A-31896, JULY 1, 1930, 10 COMP. GEN. 1

A-31896: Jul 1, 1930

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VETERANS' BUREAU - INSURANCE - COLLECTION OF UNPAID PREMIUMS THE GOVERNMENT IS NOT LIMITED IN THE MATTER OF RECOVERY OF THE AMOUNT OF UNPAID INSURANCE PREMIUMS TO THE PARTICULAR POLICY AGAINST WHICH AN INTEREST-BEARING LIEN FOR THE UNPAID PREMIUMS PLUS ACCRUED INTEREST HAS BEEN PLACED UNDER THE TERMS OF SECTION 304 OF THE WORLD WAR VETERANS' ACT. REQUESTING DECISION OF A QUESTION PRESENTED AS FOLLOWS: I HAVE THE HONOR TO REQUEST YOUR DECISION AS TO THE CASE OF CHARLES E. THE INSURANCE WAS REDUCED TO $1. ON WHICH PREMIUMS WERE PAID THROUGH MARCH. 500 TERM INSURANCE WAS CONVERTED TO A FIVE-YEAR CONVERTIBLE TERM POLICY (K-613325). WHICH POLICY WAS KEPT IN FORCE BY REGULAR PAYMENT OF PREMIUMS AND WHICH POLICY WAS IN FULL FORCE AND EFFECT ON FEBRUARY 28.

A-31896, JULY 1, 1930, 10 COMP. GEN. 1

VETERANS' BUREAU - INSURANCE - COLLECTION OF UNPAID PREMIUMS THE GOVERNMENT IS NOT LIMITED IN THE MATTER OF RECOVERY OF THE AMOUNT OF UNPAID INSURANCE PREMIUMS TO THE PARTICULAR POLICY AGAINST WHICH AN INTEREST-BEARING LIEN FOR THE UNPAID PREMIUMS PLUS ACCRUED INTEREST HAS BEEN PLACED UNDER THE TERMS OF SECTION 304 OF THE WORLD WAR VETERANS' ACT, AS AMENDED BY THE ACT OF JULY 2, 1926, 44 STAT. 799, BUT IN THE EVENT OF THE LAPSE OF SUCH POLICY BEFORE IT ACQUIRES SUFFICIENT VALUE TO COVER THE INDEBTEDNESS, COLLECTION MAY BE EFFECTED UNDER THE TERMS OF SECTION 22 OF THE WORLD WAR VETERANS' ACT DATED JUNE 7, 1924, 43 STAT. 613, BY DEDUCTION FROM PAYMENTS MADE IN SETTLEMENTS UNDER OTHER POLICIES ISSUED TO THE SAME VETERAN, OR FROM COMPENSATION PAYMENTS IN HIS FAVOR.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, JULY 1, 1930:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF MAY 15, 1930, REQUESTING DECISION OF A QUESTION PRESENTED AS FOLLOWS:

I HAVE THE HONOR TO REQUEST YOUR DECISION AS TO THE CASE OF CHARLES E. SHERMER (CHARLES E. SHERMAN), C-418,306, NOW PENDING FOR CONSIDERATION BEFORE THIS BUREAU, AND ALSO AS TO CERTAIN OTHER CASES HEREIN DISCUSSED WHICH HAD BEEN PREVIOUSLY PASSED UPON BY THIS BUREAU. CHARLES E. SHERMER WHILE IN SERVICE CARRIED $10,000 YEARLY RENEWABLE TERM INSURANCE. EFFECTIVE DECEMBER 1, 1918, THE INSURANCE WAS REDUCED TO $1,500, ON WHICH PREMIUMS WERE PAID THROUGH MARCH, 1927. EFFECTIVE APRIL 1, 1927, THIS $1,500 TERM INSURANCE WAS CONVERTED TO A FIVE-YEAR CONVERTIBLE TERM POLICY (K-613325), WHICH POLICY WAS KEPT IN FORCE BY REGULAR PAYMENT OF PREMIUMS AND WHICH POLICY WAS IN FULL FORCE AND EFFECT ON FEBRUARY 28, 1929, FROM WHICH DATE A PERMANENT AND TOTAL DISABILITY HAS BEEN FOUND TO EXIST. THERE IS NO QUESTION IN THE CASE BUT THAT THE FIVE-YEAR CONVERTIBLE TERM POLICY, K-613325, WAS MATURED BY OPERATION OF THIS PERMANENT AND TOTAL DISABILITY RATING.

