A-7208, FEBRUARY 5, 1925, 4 COMP. GEN. 656

A-7208: Feb 5, 1925

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WAR RISK INSURANCE IN THIS DECISION VARIOUS QUESTIONS ARE DECIDED AS TO THE STATUS OF POLICIES FOR INSURANCE ISSUED UNDER THE WAR RISK INSURANCE ACT. 1925: I HAVE YOUR LETTER OF DECEMBER 27. GREEN WAS GRANTED $5. THE NAVY ALLOTMENT OFFICE HAS REPORTED THAT THE ALLOTMENT WAS NOT RENEWED BUT THAT SUBSEQUENT PREMIUMS FOR TWELVE MONTHS WERE DEDUCTED. THE BUREAU'S CLAIM WAS FILED THROUGH THE GENERAL ACCOUNTING OFFICE. THE CLAIM WAS DENIED SEPTEMBER 15. IT IS TO BE NOTED THAT IN THIS CASE THE TERM INSURANCE WAS CONVERTED WITHOUT FORMAL REINSTATEMENT ON THE ASSUMPTION THAT THE INSURED'S ACQUIESCENCE IN THE DEDUCTION OF PREMIUMS FROM HIS PAY REALLY KEPT IT IN FORCE SO THAT NO REINSTATEMENT WAS NECESSARY.

A-7208, FEBRUARY 5, 1925, 4 COMP. GEN. 656

WAR RISK INSURANCE IN THIS DECISION VARIOUS QUESTIONS ARE DECIDED AS TO THE STATUS OF POLICIES FOR INSURANCE ISSUED UNDER THE WAR RISK INSURANCE ACT, AS AMENDED, AND THE WORLD WAR VETERANS' ACT OF JUNE 7, 1924, 43 STAT. 625, 525, RELATIVE TO LAPSE, REINSTATEMENT, AND THE REFUND OF PREMIUMS. FOR POINTS INVOLVED SEE DECISION.

COMPTROLLER GENERAL MCCARL TO THE DIRECTOR, UNITED STATES VETERANS' BUREAU, FEBRUARY 5, 1925:

I HAVE YOUR LETTER OF DECEMBER 27, 1924, SUBMITTING A STATEMENT OF FACTS IN THE CASES OF WALLACE V. GREEN AND JOHN T. BITTLE, WITH REQUEST FOR DECISION OF SEVERAL QUESTIONS INVOLVED THEREIN AS FOLLOWS:

WALLACE V. GREEN WAS GRANTED $5,000 TERM INSURANCE, EFFECTIVE JUNE 7, 1921, WHEN HE REGISTERED AN ALLOTMENT TO COVER HIS PREMIUMS TO EXPIRE JUNE, 1923. THE NAVY ALLOTMENT OFFICE HAS REPORTED THAT THE ALLOTMENT WAS NOT RENEWED BUT THAT SUBSEQUENT PREMIUMS FOR TWELVE MONTHS WERE DEDUCTED. ON MAY 12, 1924, GREEN APPLIED FOR THE CONVERSION OF $1,000 OF INSURANCE, STATING THAT THE PREMIUMS ON THE TERM INSURANCE HAD BEEN PAID TO INCLUDE MAY, 1924, AND EXECUTING A NEW ALLOTMENT OF HIS PAY TO COVER PREMIUMS EFFECTIVE JUNE 1, 1924. BEING OF THE OPINION THAT THIS ACTION ON THE PART OF THE INSURED CONSTITUTED AN ACKNOWLEDGEMENT AND RATIFICATION BY HIM OF THE PREMIUM DEDUCTIONS MADE BY THE NAVY AFTER THE EXPIRATION OF THE FIRST ALLOTMENT, THE BUREAU ISSUED THE CONVERTED POLICY WITHOUT A FORMAL REINSTATEMENT OF THE TERM INSURANCE AND TOOK STEPS TO SECURE FROM THE NAVY CREDIT FOR THE PREMIUMS FOR THE PERIOD FROM JUNE, 1923, TO MAY, 1924. THE SUGGESTION OF THE NAVY DEPARTMENT, THE BUREAU'S CLAIM WAS FILED THROUGH THE GENERAL ACCOUNTING OFFICE, BUT THE CLAIM WAS DENIED SEPTEMBER 15, 1924. (CLAIM 044 233 ALF-806.)

