A-29718, JANUARY 8, 1930, 9 COMP. GEN. 274

A-29718: Jan 8, 1930

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VETERANS' BUREAU - INSURANCE THERE IS NO PROVISION IN EITHER THE WAR RISK INSURANCE ACT OR THE WORLD WAR VETERANS' ACT WHICH REASONABLY MAY BE CONSTRUED AS AUTHORIZING THE ISSUANCE OF REGULATIONS WAIVING PAYMENT OF PREMIUMS DURING MILITARY SERVICE FOR A PERIOD AFTER WHICH THE INSURED HAD SHOWN BY HIS ACTION A CLEAR INTENT TO DISCONTINUE HIS INSURANCE. WHERE A VETERAN ACCEPTED HIS ACTIVE DUTY PAY WHILE IN THE MILITARY SERVICE OVER A PERIOD OF 13 MONTHS PRIOR TO DISCHARGE WITH ACTUAL KNOWLEDGE THAT INSURANCE PREMIUMS WERE NOT BEING DEDUCTED. THE INSURANCE LAPSED FOR NONPAYMENT OF PREMIUMS AND THERE IS NO AUTHORITY FOR THE VETERANS' BUREAU TO VALIDATE THE INSURANCE AND MAKE PAYMENTS THEREUNDER BY THE RATING OF PERMANENT TOTAL DISABILITY RETROACTIVELY EFFECTIVE FROM THE DATE OF DISCHARGE.

A-29718, JANUARY 8, 1930, 9 COMP. GEN. 274

VETERANS' BUREAU - INSURANCE THERE IS NO PROVISION IN EITHER THE WAR RISK INSURANCE ACT OR THE WORLD WAR VETERANS' ACT WHICH REASONABLY MAY BE CONSTRUED AS AUTHORIZING THE ISSUANCE OF REGULATIONS WAIVING PAYMENT OF PREMIUMS DURING MILITARY SERVICE FOR A PERIOD AFTER WHICH THE INSURED HAD SHOWN BY HIS ACTION A CLEAR INTENT TO DISCONTINUE HIS INSURANCE. WHERE A VETERAN ACCEPTED HIS ACTIVE DUTY PAY WHILE IN THE MILITARY SERVICE OVER A PERIOD OF 13 MONTHS PRIOR TO DISCHARGE WITH ACTUAL KNOWLEDGE THAT INSURANCE PREMIUMS WERE NOT BEING DEDUCTED, THE INSURANCE LAPSED FOR NONPAYMENT OF PREMIUMS AND THERE IS NO AUTHORITY FOR THE VETERANS' BUREAU TO VALIDATE THE INSURANCE AND MAKE PAYMENTS THEREUNDER BY THE RATING OF PERMANENT TOTAL DISABILITY RETROACTIVELY EFFECTIVE FROM THE DATE OF DISCHARGE.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JANUARY 8, 1930:

THERE IS BEFORE THIS OFFICE FOR DETERMINATION IN CONNECTION WITH THE PREAUDIT THE QUESTION AS TO THE LEGALITY OF THE ADMINISTRATIVE AWARD OF WAR RISK TERM INSURANCE ON THE BASIS OF PERMANENT AND TOTAL DISABILITY AS OF DATE OF DISCHARGE, IN FAVOR OF OWASA JOHN JENNINGS, UNDER TERM INSURANCE C-446061.