ON APRIL 18, 1927, THE VETERAN APPLIED FOR THE REINSTATEMENT AND CONVERSION OF AN ADDITIONAL $1,500 OF HIS LAPSED TERM INSURANCE. BASED UPON THIS APPLICATION POLICY K-623771 WAS ISSUED FOR $1,500 EFFECTIVE JULY 1, 1927. PREMIUMS WERE PAID FOR THREE MONTHS AND THE POLICY WAS THEREAFTER ALLOWED TO LAPSE THROUGH THE FAILURE TO PAY THE PREMIUM DUE OCTOBER 1, 1927. IN CONNECTION WITH POLICY K-623771 WHEN THE REINSTATEMENT WAS EFFECTED OF THE TERM INSURANCE UPON WHICH THIS CONVERTED POLICY WAS BASED, SAID REINSTATEMENT WAS MADE UNDER SECTION 304 OF THE WORLD WAR VETERANS' ACT, 1924, AS AMENDED. THE PREMIUMS NECESSARY TO REINSTATE UNDER SECTION 304, WORLD WAR VETERANS' ACT, 1924, AS AMENDED, REDUCTION. THE SECOND OPINION IS IN THE CASE OF SIGURD F. ANDERSON, WERE PROVIDED FOR THROUGH THE CREATION OF A PREMIUM LIEN AS PERMITTED BY THAT SECTION, AMOUNTING TO $129.16.

THE QUESTION IN THE CASE RELATES TO THE SATISFACTION OF THIS LIEN ESTABLISHED AGAINST POLICY K-623771, WHICH POLICY WAS PERMITTED TO LAPSE BEFORE ANY RESERVE VALUE HAD ARISEN. IF THE VETERAN IS STILL RESPONSIBLE FOR THE LIEN ESTABLISHED AGAINST THE LAPSED POLICY, K 623771, THE QUESTION ARISES WHETHER SAID LIEN MAY BE SATISFIED UNDER THE OTHER POLICY, K- 613325, WHICH WAS MATURED BY REASON OF THE PERMANENT AND TOTAL DISABILITY RATING HEREINBEFORE MENTIONED.

WHILE THIS SPECIFIC PROBLEM HAS NOT PREVIOUSLY BEEN MADE THE BASIS OF ANY BUREAU RULING, I TRANSMIT AT THIS TIME FOR YOUR INFORMATION COPIES OF OPINIONS IN TWO CASES DEALING WITH THE QUESTION OF THE SATISFACTION OF PREMIUM LIENS UNDER SECTION 304, WORLD WAR VETERANS' ACT, 1924, AS AMENDED, WHICH OPINIONS, HAVING RECEIVED THE DIRECTOR'S APPROVAL, HAVE BEEN FOLLOWED AS BUREAU PRECEDENTS. THE FIRST IS AN OPINION IN THE CASE OF LAWRENCE PETER BRICKEY, T-1481556. THIS HOLDS THAT WHERE TERM INSURANCE HAS BEEN REINSTATED AND CONVERTED AND A PREMIUM LIEN CREATED AND WHERE THE INSURANCE IS LATER REDUCED THERE IS NO AUTHORITY FOR A PROPORTIONATE REDUCTION OF THE LIEN AND THE FULL AMOUNT OF THE ORIGINAL LIEN STANDS AGAINST THE CONTINUED CONVERTED INSURANCE REMAINING AFTER THE REDUCTION. THE SECOND OPINION IS IN THE CASE OF SIGURD F. ANDERSON, THE K -79013, K-592100, APRIL 4, 1927. IN THE LATTER CASE THE INSURED, SIGURD F. ANDERSON, CONVERTED $5,000 TERM INSURANCE UNDER POLICY K-79013, EFFECTIVE NOVEMBER 1, 1919. ON JULY 3, 1926, MR. ANDERSON REINSTATED AND CONVERTED HIS REMAINING $5,000 TERM INSURANCE AND UNDER SECTION 304, WORLD WAR VETERANS' ACT, 1924, AS AMENDED, ESTABLISHED A LIEN AGAINST HIS SECOND POLICY (K-592100), AMOUNTING TO $323.90. THE INSURED APPLIED FOR A POLICY LOAN UNDER CLAUSE 5 (D) OF HIS POLICIES. AT THE TIME OF THE APPLICATION POLICY K 592100 HAD BEEN IN FORCE FOR LESS THAN ONE YEAR AND HENCE UNDER SAID CLAUSE THEN HAD NO LOAN VALUE. AT THE SAME TIME THE INSURED HAD ALSO BEEN GRANTED A LOAN AGAINST HIS PRIOR POLICY K-79013 AND THE AMOUNT OF THAT LOAN PLUS THE PREMIUM LIEN ON POLICY K-592100 WAS IN EXCESS OF THE LOAN VALUE ON POLICY K-79013. IN THE ANDERSON CASE IT WAS HELD:

"THERE IS A CLOSE QUESTION INVOLVED AS TO WHETHER THESE TWO POLICIES MAY BE REGARDED AS ENTIRELY SEPARATE AND DISTINCT ENTITIES, OR WHETHER THE FACT THAT THEY ARE BOTH PREDICATED ON AND HAVE THEIR ORIGIN IN THE TERM INSURANCE ORIGINALLY APPLIED FOR WOULD PRECLUDE SUCH VIEW. RESOLVING ALL POSSIBLE DOUBTS, IT IS THE OPINION OF THIS SERVICE THAT THE TWO POLICIES, AT LEAST FOR THE PRESENT PURPOSE, MAY BE REGARDED AS DISTINCT AND SEPARATE. EVEN UNDER THIS VIEW OF THE CASE, HOWEVER, IT DOES NOT FOLLOW THAT AN ADDITIONAL LOAN MAY BE MADE ON POLICY K-79013 UP TO ITS MAXIMUM LOAN VALUE WITHOUT REGARD TO THE LIEN CONCURRENTLY RUNNING ON THE OTHER POLICY. AS JUST STATED, THE POLICY UPON WHICH THE LIEN IS NOW RUNNING HAS NO PRESENT LOAN VALUE, THOUGH, OF COURSE, IN TIME IT MAY ACCUMULATE A LOAN VALUE WHICH WOULD EQUAL OR POSSIBLY EXCEED THE AMOUNT OF THE PREMIUM LIEN. HOWEVER, SHOULD THIS POLICY BE ALLOWED TO LAPSE BEFORE ITS LOAN VALUE EQUALED OR EXCEEDED THE AMOUNT OF THE LIEN, THE GOVERNMENT WOULD BE WITHOUT PROTECTION, UNLESS THE OTHER POLICY ON WHICH THERE IS NO PREMIUM LIEN MIGHT BE MADE SUBJECT TO THE INDEBTEDNESS ON THE FIRST POLICY. IT IS THE OPINION OF THIS SERVICE THAT WHILE POLICY K-592100, WHICH NOW HAS NO LOAN VALUE AND WHICH IS SUBJECT TO THE ATTACHMENT OF A LIEN FOR PREMIUMS, MAY BE REGARDED AS SEPARATE FROM THE OTHER POLICY, NEVERTHELESS, UNDER SECTION 22 OF THE WORLD WAR VETERANS' ACT, IN A CASE OF NECESSITY THIS LIEN MIGHT BE CHARGED AGAINST THE OTHER POLICY, NAMELY, K-79013.

"SECTION 22 OF THE WORLD WAR VETERANS' ACT PROVIDES IN SUBSTANCE, "THAT SUCH COMPENSATION, INSURANCE, AND MAINTENANCE AND SUPPORT ALLOWANCE SHALL BE SUBJECT TO ANY CLAIMS WHICH THE UNITED STATES MAY HAVE,UNDER TITLES II, III, IV, AND V, AGAINST THE PERSON ON WHOSE ACCOUNT THE COMPENSATION, INSURANCE, OR MAINTENANCE AND SUPPORT ALLOWANCE IS PAYABLE.'

"UNDER THE PROVISIONS OF THIS SECTION IN THE EVENT OF NECESSITY THE GOVERNMENT WOULD NOT BE LIMITED TO THE PROCEEDS OF POLICY K-592100 IN ORDER TO SATISFY THE PREMIUM LIEN AGAINST THAT POLICY, BUT MIGHT PROCEED TO SATISFY THE LIEN OR AS MUCH THEREOF AS MAY BE NECESSARY FROM THE PROCEEDS OF THE OTHER POLICY (K-79013). AS THE AMOUNT OF THE PREMIUM LIEN AGAINST POLICY K-592100 AND THE LOAN ALREADY OUTSTANDING AGAINST POLICY K- 79013 IS EVEN NOW IN EXCESS OF THE PRESENT LOAN VALUE ON THE LATTER POLICY, IT IS THE OPINION OF THIS SERVICE THAT THERE IS NO AUTHORITY TO GRANT AN ADDITIONAL LOAN TO THE INSURED AT THE PRESENT TIME.'