IT IS TO BE NOTED THAT IN THIS CASE THE TERM INSURANCE WAS CONVERTED WITHOUT FORMAL REINSTATEMENT ON THE ASSUMPTION THAT THE INSURED'S ACQUIESCENCE IN THE DEDUCTION OF PREMIUMS FROM HIS PAY REALLY KEPT IT IN FORCE SO THAT NO REINSTATEMENT WAS NECESSARY. YOUR DECISION IN THE CARBERRY CASE, HOWEVER, SEEMS NOT ALTOGETHER CONSISTENT WITH THE VIEW.

THE OTHER CASE IS THAT OF JOHN T. BITTLE, WHO ENTERED THE SERVICE AUGUST 25, 1922, AND APPLIED FOR INSURANCE SEPTEMBER 6, 1922. HIS APPLICATION BORE THE NOTATION:

"ALLOTMENT FOR $1.28 FOR 21 MONTHS TO PAY FOR PREMIUMS REGISTERED AT NAVAL TRAINING STATION AT SAN FRANCISCO, CALIFORNIA, EFFECTIVE SEPTEMBER, 1922.'

THIS ALLOTMENT WAS NOT ACCOMPLISHED PRIOR TO THE SAILOR'S TRANSFER THROUGH NO FAULT OF HIS. HE SUBSEQUENTLY EXECUTED A NEW APPLICATION DATED DECEMBER 24, 1922, WHICH WAS AFTER THE EXPIRATION OF THE 120 DAYS ALLOWED FOR APPLYING FOR INSURANCE, AND ALSO EXECUTED AN ALLOTMENT TO COVER THE PREMIUMS BEGINNING WITH THE MONTH OF JANUARY, 1923. THE PREMIUMS WERE DEDUCTED UNDER THIS ALLOTMENT TO INCLUDE THE MONTH OF SEPTEMBER, 1923. THE BUREAU HAS HELD THAT THE SECOND APPLICATION WAS INVALID AS AN ORIGINAL APPLICATION FOR INSURANCE. IT HAS FURTHER BEEN HELD THAT THE FIRST APPLICATION WAS VALID NOTWITHSTANDING THE FAILURE OF THE INSURED TO EXECUTE AN ALLOTMENT, BUT THAT THE INSURANCE LAPSED AT THE END OF 31 DAYS. THIS IS IN ACCORDANCE WITH THE PRECEDENTS OF THIS BUREAU OF LONG STANDING AND BELIEVED TO BE CORRECT.

THE QUESTIONS PRESENTED ARE TYPICAL OF THOSE ARISING IN QUITE A NUMBER OF OTHER CASES AND THIS BUREAU HAS ON HAND A CONSIDERABLE AMOUNT OF MONEY THAT HAS BEEN DEDUCTED FROM THE PAY OF SOLDIERS AND SAILORS FOR INSURANCE PREMIUMS UNDER CONDITIONS SIMILAR TO THOSE SET FORTH ABOVE. WHERE THESE PREMIUMS HAVE BEEN TURNED OVER TO THE BUREAU BY THE ARMY OR NAVY THE QUESTION IS SIMPLY WHETHER OR NOT THE INSURANCE IS IN FORCE, AND IF NOT, WHETHER THE BUREAU MUST MAKE A REFUND OF THE PREMIUMS TO THE INSURED. WHERE THE PREMIUMS HAVE NOT BEEN TURNED OVER TO THE BUREAU BY THE ARMY OR NAVY THE QUESTION IS WHETHER THE INSURANCE WAS IN FORCE, AND IF SO, WHETHER THE ARMY OR NAVY MUST ACCOUNT TO THE BUREAU FOR THE PREMIUMS.

