE INSURANCE MEDICAL SECTION OF THE BUREAU, EVIDENTLY THE SECTION CHARGED WITH THE DUTY OF DETERMINING THE LEGALITY OF THE REINSTATEMENTS OF INSURANCE AND THE INSURABILITY OF THE APPLICANT. THE APPLICATION FOR REINSTATEMENT WAS REJECTED BY THAT SECTION UNDER THE PROVISIONS OF SECTION 304 OF THE WORLD WAR VETERANS' ACT, AS AMENDED, BY REASON OF THE FACT THAT HE WAS SUFFERING WITH A NONSERVICE CONNECTED DISABILITY, WHICH DISQUALIFIED HIM FROM REINSTATING HIS INSURANCE.

THE BUREAU HAS APPROVED THE DEATH CLAIM ON THE BASIS THAT THE CONVERTED POLICY BECAME INCONTESTABLE AFTER SIX MONTHS FROM DATE OF ISSUANCE UNDER SECTION 307 OF THE ACT OF JUNE 7, 1924, 43 STAT. 627.

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 PRINCIPLE ANNOUNCED IN SAID DECISION WAS APPLIED IN DECISION DATED JANUARY 8, 1929, A-25451, 8 COMP. GEN. 350, TO THE CASE OF MAURICE HELLMAN, WHEREIN IT WAS STATED:

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 ISSUES 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 INSURANCE 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 INSTANT CASE THE INSURED WAS NOT ENTITLED TO REINSTATEMENT OF HIS TERM INSURANCE, A PREREQUISITE TO THE ISSUANCE OF A CONVERTED POLICY, UNDER THE RULES AND REGULATIONS OF THE BUREAU, INDEPENDENTLY OF THE PROVISIONS OF THE STATUTE, FOR THE REASON THAT HE WAS SUFFERING FROM A DISQUALIFYING DISABILITY AT THE TIME HE MADE APPLICATION FOR REINSTATEMENT. IN OTHER WORDS, HE WAS NOT AN INSURABLE RISK AND HE MADE NO ATTEMPT IN HIS APPLICATION TO CLAIM REINSTATEMENT AS SUCH. NO MEDICAL EXAMINATION APPEARS TO HAVE BEEN MADE BY A MEDICAL OFFICER OF THE BUREAU. THE SOLE AUTHORITY TO REINSTATE THIS TERM INSURANCE, BY ONE SUFFERING FROM A DISABILITY LESS THAN PERMANENT AND TOTAL, IS FOUND IN SECTION 304 OF THE STATUTE AS AMENDED BY THE ACT OF JULY 2, 1926, 44 STAT. 799, WHEREIN THERE IS FIXED AS A CONDITION PRECEDENT TO REINSTATEMENT "THAT THE APPLICANT'S DISABILITY IS THE RESULT OF AN INJURY OR DISEASE, OR OF AN AGGRAVATION THEREOF, SUFFERED OR CONTRACTED IN THE ACTIVE MILITARY OR NAVAL SERVICE DURING THE WORLD WAR.' THIS CONDITION PRECEDENT MUST BE AFFIRMATIVELY DETERMINED BY THE BUREAU BEFORE THERE EXISTS ANY AUTHORITY TO CONTRACT WITH THE INSURED FOR, OR TO ISSUE TO HIM, A CONVERTED POLICY. IN THE ABSENCE THEREOF THE LACK OF AUTHORITY TO CONTRACT IS NOT CURED UNDER SECTION 307 OF THE STATUTE, MERELY BECAUSE THE OFFICERS OR EMPLOYEES OF THE BUREAU ERRONEOUSLY ISSUED A CONVERTED POLICY ON WHICH PREMIUMS WERE PAID FOR SIX MONTHS OR MORE.