THE QUESTION NOW IN ISSUE IN THE SHERMER CASE IS WHETHER THE RULINGS LAID DOWN IN THE BRICKEY AND ANDERSON CASES ARE CORRECT; AND IF SO, WHETHER THEY MAY PROPERLY BE APPLIED AND EXTENDED TO THE PRESENT SITUATION. THE SUGGESTION HAS BEEN MADE THAT THE POLICY ADOPTED BY THE BUREAU WITH REFERENCE TO THE SATISFACTION OF PREMIUM LIENS SHOULD BE MODIFIED, AND THE CONTENTION HAS BEEN ADVANCED THAT THE LIEN SHOULD BE SATISFIED ONLY FROM THE PROCEEDS OF THE PARTICULAR POLICY IN WHICH IT MAY HAVE BEEN ATTACHED, SO THAT IF SAID POLICY LAPSES THE LIEN FAILS AND THE BUREAU ACCORDINGLY CAN NOT PROCEED TO SATISFY THE LIEN FROM THE AVAILS OF ANY OTHER POLICY WHICH MAY HAVE BEEN ISSUED TO THE VETERAN.

THE WAR RISK INSURANCE ACT ORIGINALLY CONTAINED NO EXPRESS AUTHORITY FOR REINSTATEMENT OF LAPSED OR CANCELED INSURANCE. IN CASES WHERE THE VETERAN WAS AN INSURABLE RISK, REINSTATEMENT OF HIS INSURANCE WAS RECOGNIZED AS PROPER UNDER REGULATIONS WHICH REQUIRED, IN ADDITION TO A SHOWING OF GOOD HEALTH, THE PAYMENT OF TWO MONTHLY PREMIUMS, ONE ON THE LAPSED OR CANCELED INSURANCE AND ONE ON THE REINSTATED INSURANCE. BY THE ACT OF AUGUST 9, 1921, 42 STAT. 156, SECTION 408 WAS ADDED TO THE WAR RISK INSURANCE ACT, EXPRESSLY AUTHORIZING REINSTATEMENTS OF LAPSED OR CANCELED INSURANCE IN CASES WHERE THE VETERAN WAS NOT AN INSURABLE RISK, PROVIDED HIS DISABILITY WAS SERVICE CONNECTED AND LESS THAN PERMANENT AND TOTAL. IN ORDER TO TAKE ADVANTAGE OF THIS STATUTORY REINSTATEMENT, THE VETERAN WAS REQUIRED "TO PAY ALL THE BACK MONTHLY PREMIUMS WHICH WOULD HAVE BECOME PAYABLE IF SUCH INSURANCE HAD NOT LAPSED, TOGETHER WITH INTEREST AT THE RATE OF 5 PERCENT PER ANNUM, COMPOUNDED ANNUALLY ON EACH PREMIUM FROM THE DATE SAID PREMIUM IS DUE BY THE TERMS OF THE POLICY.' THE EVIDENT THEORY BACK OF THIS REQUIREMENT WAS THAT BECAUSE THE VETERAN HAD BECOME DISABLED AND NO LONGER AN INSURABLE RISK DURING THE PERIOD OF LAPSE OR CANCELLATION, HE MUST PAY FOR INSURANCE PROTECTION DURING ALL OF SUCH PERIOD IN ORDER THAT THE INSURANCE MIGHT BE CONSIDERED AS NEVER HAVING LAPSED OR BEEN CANCELED. THIS PROVISION FOR STATUTORY REINSTATEMENTS OF INSURANCE BY DISABLED VETERANS WAS REENACTED IN THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 625, AS SECTION 304, BUT NO PROVISION WAS THEN MADE FOR PAYMENT OF BACK PREMIUMS WITH INTEREST OTHER THAN IN CASH. BY THE ACT OF JULY 2, 1926, 44 STAT. 799, SECTION 304 OF THE STATUTE WAS AMENDED BY ADDING THE FOLLOWING PROVISO:

* * * PROVIDED FURTHER, THAT WHERE WITHIN ONE YEAR OF THIS AMENDATORY ACT ALL OF THE REQUIREMENTS FOR REINSTATEMENT OF YEARLY RENEWABLE TERM INSURANCE UNDER THIS SECTION ARE COMPLIED WITH, EXCEPT THE PAYMENT OF UNPAID PREMIUMS WITH INTEREST, AND PROOF SATISFACTORY TO THE DIRECTOR IS FURNISHED SHOWING THE APPLICANT IS UNABLE TO PAY SUCH PREMIUMS WITH INTEREST OR SOME PART THEREOF, THE APPLICATION MAY BE APPROVED, AND THE AMOUNT OF UNPAID PREMIUMS WITH INTEREST AS PROVIDED IN THIS SECTION SHALL BE PLACED AS AN INTEREST-BEARING INDEBTEDNESS AGAINST THE INSURANCE, SUCH INDEBTEDNESS TO BEAR INTEREST AT THE RATE OF 5 PERCENT PER ANNUM, COMPOUNDED ANNUALLY, TO BE DEDUCTED IN ANY SETTLEMENT THEREUNDER: * * *

WITH THIS PROVISO ADDED TO THE SECTION, TWO CLASSES ARE ESTABLISHED UNDER THE SECTION, TO WIT, (1) THOSE FINANCIALLY ABLE TO PAY, AND WHO HAVE PAID, ALL THE BACK PREMIUMS WITH INTEREST IN CASH; AND (2) THOSE FINANCIALLY UNABLE TO PAY, AND WHO HAVE NOT PAID, THE BACK PREMIUMS WITH INTEREST IN CASH, BUT WHO HAVE HAD THE AMOUNT THEREOF "PLACED AS AN INTEREST-BEARING INDEBTEDNESS AGAINST THE INSURANCE.' THEREFORE, TO HOLD THAT THE EXPRESS TERMS OF THE PROVISO LIMIT THE COLLECTION OF THE INDEBTEDNESS THUS PLACED "AGAINST THE INSURANCE" TO "ANY SETTLEMENT THEREUNDER," CREATES A DEFINITE DISCRIMINATION IN FAVOR OF CLASS (2)AND AGAINST CLASS (1). THAT IS TO SAY, IF SUCH IS TO BE CONSIDERED THE PROPER CONSTRUCTION, UPON SUBSEQUENT LAPSE OF A REINSTATED AND CONVERTED POLICY ISSUED TO CLASS (1) VETERANS, THE INSURED HAS LOST THE PAYMENT OF THE BACK PREMIUMS MADE IN CASH, WHEREAS IN THE EVENT OF A SUBSEQUENT LAPSE OF A REINSTATED AND CONVERTED POLICY ISSUED TO CLASS (2) VETERANS, AS IN THE INSTANT CASE, THE VETERAN HAS LOST NOTHING AND HAS HAD THE BENEFIT OF THE INSURANCE PROTECTION ON THE SAME BASIS AS ONE WHO HAD PAID OUT HIS CASH.

REFERENCE HAS BEEN HAD TO HEARINGS BEFORE THE CONGRESSIONAL COMMITTEES AND THE LEGISLATIVE HISTORY OF THE PROVISION. SEE PARTICULARLY PAGES 119 TO 147 OF THE HEARINGS BEGUN JANUARY 7, 1925, BEFORE THE COMMITTEE ON WORLD WAR VETERANS' LEGISLATION, HOUSE OF REPRESENTATIVES, SIXTY- EIGHTHCONGRESS, WHICH CONSIDERED A SIMILAR PROVISO, AND THE DEBATES ON THIS PARTICULAR PROVISO BEFORE THE SENATE, CONGRESSIONAL RECORD, SIXTY- NINTH CONGRESS, FIRST SESSION, PAGES 12084 TO 12089. THERE WAS NOT DISCUSSED THE EFFECT OF THE CONTINGENCY OF A SUBSEQUENT LAPSE OF A REINSTATED AND CONVERTED POLICY AGAINST WHICH A LIEN FOR UNPAID PREMIUMS WITH INTEREST HAD BEEN PLACED, AND THE RIGHT OF THE GOVERNMENT WITH RESPECT THERETO, BUT THERE WERE EXPRESSIONS OF CONCERN THAT THE FIRST BILL, PROVIDING FOR A NONINTEREST BEARING INDEBTEDNESS, PROPOSED DISCRIMINATION BETWEEN CLASSES ON THE BASIS OF THEIR FINANCIAL CONDITION. TO MEET SOME OF THE OBJECTIONS ON ACCOUNT OF THIS DISCRIMINATION, THE PROVISIONS OF THE ORIGINAL BILL WERE CHANGED TO PROVIDE FOR THE PLACING AGAINST THE INSURANCE OF AN INTEREST-BEARING, INSTEAD OF A NONINTEREST- BEARING, INDEBTEDNESS TO COVER AMOUNTS OF UNPAID PREMIUMS WITH INTEREST. WITH THIS CHANGE, THE CONGRESS FINALLY PASSED THE AMENDMENT TO THE SECTION ABOVE QUOTED.