THERE IS ALSO THE QUESTION AS TO WHAT EFFECT, IF ANY, SECTION 411 OF THE WAR RISK INSURANCE ACT AND 307 OF THE WORLD WAR VETERANS' ACT, RELATING TO INCONTESTABILITY, HAVE ON EITHER OR BOTH OF THESE CASES.

SPECIFICALLY, THE QUESTIONS THE BUREAU DESIRES TO HAVE ANSWERED ARE AS FOLLOWS:

IN THE GREEN CASE---

(1) DID THE INSURANCE LAPSE AFTER THE EXPIRATION OF THE FIRST ALLOTMENT, NOTWITHSTANDING THAT THE PREMIUMS WERE DEDUCTED FROM THE INSURED'S PAY WITH HIS ACQUIESCENCE AND SUBSEQUENT RATIFICATION? THE FACT THAT SECTION 4065 OF THE REGULATIONS, STIPULATING THE CIRCUMSTANCES UNDER WHICH THE INSURANCE SHALL LAPSE, CONTAINS THE WORDS "UNLESS THE INSURED * * * OTHERWISE MAKES PAYMENT OF SAID PREMIUMS * * * WOULD SEEM TO RAISE SOME DOUBT ON THIS POINT.

(2) ASSUMING THE INSURANCE TO HAVE LAPSED, CAN THE CONVERTED POLICY ISSUED WITHOUT FORMAL REINSTATEMENT OF THE TERM INSURANCE BE HELD TO HAVE BEEN VALID WHEN ISSUED?

(3) IF THE ANSWER TO THE PRECEDING QUESTION IS IN THE NEGATIVE, DID THE CONVERTED POLICY SO ISSUED BECOME INCONTESTABLE AT THE EXPIRATION OF SIX MONTHS AFTER IT WAS ISSUED, FULL PREMIUMS HAVING BEEN PAID THEREON DURING THAT PERIOD?

(4) IN CASE YOU HOLD THAT THE CONVERTED POLICY IS INVALID, IS THIS BUREAU AUTHORIZED TO REFUND TO THE INSURED THE PREMIUMS WHICH IT RECEIVED UNDER THE SECOND ALLOTMENT?

(5) IN CASE YOU HOLD, EITHER THAT THE TERM INSURANCE DID NOT LAPSE AFTER EXPIRATION OF THE FIRST ALLOTMENT, OR THAT THE CONVERTED POLICY WAS VALID WHEN ISSUED, OR THAT IT BECAME INCONTESTABLE AT THE EXPIRATION OF SIX MONTHS, IS THIS BUREAU ENTITLED TO CREDIT FROM THE NAVY DEPARTMENT FOR THE PREMIUMS DEDUCTED FOR THE PERIOD FROM JUNE, 1923, TO MAY, 1924, DURING WHICH TIME NO ALLOTMENT WAS IN FORCE?

IN THE BITTLE CASE THERE CAN BE NO DOUBT, OF COURSE, THAT THE INSURANCE LAPSED PRIOR TO THE FILING OF THE SECOND APPLICATION. THEREFORE THE ONLY QUESTIONS PRESENTED ARE THE FOLLOWING:

(1) DID THE EXECUTION OF THE SECOND APPLICATION FOR INSURANCE, TAKEN IN CONNECTION WITH THE EXECUTION OF THE ALLOTMENT EFFECTIVE JANUARY 1, 1923, AND THE DEDUCTION OF PREMIUMS THEREUNDER FOR MORE THAN SIX MONTHS, CONSTITUTE SUCH A REINSTATEMENT OF THE INSURANCE AS WOULD, THOUGH INFORMAL, RIPEN INTO INCONTESTABILITY UNDER SECTIONS 411 OF THE WAR RISK INSURANCE ACT AND 307 OF THE WORLD WAR VETERANS' ACT, 1924?