IT HAS BEEN SUGGESTED THAT THE DOCTRINE OF ESTOPPEL WOULD PRECLUDE THE GOVERNMENT FROM DENYING ITS OBLIGATION UNDER A CONVERTED POLICY UNLAWFULLY ISSUED BY REASON OF THE OMISSION OF THE OFFICERS OR EMPLOYEES OF THE BUREAU, AS AGENTS OF THE GOVERNMENT PROPERLY TO ACT ON A REINSTATEMENT WHICH FORMS THE BASIS OF THE CONVERSION, IF THE INSURED HAD NO NOTICE OF THE ADMINISTRATIVE ERROR OR IRREGULARITY. IN THE CASE OF UNITED STATES V. LOVELAND ET AL., 25 FED.REP. (2D) 447, 448, DECIDED FEBRUARY 27, 1928, BY THE CIRCUIT COURT OF APPEALS, THIRD CIRCUIT, INVOLVING A WAR RISK INSURANCE POLICY, THE COURT SAID:

IN THE FINAL ANALYSIS THE ACT OF OMISSION BY WHICH THE GOVERNMENT IS ESTOPPED, IF AT ALL, IS THE FAILURE OF THE GOVERNMENT'S EMPLOYEES TO REPLY TO THE LETTER OF AUGUST 29. WE SHALL NOT QUOTE THE MANY AUTHORITIES DENYING SUCH EFFECT TO THE OMISSION OF AN OFFICER OF THE GOVERNMENT, BUT REFER TO THEM AS COLLECTED IN 22 CYC. 1664C, WHERE THE CONSENSUS OF THEM IS THUS STATED: "THE GOVERNMENT IS NOT RESPONSIBLE FOR THE LACHES OR WRONGFUL ACT OF ITS OFFICERS. IT MAY BE THE LOSER BY THEIR NEGLIGENCE, BUT IT NEVER BECOMES BOUND TO OTHERS FOR THE CONSEQUENCES OF SUCH NEGLECT, UNLESS IT BE BY EXPRESS AGREEMENT TO THAT EFFECT.' WE HAVE NOT OVERLOOKED THE CONTENTION THAT THE GOVERNMENT, BY ENTERING INTO THE INSURANCE FIELD AND CONSENTING TO BE SUED, IS THEREBY PUT IN THE SAME POSITION AS A CONTESTING INSURANCE COMPANY. BUT SUCH CONCLUSION DOES NOT FOLLOW. WHAT THE POWER OF AGENTS OF INSURANCE COMPANIES MAY BE TO BIND THEIR COMPANIES IS A QUESTION OF NO PRESENT MOMENT. THE QUESTION HERE INVOLVED IS THE POWER OF SERVANTS OF THE UNITED STATES TO PLACE LIABILITY UPON IT BY AN ACT OF OMISSION WHEN THEY WOULD BE POWERLESS SO TO DO BY AN ACT OF COMMISSION. THE DECISIONS HOLDING THAT A SERVANT OF THE GOVERNMENT HAS, IN THE ABSENCE OF STATUTORY WARRANT AND DUTY, NO SUCH POWER, ARE TOO FIRMLY SETTLED AND SO PROVIDENTLY WISE AS TO FORBID OUR HOLDING THAT, WHEN THE GOVERNMENT BROADENED ITS FIELD OF OPERATION TO NEW FIELDS, IT THEREBY BROADENED THE POWER OF THOSE IT EMPLOYED IN SUCH NEW TO COMMIT THE GOVERNMENT TO LIABILITIES IN SUCH FIELD WHICH THEY HAD NO POWER TO DO IN OTHER SPHERES OF GOVERNMENT ACTIVITY. * * *

APPLYING THE PRINCIPLE THUS ANNOUNCED TO THE INSTANT CASE, THE GOVERNMENT MAY NOT BE CONSIDERED AS ESTOPPED BECAUSE OF THE FAILURE OF ITS OFFICERS AND EMPLOYEES TO ACT PROMPTLY ON THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE OR BECAUSE OF THE WRONGFUL ACT OF THE GOVERNMENT'S AGENTS IN ISSUING A CONVERTED POLICY WITHOUT HAVING ACTED ON THE APPLICATION FOR REINSTATEMENT OF THE TERM INSURANCE. WHILE IT MAY BE THAT THE INSURED HAD NO NOTICE OF THE ADMINISTRATIVE OMISSION OR ERROR, THE PARTIES IN INTEREST WILL BE IN WORSE POSITION IF THE PREMIUMS PAID ON THE CONVERTED POLICY ARE REFUNDED THAN THEY WOULD HAVE BEEN IF THE ADMINISTRATIVE OFFICE HAD ACTED PROPERLY AND PROMPTLY ON THE CASE.