IT APPEARS FROM THE RECORD THAT THE VETERAN APPLIED FOR $10,000 TERM INSURANCE ON FEBRUARY 12, 1918, WHILE IN THE MILITARY SERVICE; THAT PREMIUMS THEREON WERE PAID TO AND INCLUDING THE MONTH OF AUGUST, 1918, BY REGULAR DEDUCTION FROM HIS SERVICE PAY, AFTER WHICH NO DEDUCTIONS FOR INSURANCE WERE MADE OR THE PREMIUMS OTHERWISE PAID; THAT HE WAS DISCHARGED OCTOBER 14, 1919; THAT EFFECTIVE MAY 1, 1920, HE REINSTATED $5,000 OF HIS INSURANCE AND CONVERTED $2,000 THEREOF INTO TWO $1000 POLICIES, ONE ON THE ORDINARY LIFE PLAN, AND THE OTHER ON A 20-YEAR ENDOWMENT PLAN, EACH EFFECTIVE JUNE 1, 1920; THAT THE REMAINING TERM INSURANCE OF $3000 WHICH HAD BEEN REINSTATED AND THE ENDOWMENT POLICY WERE TERMINATED JUNE 1 AND JULY 1, 1920, RESPECTIVELY, FOR NONPAYMENT OF PREMIUMS; THAT PREMIUMS ON THE ORDINARY LIFE POLICY WERE PAID TO INCLUDE JULY, 1925; THAT THE OTHER $5,000 OF TERM INSURANCE WAS NEVER REINSTATED OR CONVERTED; THAT AWARD ON THE BASIS OF PERMANENT TOTAL DISABILITY WAS GRANTED TO THE INSURED UNDER THE $1,000 ORDINARY LIFE POLICY EFFECTIVE MAY 14, 1925; AND THAT BY MEDICAL RATING OF JULY 30, 1929, THE VETERAN WAS RATED AS PERMANENTLY AND TOTALLY DISABLED FROM DATE OF DISCHARGE, TO WIT, OCTOBER 14, 1919. THE BUREAU NOW HAS APPROVED AN ADDITIONAL AWARD OF TERM INSURANCE IN THE AMOUNT OF $9,000 UNDER WHICH IT IS PROPOSED TO PAY THE MONTHLY INSTALLMENTS ACCRUED SINCE OCTOBER 14, 1919, OR FOR A PERIOD OF 10 YEARS, AND, ALSO, TO CONTINUE THE MONTHLY PAYMENTS THEREUNDER, AND TO DEDUCT PREMIUMS WHICH WERE UNPAID FOR THE PERIOD OF 13 MONTHS DURING MILITARY SERVICE, TO WIT, FROM SEPTEMBER, 1918, TO AND INCLUDING SEPTEMBER, 1919, FROM THE INITIAL PAYMENT OF INSURANCE. IT IS PROPOSED, ALSO, TO AWARD INSTALLMENTS ON THE $1,000 ORDINARY LIFE POLICY FROM DECEMBER 1, 1920, THE EXPIRATION OF THE CONTESTABLE PERIOD AFTER CONVERSION. AS TO THIS POLICY NO QUESTION WILL BE RAISED BY THIS OFFICE AT THIS TIME.

THE RECORDS IN THIS OFFICE OF PAYMENTS MADE TO THE INSURED DURING HIS MILITARY SERVICE SHOWN THAT INSURANCE PREMIUMS IN THE AMOUNT OF $6.60 PER MONTH WERE DEDUCTED FROM FEBRUARY, 1918, TO AND INCLUDING AUGUST, 1918, BUT THAT FOR THE REMAINING 13 MONTHS OF HIS SERVICE, FROM SEPTEMBER, 1918, TO AND INCLUDING SEPTEMBER, 1919, NO DEDUCTIONS FOR INSURANCE WERE MADE FROM HIS PAY AND NO EXPLANATION APPEARS OF RECORD AS TO THE REASON FOR THE FAILURE TO MAKE THE DEDUCTIONS ORIGINALLY AUTHORIZED BY THE INSURED. PREMIUM DEDUCTION WAS MADE FROM FINAL PAY. THE RATE OF PAY, $30 PER MONTH, THE INSURED HAD BEEN RECEIVING PRIOR TO AUGUST, 1918, REMAINED THE SAME THROUGH DECEMBER, 1918. IT WOULD SEEM UNREASONABLE TO CONCLUDE THAT HE DID NOT KNOW INSURANCE PREMIUMS IN AN AMOUNT EXCEEDING ONE-FIFTH OF HIS TOTAL MONTHLY PAY WERE NOT BEING DEDUCTED, OR, STATING IT CONVERSELY, IT IS REASONABLE TO CONCLUDE THAT HE ACCEPTED HIS FULL PAY DURING SEPTEMBER, OCTOBER, NOVEMBER AND DECEMBER, 1918, AT THE SAME RATE HE HAD BEEN RECEIVING, WITH ACTUAL KNOWLEDGE THAT THE INSURANCE PREMIUMS WERE NOT BEING DEDUCTED. IN JANUARY, 1919, HE WAS PROMOTED TO SERGEANT AND IN MARCH OF THE SAME YEAR TO SERGEANT FIRST CLASS, BUT NO INSURANCE PREMIUMS WERE DEDUCTED FROM HIS PAY AT ANY TIME AFTER AUGUST, 1918, ALTHOUGH OTHER AUTHORIZED DEDUCTIONS WERE MADE. IN HIS SIGNED APPLICATION FOR REINSTATEMENT OF ONE-HALF OF HIS TERM INSURANCE, EXECUTED APRIL 26, 1920, SUBSEQUENT TO DISCHARGE, THE INSURED STATED THAT THE LAST MONTH FOR WHICH PREMIUMS ON HIS INSURANCE WERE PAID WAS AUGUST, 1918, WHICH IS CORROBORATIVE OF THE RECORD, SHOWING BEYOND A REASONABLE DOUBT THAT THE VETERAN HAD RECEIVED HIS SERVICE PAY SUBSEQUENT TO AUGUST, 1918, WITH ACTUAL KNOWLEDGE THAT PREMIUMS FOR INSURANCE WERE NOT BEING DEDUCTED. FURTHERMORE, THE INSURED IS STILL LIVING, BUT THERE IS NOTHING IN THE RECORD TO INDICATE THAT HE DID NOT KNOW INSURANCE PREMIUMS WERE NOT BEING DEDUCTED DURING THE 13 MONTHS' PERIOD IN QUESTION.