(2) ASSUMING THAT THE ABOVE QUESTION MUST BE ANSWERED IN THE NEGATIVE, IS THIS BUREAU AUTHORIZED TO REFUND TO THE INSURED THE PREMIUMS WITH WHICH IT HAS BEEN CREDITED BY THE NAVY DEPARTMENT, THE SAME HAVING BEEN DEDUCTED FROM THE PAY OF THE INSURED FOR THE PERIOD FROM JANUARY, 1923, TO SEPTEMBER, 1923?

THE BUREAU REGULATIONS RELATIVE TO REINSTATEMENT OF LAPSED OR CANCELED INSURANCE WHILE THE INSURED IS STILL IN THE MILITARY OR NAVAL SERVICE ARE TO BE FOUND IN U.S. VETERANS' BUREAU REGULATIONS, 1923, SECTION 4085 ET SEQ.

THE ANSWERS TO THE QUESTIONS SUBMITTED ARE AS FOLLOWS:

IN THE GREEN CASE:

(1) THIS QUESTION IS ANSWERED IN THE AFFIRMATIVE. SEE SECTION 4065, REGULATIONS, UNITED STATES VETERANS' BUREAU, 1923, CONSTRUED IN DECISIONS OF JULY 10, 1924, 4 COMP. GEN. 36, AND AUGUST 5, 1924, 4 COMP. GEN. 155. IN THE LAST-CITED CASE IT WAS HELD:

* * * IN THE ABSENCE OF AFFIRMATIVE ACTION BY THE ENLISTED MAN AUTHORIZING THE APPLICATION OF THE AMOUNT DEDUCTED FROM HIS PAY AS INSURANCE PREMIUMS THERE EXISTS NO PROPER BASIS FOR A SETTLEMENT BY THIS OFFICE IN FAVOR OF THE VETERANS' BUREAU OF THE AMOUNT DEDUCTED. THE PAYMENT OF INSURANCE PREMIUMS IS A MATTER OF CONTRACT BETWEEN THE VETERANS' BUREAU AND THE INSURED AND NECESSITATES AN AUTHORIZATION BY THE ENLISTED MAN BEFORE ANY AMOUNT DEDUCTED FROM THE PAY OF THE ENLISTED MAN MAY BE APPLIED AS PREMIUMS.

(2) SECTIONS 408 AND 409 OF THE WAR RISK INSURANCE ACT, MARCH 4, 1923, 42 STAT. 1525, AND SECTIONS 304, 305, AND 306 OF THE WORLD WAR VETERANS' ACT, JUNE 7, 1924, 43 STAT. 625, PROVIDE THE EXCEPTIONS TO THE REQUIREMENT THAT INSURANCE PREMIUMS MUST BE PAID TO KEEP ALIVE INSURANCE POLICIES, AND IT IS UNDERSTOOD THAT THESE CASES DO NOT FALL WITHIN ANY OF THESE EXCEPTIONS. THE TERM INSURANCE OF GREEN LAPSED AUGUST 1, 1923, THE EXPIRATION OF THE GRACE PERIOD FROM JUNE 30, 1923, TERMINATION OF THE ALLOTMENT MADE BY HIM FOR INSURANCE PREMIUMS. 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.

(3) IN DECISION OF MAY 29, 1924, 3 COMP. GEN. 906, CONSTRUING SECTION 411, ACT OF AUGUST 9, 1921, 42 STAT. 157, AS AMENDED BY THE ACT OF MARCH 4, 1923, 42 STAT. 1527, REENACTED AS SECTION 307 OF THE WORLD WAR VETERANS' ACT, JUNE 7, 1924, 43 STAT. 627, PROVIDING THAT POLICIES OF INSURANCE SHALL BE INCONTESTABLE AFTER HAVING BEEN IN FORCE SIX MONTHS FROM THE DATE OF ISSUANCE OR REINSTATEMENT, WITH CERTAIN EXCEPTIONS, IT WAS HELD AS FOLLOWS:

