A-5839, FEBRUARY 11, 1925, 4 COMP. GEN. 682

A-5839: Feb 11, 1925

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WAR RISK INSURANCE - MATURITY BY DEATH PENDING CONSIDERATION OF APPLICATION FOR CASH SURRENDER VALUE THE EFFECTIVE DATE OF THE CASH SURRENDER OF A POLICY OF CONVERTED WAR RISK INSURANCE IS THE DATE OF FINAL ADJUDICATION AND PAYMENT OF THE CASH SURRENDER VALUE BY THE VETERANS' BUREAU. WHILE THE INSURANCE IS STILL IN FORCE UNDER THE TERMS OF THE POLICY. 1925: I HAVE YOUR LETTER OF OCTOBER 17. IS ONE WHICH WILL BE VITALLY AFFECTED BY THE DETERMINATION OF THIS QUESTION. THE EFFECTIVE DATE OF THE POLICY WAS OCTOBER 1. PREMIUMS ON THIS POLICY WERE PAID CONTINUOUSLY TO INCLUDE AUGUST. WAS RECEIVED BY THE BUREAU. A GRACE OF THIRTY-ONE DAYS WITHOUT INTEREST WILL BE ALLOWED. DURING WHICH TIME THE POLICY WILL REMAIN IN FORCE.

A-5839, FEBRUARY 11, 1925, 4 COMP. GEN. 682

WAR RISK INSURANCE - MATURITY BY DEATH PENDING CONSIDERATION OF APPLICATION FOR CASH SURRENDER VALUE THE EFFECTIVE DATE OF THE CASH SURRENDER OF A POLICY OF CONVERTED WAR RISK INSURANCE IS THE DATE OF FINAL ADJUDICATION AND PAYMENT OF THE CASH SURRENDER VALUE BY THE VETERANS' BUREAU, AND THE DEATH OF THE INSURED AT ANY TIME PRIOR TO THAT DATE, WHILE THE INSURANCE IS STILL IN FORCE UNDER THE TERMS OF THE POLICY, MATURES THE POLICY AND OBLIGATES THE GOVERNMENT TO MAKE LAWFUL PAYMENT THEREUNDER, RATHER THAN TO PAY THE CASH SURRENDER VALUE.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, FEBRUARY 11, 1925:

I HAVE YOUR LETTER OF OCTOBER 17, 1924, PARTLY AS FOLLOWS:

A QUESTION HAS ARISEN WITH RESPECT TO YOUR DECISION A.D. 8132, DATED MARCH 4, 1924, IN SO FAR AS IT DETERMINED THE EFFECTIVE DATE OF THE CASH SURRENDER OF A UNITED STATES GOVERNMENT LIFE (CONVERTED) INSURANCE POLICY.

THE CASE OF WILLIAM WOZNY, C-630,294, IS ONE WHICH WILL BE VITALLY AFFECTED BY THE DETERMINATION OF THIS QUESTION. THE RECORDS SHOW THAT THE ABOVE-NAMED MAN WHILE A MEMBER OF THE ACTIVE MILITARY SERVICE MADE A VALID APPLICATION FOR $1,000 CONVERTED INSURANCE ON THE 20-YEAR ENDOWMENT PLAN. THE EFFECTIVE DATE OF THE POLICY WAS OCTOBER 1, 1920. PREMIUMS ON THIS POLICY WERE PAID CONTINUOUSLY TO INCLUDE AUGUST, 1922. ON OCTOBER 27, 1922, THE INSURED WROTE THE FOLLOWING LETTER TO THE BUREAU:

ELEVENTH ORDNANCE COMPANY,

SCHOFIELD BARRACKS, HAWAII,

OCTOBER 27, 1922. SUBJECT: REIMBURSEMENT OF CASH SURRENDER VALUE OF INSURANCE. TO: U.S. VETERANS' BUREAU, WASHINGTON, D.C.

1. REQUEST THAT I BE REIMBURSED WITH THE CASH SURRENDER VALUE OF MY INSURANCE.

2. KIND OF INSURANCE: 20-YEAR ENDOWMENT.

3. AMOUNT OF INSURANCE: ONE THOUSAND DOLLARS ($1,000.00).

4. POLICY NUMBER: K 213,308.

5.INSURANCE BECAME EFFECTIVE OCTOBER 1, 1920; TERMINATED JULY 31, 1922, BY REQUEST.

6. I HEREWITH INCLOSE MY POLICY AND SURRENDER ALL CLAIM THERETO.

(SIGNED) WILLIAM WOZNY.

(R-1368307) PRIVATE, ELEVENTH ORDNANCE COMPANY.

