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GOVERNMENT AND NATIONAL SERVICE LIFE INSURANCE PREMIUMS - GUARANTEE PAYMENTS INASMUCH AS NATIONAL SERVICE LIFE INSURANCE POLICIES WERE EXEMPT FROM THE PREMIUM GUARANTY PROVISIONS OF THE SOLDIERS' AND SAILORS' RELIEF ACT OF 1940 AND WERE EXPRESSLY DISCONTINUED BY THE SERVICEMEN'S INDEMNITY ACT OF 1951. THERE IS NO AUTHORITY FOR THE DEPARTMENT OF DEFENSE TO ENTER INTO AN AGREEMENT WITH THE VETERANS' ADMINISTRATION TO GUARANTEE THE PAYMENT OF PREMIUMS ON SUCH POLICIES AND ANY GUARANTEE PAYMENTS MADE FROM APPROPRIATED FUNDS WERE IMPROPER. ARE NOT LIABLE FOR PREMIUMS PAID ON THEIR BEHALF BY THE GOVERNMENT AND THE PREMIUM PAYMENTS MAY NOT BE REGARDED AS OVERPAYMENTS OR ERRONEOUS PAYMENTS TO THE MEMBER TO CONSTITUTE A DEBT WHICH COULD BE COLLECTED BY CHECK AGE AGAINST THE MEMBER'S PAY ACCOUNT UNDER AUTHORITY OF THE ACT OF JULY 15.

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B-123209, JANUARY 25, 1956, 35 COMP. GEN. 418

PAY - ALLOTMENTS - U.S. GOVERNMENT AND NATIONAL SERVICE LIFE INSURANCE PREMIUMS - GUARANTEE PAYMENTS INASMUCH AS NATIONAL SERVICE LIFE INSURANCE POLICIES WERE EXEMPT FROM THE PREMIUM GUARANTY PROVISIONS OF THE SOLDIERS' AND SAILORS' RELIEF ACT OF 1940 AND WERE EXPRESSLY DISCONTINUED BY THE SERVICEMEN'S INDEMNITY ACT OF 1951, THERE IS NO AUTHORITY FOR THE DEPARTMENT OF DEFENSE TO ENTER INTO AN AGREEMENT WITH THE VETERANS' ADMINISTRATION TO GUARANTEE THE PAYMENT OF PREMIUMS ON SUCH POLICIES AND ANY GUARANTEE PAYMENTS MADE FROM APPROPRIATED FUNDS WERE IMPROPER. MEMBERS OF THE UNIFORMED SERVICES WHO MADE APPLICATION FOR NATIONAL SERVICE LIFE INSURANCE, BUT WHO FAILED TO EXECUTE AN ALLOTMENT OF PAY TO COVER THE PREMIUMS, ARE NOT LIABLE FOR PREMIUMS PAID ON THEIR BEHALF BY THE GOVERNMENT AND THE PREMIUM PAYMENTS MAY NOT BE REGARDED AS OVERPAYMENTS OR ERRONEOUS PAYMENTS TO THE MEMBER TO CONSTITUTE A DEBT WHICH COULD BE COLLECTED BY CHECK AGE AGAINST THE MEMBER'S PAY ACCOUNT UNDER AUTHORITY OF THE ACT OF JULY 15, 1954, 15 U.S.C. 46D.

TO THE SECRETARY OF DEFENSE, JANUARY 25, 1956:

REFERENCE IS MADE TO A LETTER DATED MARCH 7, 1955, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF DEFENSE ( COMPTROLLER), REQUESTING AN OPINION WHETHER (1) THE DEPARTMENT OF DEFENSE IS LEGALLY JUSTIFIED IN CHECKING THE PAY ACCOUNTS OF MEMBERS OF THE ARMED FORCES FOR INSURANCE PREMIUMS WHICH WERE NOT DEDUCTED FROM THEIR SERVICE PAY WHERE THE MEMBER INDICATED IN THE APPLICATION FOR NATIONAL SERVICE LIFE INSURANCE THAT PREMIUMS WOULD BE PAID BY AN ALLOTMENT FROM HIS SERVICE PAY BUT FAILED TO MAKE THE ALLOTMENT, AND (2) WHETHER IN VIEW OF THE ENACTMENT OF THE INSURANCE ACT OF 1951, 65 STAT. 36, 38 U.S.C. 820, THE GUARANTEE BY THE DEPARTMENT OF DEFENSE OF THE PAYMENTS OF PREMIUMS TO THE VETERANS' ADMINISTRATION NOW IS NECESSARY. THE QUESTIONS WILL BE CONSIDERED IN REVERSE ORDER.