THE POLICY OF INSURANCE CAN HAVE NO GREATER MEANING NOR IMPOSE A GREATER LIABILITY UPON THE UNITED STATES THAN THAT WHICH IS PROVIDED BY THE STATUTE. I WOULD UNDERSTAND THE PROVISION OF THE STATUTE WITH REFERENCE TO INCONTESTABILITY AFTER SIX MONTHS TO MEAN INCONTESTABLE WITH RESPECT TO THOSE MATTER WHICH USUALLY ARE SO INCONTESTABLE IN LIFE INSURANCE--- HEALTH CONDITION, FAMILY CONDITIONS, RELATIONSHIP, ETC.; THAT IS TO SAY, WHETHER THE INSURED APPEARS A PROPER INSURABLE SUBJECT. IT HAS RELATION TO WHAT MIGHT BE CLASSED "DEFECTS" IN THE SUBJECT OF INSURANCE RATHER THAN DEFECTS IN THE AUTHORITY TO CONTRACT.

THUS IN THIS CASE 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.

(4) THE REFUND OF PREMIUMS COVERING PERIOD FOR WHICH NO INSURANCE PROTECTION IS GIVEN IS AUTHORIZED. ACCORDINGLY, IF UNDER THE REGULATIONS OF THE BUREAU THE REINSTATEMENT OF THE TERM POLICY WAS NOT AUTHORIZED REFUND OF PREMIUMS COLLECTED SUBSEQUENT TO THE LAPSING THEREOF MAY BE MADE.

(5) THE RIGHT OF THE BUREAU TO CREDIT FOR PREMIUMS DEDUCTED FROM THE PAY OF GREEN DURING PERIOD FROM JUNE, 1923, TO MAY, 1924, WOULD DEPEND ON WHETHER THE INSURED WAS ENTITLED TO REINSTATEMENT OF HIS TERM INSURANCE UNDER THE REGULATIONS WHICH REQUIRED AS A CONDITION OF SUCH REINSTATEMENT PAYMENT OF BACK PREMIUMS. IF SO, THE INSURED SHOULD BE REQUIRED AS A CONDITION OF THE VALIDATING OF PRESENT INSURANCE TO AUTHORIZE AFFIRMATIVELY THE APPLICATION OF THE AMOUNT DEDUCTED FROM HIS PAY TO THE PAYMENT OF SUCH BACK PREMIUMS.

IN THE BITTLE CASE:

(1) THE FACTS IN THIS CASE ARE NOT ENTIRELY CLEAR, BUT IT IS UNDERSTOOD THAT THE ENLISTED MAN, ALTHOUGH MAKING APPLICATION FOR INSURANCE WITHIN THE SPECIFIED PERIOD OF 120 DAYS AFTER ENTRANCE INTO THE SERVICE, FAILED TO FOLLOW IT UP WITH THE EXECUTION OF A PROPER ALLOTMENT OF HIS PAY OR TO OTHERWISE PROVIDE FOR THE PAYMENT OF THE INSURANCE PREMIUMS, THE POLICY HAVING LAPSED AFTER 31 DAYS. ON THAT BASIS THE QUESTION IS ANSWERED IN THE NEGATIVE. SEE 3 COMP. GEN. 905, AND ANSWER TO QUESTION (3) IN THE GREEN CASE HEREIN. IF, ON DECEMBER 24, 1922, THE APPLICANT FOR INSURANCE HAD A STATUS ENTITLING HIM UNDER THE REGULATIONS OF THE BUREAU TO REINSTATEMENT OF INSURANCE THAT HAD LAPSED AT THE EXPIRATION OF THE 31-DAY PERIOD, THE SECOND APPLICATION FOR INSURANCE SHOULD BE SO CONSIDERED. ANSWER TO QUESTION 2 IN THE GREEN CASE.

(2) THE INSURANCE PREMIUMS MAY BE EITHER CREDITED TO, OR REFUNDED TO, THE APPLICANT FOR INSURANCE, DEPENDING ON THE RIGHT TO REINSTATEMENT.