THE INSURED DIED ON NOVEMBER 22, 1922, A FEW DAYS BEFORE HIS REQUEST FOR CASH SURRENDER, ACCOMPANIED BY THE POLICY, WAS RECEIVED BY THE BUREAU. THE UNITED STATES GOVERNMENT LIFE (CONVERTED) INSURANCE POLICY PROVIDES AS FOLLOWS:

"GRACE FOR PAYMENT OF PREMIUMS. 2. FOR THE PAYMENT OF ANY PREMIUM UNDER THIS POLICY, A GRACE OF THIRTY-ONE DAYS WITHOUT INTEREST WILL BE ALLOWED, DURING WHICH TIME THE POLICY WILL REMAIN IN FORCE; BUT IF THE POLICY SHALL BECOME A CLAIM WITHIN THE GRACE PERIOD, THE UNPAID PREMIUMS SHALL BE DEDUCTED FROM THE AMOUNT OF INSURANCE PAYABLE.

"CASH SURRENDER AND LOAN PROVISIONS. 5. CASH-SURRENDER VALUE, PAID UP INSURANCE, EXTENDED INSURANCE, AND POLICY-LOAN PROVISIONS AS FOLLOWS SHALL BE EFFECTIVE ONLY AFTER PREMIUMS FOR TWELVE FULL MONTHS HAVE BEEN PAID--- ALL VALUES, RESERVES, AND NET SINGLE PREMIUMS BEING BASED ON THE AMERICAN EXPERIENCE TABLE OF MORTALITY, WITH INTEREST AT THREE AND ONE-HALF PERCENTUM PER ANNUM:

"CASH SURRENDER VALUE. (A) UPON WRITTEN REQUEST THEREFOR BY THE INSURED MADE WHILE THIS POLICY IS IN FORCE OR NOT LATER THAN THREE CALENDAR MONTHS AFTER THE DUE DATE OF THE PREMIUM IN DEFAULT, AND UPON COMPLETE SURRENDER OF THIS POLICY WITH ALL CLAIMS THEREUNDER, THE UNITED STATES WILL PAY TO THE INSURED THE CASH-SURRENDER VALUE HEREOF. THE SAID CASH-SURRENDER VALUE AT THE END OF ANY POLICY YEAR FOR WHICH PREMIUMS HAVE BEEN PAID IN FULL, IF NO INSTALLMENTS ON ACCOUNT OF TOTAL PERMANENT DISABILITY HAVE BEEN PAID, SHALL BE THE RESERVE, TOGETHER WITH ANY DIVIDEND ACCUMULATIONS LEFT ON DEPOSIT, LESS ANY INDEBTEDNESS UNDER THIS POLICY. FOR EACH MONTH WITHIN ANY POLICY YEAR, FOR WHICH MONTH THE PREMIUM HAS BEEN PAID, THE RESERVE AT THE END OF THE PRECEDING POLICY YEAR SHALL BE INCREASED BY ONE- TWELFTH OF THE INCREASE IN RESERVE FOR THE CURRENT POLICY YEAR.

"EXTENDED INSURANCE. (C) UPON DEFAULT IN PAYMENT OF PREMIUM AND THE EXPIRATION OF THE GRACE PERIOD, IF THE POLICY HAS NOT BEEN SURRENDERED FOR A CASH VALUE OR FOR PAID-UP INSURANCE, THIS POLICY SHALL BE EXTENDED AUTOMATICALLY AS TERM INSURANCE, PAYABLE IN MONTHLY INSTALLMENTS, FOR SUCH TIME FROM THE DUE DATE OF THE PREMIUM UNPAID AS THE CASH-SURRENDER VALUE WILL PURCHASE WHEN APPLIED AS A NET SINGLE PREMIUMS AT THE ATTAINED AGE OF THE INSURED. * * *.'

IN DECISION OF MARCH 4, 1924, 3 COMP. GEN. 582, CONSIDERING THE EFFECT OF A REQUEST TO SURRENDER A POLICY RECEIVED IN THE BUREAU, BUT NOT ACTED UPON UNTIL AFTER EVIDENCE HAD BEEN RECEIVED IN THE BUREAU SHOWING THE POLICY HAD MATURED BY PERMANENT AND TOTAL DISABILITY, IT WAS HELD:

UNDER THE TERMS OF THE POLICIES QUOTED, THE BUREAU MUST DETERMINE AS A FACT THAT THE WRITTEN REQUEST BY THE INSURED FOR CASH SURRENDER WAS MADE "WHILE THIS POLICY IS IN FORCE.' THAT IS, THAT THERE WAS A VALID AND SUBSISTING INSURANCE POLICY WHICH HAD NOT MATURED BY PERMANENT TOTAL DISABILITY. * * *

* * * IT MAY BE SAID, THEREFORE, THAT THE PROOF WAS ACTUALLY IN THE BUREAU AT THE TIME THE POLICY WAS FINALLY SURRENDERED, WHICH WOULD BE THE DATE OF PAYMENT OF THE CASH VALUE. * * *