THIS OFFICE HERETOFORE HAS QUESTIONED THE LEGALITY OF THE AWARD, BUT IT APPEARS THAT NOTWITHSTANDING THE DEFINITE EVIDENCE THAT THE INSURED HAD ACTUAL KNOWLEDGE OF THE FAILURE TO DEDUCT INSURANCE PREMIUMS OVER A PERIOD OF 13 MONTHS, THE BUREAU APPEARS TO CONTEND THAT UNDER THE TERMS OF SECS. 4061 AND 4062 OF VETERANS' BUREAU REGULATIONS 1923, BASED ON TREASURY DECISION NO. 48, DATED SEPTEMBER 29, 1919, THE INSURED WAS FULLY PROTECTED DURING THE ENTIRE PERIOD OF HIS MILITARY SERVICE NOTWITHSTANDING THE FAILURE TO DEDUCT OR PAY PREMIUMS OVER THE PERIOD OF 13 MONTHS, THERE BEING NO SPECIFIC REQUEST BY THE INSURED FOR CANCELLATION OF HIS INSURANCE.

SECTIONS 4061 AND 4062 OF THE REGULATIONS IN QUESTION PROVIDE AS FOLLOWS:

SEC. 4061. THE YEARLY RENEWABLE TERM INSURANCE WILL NOT BE PERMITTED TO LAPSE FOR NONPAYMENT OF PREMIUM WHILE THE INSURED IS IN THE ACTIVE MILITARY OR NAVAL SERVICE AND PREMIUMS THEREFOR ARE AUTHORIZED TO BE DEDUCTED FROM THE INSURED'S PAY OR DEPOSIT, EXCEPT AS PROVIDED IN SECS. 4062 TO 4066, INCLUSIVE. (T.D. 48 W.R., SEPTEMBER 29, 1919. SEE SEC. 4065 AND NOTE.)

SEC. 4062. LAPSATION OR CANCELLATION OF INSURANCE WHILE THE INSURED IS IN ACTIVE SERVICE.--- THE YEARLY RENEWABLE TERM INSURANCE MENTIONED IN SEC. 4061 SHALL, HOWEVER, LAPSE, AND TERMINATE---

(C) UPON THE WRITTEN REQUEST, DULY WITNESSED AND FORWARDED THROUGH MILITARY CHANNELS TO THE UNITED STATES VETERANS' BUREAU, FOR CANCELLATION OF THE INSURANCE, IN WHOLE OR IN PART, AND CORRESPONDING CESSATION OR REDUCTION OF THE PAYMENT OF PREMIUMS.