IF THERE WERE TO BE CONSIDERED ONLY THE TERMS OF THE PROVISO ITSELF, I WOULD BE INCLINED TO THE VIEW THAT THE WORDS "AN INTEREST-BEARING INDEBTEDNESS AGAINST THE INSURANCE * * * TO BE DEDUCTED IN ANY SETTLEMENT THEREUNDER," WERE WORDS OF LIMITATION RESTRICTING THE COLLECTION OF INDEBTEDNESS TO A DEDUCTION FROM ANY AMOUNT PAID UNDER THE PARTICULAR POLICY AGAINST WHICH THE INDEBTEDNESS HAD BEEN PLACED. BUT BEARING IN MIND THE HISTORY OF THIS LEGISLATION, AND THE APPARENT INTENT OF THE CONGRESS TO EQUALIZE AS NEARLY AS POSSIBLE THE RIGHTS OF ALL VETERANS WITH SERVICE-CONNECTED DISABILITIES TO REINSTATE INSURANCE, I AM CONSTRAINED TO HOLD THAT THE PLACING OF THE INTEREST BEARING INDEBTEDNESS AGAINST A POLICY SHOULD BE CONSIDERED AS IN THE NATURE OF THE EXECUTION OF A NOTE BY THE INSURED WITH THE PARTICULAR POLICY AS COLLATERAL, AND THAT THE WORDS IN THE STATUTE MERELY PRESCRIBE A PROCEDURE FOR COLLECTION, WHICH, IF NOT POSSIBLE, BECAUSE OF THE LAPSE OF THE PARTICULAR POLICY AGAINST WHICH THE INDEBTEDNESS HAD BEEN PLACED, PRIOR TO MATURITY OR BEFORE THE POLICY HAD ACQUIRED A VALUE EQUAL TO OR IN EXCESS OF THE AMOUNT OF THE LIEN, DOES NOT, IPSO FACTO, CANCEL THE INDEBTEDNESS NOR DEFEAT THE GOVERNMENT'S RECOURSE UNDER OTHER PROVISIONS OF THE STATUTE TO EFFECT A COLLECTION THEREOF. SECTION 22 OF THE ACT OF JUNE 7, 1924 (43 STAT. 613), PROVIDES IN PART AS FOLLOWS:

* * * PROVIDED, THAT SUCH COMPENSATION, INSURANCE, AND MAINTENANCE AND SUPPORT ALLOWANCE SHALL BE SUBJECT TO ANY CLAIMS WHICH THE UNITED STATES MAY HAVE, UNDER TITLES II, III, IV, AND V, AGAINST THE PERSON ON WHOSE ACCOUNT THE COMPENSATION, INSURANCE, OR MAINTENANCE AND SUPPORT ALLOWANCE IS PAYABLE.

UNDER THIS SECTION THE INDEBTEDNESS FOR UNPAID PREMIUMS WITH ACCRUED INTEREST PLACED AGAINST A POLICY WHICH HAS SUBSEQUENTLY LAPSED BEFORE ACQUIRING SUFFICIENT VALUE TO COVER THE INDEBTEDNESS, MAY BE COLLECTED BY DEDUCTION FROM PAYMENTS MADE IN SETTLEMENTS UNDER OTHER POLICIES ISSUED TO THE SAME VETERAN OR AGAINST COMPENSATION PAYMENTS IN HIS FAVOR.

YOU ARE ADVISED, THEREFORE, THAT IN THE CASE OF CHARLES E. SHERMER, THE VETERAN IS STILL LIABLE TO THE GOVERNMENT FOR THE AMOUNT OF THE LIEN ESTABLISHED AGAINST THE LAPSED POLICY, AND THAT SUCH INDEBTEDNESS MAY BE SATISFIED BY DEDUCTION FROM THE AMOUNT OTHERWISE DUE UNDER HIS OTHER POLICY, WHICH HAS MATURED.

THIS OFFICE HAS NO OBJECTION TO OFFER TO THE BUREAU PROCEDURE IN THE CASES OF LAWRENCE PETER BRICKEY AND SIGURD F. ANDERSON.