THE QUESTION FOR DETERMINATION ON THE PRESENT SUBMISSION IS WHETHER UPON THE FACTS PRESENTED THE LIABILITY OF THE GOVERNMENT IS ON THE BASIS OF THE CASH-SURRENDER VALUE OR THE INSURANCE; THAT IS TO SAY, WHETHER THE ACTION OF THE INSURED IN SENDING IN HIS POLICY AND REQUESTING PAYMENT OF THE CASH -SURRENDER VALUE THEREOF RELIEVES THE GOVERNMENT OF ITS LIABILITY TO MAKE PAYMENT ON THE BASIS OF THE FACE VALUE OF THE POLICY WHEN DEATH OCCURS THEREAFTER BUT BEFORE PAYMENT OF THE CASH-SURRENDER VALUE. THE ANSWER TO THIS QUESTION IS DEPENDENT UPON WHETHER THE POLICY CONTINUED IN FORCE AS AN INSURANCE POLICY TO NOVEMBER 22, 1922, DATE OF DEATH OF THE INSURED, NOTWITHSTANDING THE FACT THAT THE INSURED HAD RELINQUISHED POSSESSION OF SAID POLICY WITH THE EXPRESSED INTENTION OF SURRENDERING SAME FOR THE CASH -SURRENDER VALUE THEREOF.

THE OFFER OF THE INSURED TO SURRENDER THE POLICY IN THIS CASE AND TO TERMINATE THE INSURANCE THEREUNDER WAS FOR THE SPECIFIC PURPOSE OF OBTAINING, AND UPON THE CONDITION THAT HE RECEIVE, THE CASH-SURRENDER VALUE THEREOF. THEREFORE, UNDER THE WELL-ESTABLISHED RULE THAT THE OFFER TO SURRENDER A POLICY UPON A CONDITION DOES NOT TERMINATE THE INSURANCE UNLESS AND UNTIL THE CONDITION IS ACCEPTED AND COMPLIED WITH, IT MUST BE HELD THAT THE SURRENDER OF POSSESSION OF THE POLICY IN THIS CASE, ACCOMPANIED BY THE REQUEST FOR THE CASH-SURRENDER VALUE, DID NOT TERMINATE THE INSURANCE, AND THAT IN SUCH CASES THE POLICY, IF OTHERWISE VALID AND SUBSISTING, REMAINS IN FULL FORCE AND EFFECT UNTIL PAYMENT OF THE CASH- SURRENDER VALUE.

IN OTHER WORDS, THE APPLICATION OF THE INSURED TO SURRENDER THE POLICY MUST BE CONSIDERED AND DETERMINATION MADE BY THE BUREAU THAT THE TERMS OF THE POLICY RELATIVE TO SURRENDER HAVE BEEN COMPLIED WITH. PENDING THAT DETERMINATION AND THE ADJUDICATION BASED THEREON THE POLICY REMAINS IN FULL FORCE AND EFFECT IF OTHERWISE VALID AND SUBSISTING. IF THE CONTINGENCY INSURED AGAINST HAPPENS--- THAT IS, DEATH OR PERMANENT TOTAL DISABILITY--- AT ANY TIME PRIOR TO SUCH FINAL ADJUDICATION AND PAYMENT OF CASH SURRENDER VALUE, THE LIABILITY OF THE GOVERNMENT FOR THE AMOUNT OF THE POLICY, SUBJECT TO THE TERMS THEREOF, BECOMES ABSOLUTE AND WOULD NOT BE SATISFIED BY PAYMENT OF THE CASH SURRENDER VALUE.

IN THE DECISION OF MARCH 4, 1924, SUPRA, THERE WERE INVOLVED RETROACTIVE RATINGS OF PERMANENT TOTAL DISABILITY, AND AS THE EFFECTIVE DATE OF MATURITY FOR THAT REASON IS EXCLUSIVELY A MATTER FOR DETERMINATION BY THE VETERANS' BUREAU, AS WELL AS THE ADJUDICATION OF AN APPLICATION FOR SURRENDER, THE CONTROLLING FACTOR IN DETERMINING WHETHER THE RATING OF DISABILITY OR THE ACTION UPON THE APPLICATION TO SURRENDER TOOK PRECEDENCE WAS HELD TO BE THE DATE OF RECEIPT IN THE BUREAU OF THE EVIDENCE ON WHICH THE DISABILITY RATING WAS BASED.

HOWEVER, IN THIS CASE A DIFFERENT SITUATION IS PRESENTED. THE DATE OF MATURITY OF A POLICY BY DEATH IS A FACT SUSCEPTIBLE OF PROOF WITHOUT SURRENDER VALUE BASED ON THAT ADJUDICATION, THE GOVERNMENT IS LIABLE UNDER ACTION BY THE BUREAU, AND IF DEATH OCCURS AT ANY TIME PRIOR TO A FINAL ADJUDICATION OF AN APPLICATION FOR SURRENDER AND THE PAYMENT OF THE CASH THE TERMS OF THE POLICY.

IN THE CASE OF WILLIAM WOZNY, PRESENTED BY YOU, IT APPEARS THAT DEATH OCCURRED BEFORE THE APPLICATION FOR SURRENDER WAS RECEIVED IN THE BUREAU AND, OF COURSE, BEFORE THE APPLICATION HAD RECEIVED ANY CONSIDERATION BY THE BUREAU AND WHILE THE POLICY WAS IN FULL FORCE AND EFFECT UNDER THE EXTENDED INSURANCE PROVISIONS THEREOF. ON THE FACTS PRESENTED PAYMENTS ARE AUTHORIZED UNDER THE POLICY.