TO APPLY THE QUOTED REGULATION AS AUTHORITY FOR THE BUREAU TO WAIVE PAYMENT OF PREMIUMS OVER A PERIOD OF 13 MONTHS OF MILITARY SERVICE WHERE THE FACTS DISCLOSE ACTUAL KNOWLEDGE ON THE PART OF THE VETERAN OF THE DISCONTINUANCE OF PREMIUM DEDUCTIONS, WHICH IS TANTAMOUNT TO AN EXPRESSED INTENT TO DISCONTINUE HIS INSURANCE, ALTHOUGH HE DID NOT SPECIFICALLY SO REQUEST, IS TO DISREGARD THE FUNDAMENTAL PRINCIPLES OF INSURANCE, WHETHER COMMERCIAL OR WAR RISK, THAT PROTECTION DEPENDS ON THE PAYMENT OF PREMIUMS.

SECTION 13 OF THE WAR RISK INSURANCE ACT OF OCTOBER 6, 1917, 40 STAT. 399, AUTHORIZED THE DIRECTOR, SUBJECT TO THE GENERAL DIRECTION OF THE SECRETARY OF THE TREASURY, TO MAKE "RULES AND REGULATIONS, NOT INCONSISTENT WITH THE PROVISIONS OF THIS ACT, NECESSARY OR APPROPRIATE TO CARRY OUT ITS PURPOSES.' SEE ALSO SEC. 5 OF THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 608. SEC. 402 OF THE WAR RISK INSURANCE ACT, AS AMENDED BY SEC. 21, OF THE ACT OF JUNE 25, 1918, 40 STAT. 615, REQUIRING THE DIRECTOR, SUBJECT TO THE GENERAL DIRECTION OF THE SECRETARY OF THE TREASURY TO DETERMINE UPON AND PUBLISH THE FULL AND EXACT TERMS AND CONDITIONS OF SUCH CONTRACTS OF INSURANCE.

SECTION 404 OF THE ACT OF OCTOBER 6, 1917, 40 STAT. 410, PROVIDES:

* * * REGULATIONS * * * SHALL PRESCRIBE THE TIME AND METHOD OF PAYMENT OF THE PREMIUMS THEREON, BUT PAYMENTS OF PREMIUMS IN ADVANCE SHALL NOT BE REQUIRED FOR PERIODS OF MORE THAN ONE MONTH EACH AND MAY BE DEDUCTED FROM THE PAY OR DEPOSIT OF THE INSURED OR BE OTHERWISE MADE AT HIS ELECTION.

LATER AMENDMENTS DID NOT MAKE MATERIAL CHANGE IN THIS PROVISION. SEE SEC. 24 OF THE ACT OF AUGUST 9, 1921, 42 STAT. 155, AND SEC. 301 OF THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 624. THERE IS NO PROVISION IN EITHER THE WAR RISK INSURANCE ACT OR THE WORLD WAR VETERANS' ACT WHICH REASONABLY MAY BE CONSTRUED AS AUTHORIZING THE ISSUANCE OF REGULATIONS WAIVING PAYMENTS OF PREMIUMS DURING MILITARY SERVICE FOR A PERIOD AFTER WHICH THE INSURED HAD SHOWN BY HIS ACTIONS A CLEAR INTENT TO DISCONTINUE HIS INSURANCE. SUCH A REGULATION WOULD BE INCONSISTENT WITH THE FUNDAMENTAL PRINCIPLE OF THE INSURANCE LAW THAT PROTECTION DEPENDS UPON THE PAYMENT OF PREMIUMS AND, THEREFORE, WOULD BE UNAUTHORIZED. THE QUOTED REGULATION SHOULD BE APPLIED, AS NO DOUBT WAS THE INTENT, TO TAKE CARE OF ONLY THOSE CASES WHERE THE INSURED HAD ALLOTTED HIS PAY, BUT THROUGH NO FAULT OF HIS OWN, THE DEDUCTIONS WERE NOT PROPERLY MADE. THE RULE HAS BEEN STATED IN SEVERAL DECISIONS OF THIS OFFICE. SEE 5 COMP. GEN. 208, 209, WHEREIN IT IS STATED:

IT HAS BEEN REPEATEDLY HELD THAT THE MERE ALLOTMENT OR OTHER FORM OF AUTHORIZATION FOR DEDUCTION FROM THE PAY OF OFFICERS AND ENLISTED MEN IN THE ACTIVE MILITARY OR NAVAL FORCES TO COVER WAR-RISK INSURANCE PREMIUMS IS NOT EQUIVALENT TO ACTUAL PAYMENT OF THE PREMIUMS, AND DOES NOT IPSO FACTO PREVENT LAPSING OF THE POLICY. ARMY OFFICERS, 2 COMP. GEN. 249, AND DECISION OF DECEMBER 5, 1923; NAVY OFFICERS, 4 COMP. GEN. 691; NAVY ENLISTED MEN, 3 COMP. GEN. 202. THERE EXISTS NO SOUND REASON FOR ANY DIFFERENT RULE WITH RESPECT TO ENLISTED MEN OF THE ARMY.

ONE OF THE CONTRACTUAL CONDITIONS OF GOVERNMENT INSURANCE IS THE MONTHLY PAYMENT OF PREMIUMS BY THE INSURED. THE ALLOTMENT SYSTEM IS A MEDIUM THROUGH WHICH PERSONS IN THE ACTIVE MILITARY OR NAVAL SERVICES MAY CONVENIENTLY EFFECT PAYMENT OF THEIR PREMIUMS. NO RESPONSIBILITY RESTS UPON THE GOVERNMENT IN THE CAPACITY OF INSURER IF THERE IS SUCH A FAILURE OF THE ALLOTMENT SYSTEM AS TO PREVENT PAYMENT OF THE PREMIUMS TO THE GOVERNMENT WHEN DUE. THE INSURED WHO ACCEPTS HIS PAY WITH KNOWLEDGE ACTUAL OR PRESUMPTIVE, THAT THE AMOUNT OF INSURANCE PREMIUMS HAS NOT BEEN DEDUCTED, IS IN NO BETTER POSITION THAN A PERSON OUTSIDE THE GOVERNMENT SERVICE WHO FAILS TO FORWARD HIS INSURANCE PREMIUMS TO THE VETERANS' BUREAU WHEN DUE.

THIS WAS QUOTED AND APPLIED IN DECISION OF DECEMBER 7, 1926, 6 COMP. GEN. 384. SEE, ALSO, O-NEILL V. THE UNITED STATES, 32 FED.REP./2D) 313, INVOLVING THE INSURANCE OF A VETERAN FROM WHOSE PAY INSURANCE PREMIUMS WERE NOT DEDUCTED AFTER A REENLISTMENT, WHERE THE COURT, IN DECIDING THAT NO LAPSE OF INSURANCE HAD ACCRUED, WAS VERY CAREFUL THROUGHOUT THE DECREE TO EMPHASIZE THE PARTICULAR FACTS DISCLOSED IN THE CASE SHOWING LACK OF KNOWLEDGE ON THE PART OF THE INSURED OF THE FAILURE TO DEDUCT THE PREMIUMS AS THEY BECAME DUE, AND THE FAULT AND RESPONSIBILITY OF THE GOVERNMENT. THE COURT STRESSED, ALSO, THE FACT THAT THERE WAS DUE THE INSURED AT THE TIME OF HIS DEATH SUFFICIENT ACCRUED PAY FROM THE GOVERNMENT TO HAVE PAID ALL UNPAID PREMIUMS. SEE ALSO CRAWFORD V. THE UNITED STATES, 291 FED.REP. 801, AND MORTAK V. THE UNITED STATES, 297 FED.REP. 485. IT DOES NOT APPEAR THAN ANY CASE HERETOFORE DECIDED BY A COURT MAY BE CONSIDERED AS SANCTIONING THE PROPOSED ACTION IN THE INSTANT CASE WHEREBY THE BUREAU SEEKS, AFTER 10 YEARS, TO VALIDATE TERM INSURANCE AS OF DATE OF DISCHARGE WITH THE INSURED A YEAR PREVIOUS HAD SHOWN EVERY INTENTION OF DISCONTINUING AND CANCELLING AND WHICH DID IN FACT LAPSE FOR NONPAYMENT OF PREMIUMS.

YOU ARE ADVISED, THEREFORE, THAT PAYMENTS UNDER THE AWARD ON THE BASIS OF THE $9,000 TERM INSURANCE ARE NOT APPROVED BY THIS OFFICE.