SECTION 602 (M) OF THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940, AS AMENDED, 38 U.S.C. 802 (M), PROVIDES THAT THE ADMINISTRATOR OF VETERANS' AFFAIRS SHALL BY REGULATIONS PRESCRIBE THE TIME AND METHOD OF PAYMENT OF THE PREMIUMS ON SUCH INSURANCE, WHICH AT THE ELECTION OF THE INSURED MAY BE DEDUCTED FROM HIS ACTIVE SERVICE PAY OR BE OTHERWISE MADE, AND AUTHORIZES THE ADVANCE OF THE FIRST PREMIUM DUE UNDER A NATIONAL SERVICE LIFE INSURANCE POLICY FROM THE CURRENT APPROPRIATIONS FOR ACTIVE SERVICE PAY OF PERSONNEL IN THE ARMED SERVICES.

IT APPEARS THAT, UNDER AN ARRANGEMENT BETWEEN THE SECRETARIES OF THE ARMY AND THE NAVY AND THE VETERANS' ADMINISTRATION, THE VETERANS' ADMINISTRATION ACCEPTED APPLICATIONS FOR NATIONAL SERVICE LIFE INSURANCE WITH THE UNDERSTANDING THAT THE ARMY AND NAVY GUARANTEED THE PREMIUMS WITH RESPECT TO APPLICATIONS DELIVERED THROUGH MILITARY CHANNELS IN WHICH THE APPLICANT EXPRESSED AN INTENTION OF PAYING PREMIUMS BY ALLOTMENT OF HIS SERVICE PAY. ON THE BASIS OF SUCH UNDERSTANDING THE VETERANS' ADMINISTRATION GRANTED INSURANCE AND APPROVED CLAIMS ON THE PREMISES THAT ALLOTMENTS WOULD BE EFFECTIVE ON THE DATE DESIGNATED AND WOULD BE PAID UNTIL OFFICIAL NOTICE OF DISCONTINUANCE WAS TRANSMITTED TO THE VETERANS' ADMINISTRATION. IN SOME INSTANCES THE ALLOTMENT FOR INSURANCE WAS NOT DEDUCTED FROM THE MEMBER'S PAY BECAUSE OF THE MEMBER'S FAILURE TO EXECUTE AN ALLOTMENT APPLICATION, AND IT IS REPORTED THAT THOSE MEMBERS NOW REFUSE TO EXECUTE A RETROACTIVE ALLOTMENT TO COVER SUCH PREMIUMS OR TO CONSENT TO CORRESPONDING CHECK AGES IN THEIR PAY ACCOUNTS.

THE SERVICEMEN'S INDEMNITY ACT OF 1951, 65 STAT. 33, 38 U.S.C. 851, PROVIDES FOR AUTOMATIC LIFE INSURANCE BEGINNING JUNE 27, 1950, OF ANY PERSON IN THE ACTIVE MILITARY OR NAVAL SERVICE OF THE UNITED STATES, WITHOUT COST TO HIM, IN THE PRINCIPAL AMOUNT OF $10,000 LESS ANY AMOUNT OF NATIONAL SERVICE LIFE INSURANCE OR UNITED STATES GOVERNMENT LIFE INSURANCE IN FORCE AT THE TIME OF DEATH. WITH CERTAIN EXCEPTIONS NOT MATERIAL HERE, THE INSURANCE ACT OF 1951 PROHIBITS THE GRANTING OF NATIONAL SERVICE LIFE INSURANCE OR UNITED STATES GOVERNMENT LIFE INSURANCE AFTER APRIL 24, 1951, OR THE PAYMENT OF PREMIUMS BY THE GOVERNMENT ON SUCH INSURANCE AFTER APRIL 24, 1951, OR THE PAYMENT OF PREMIUMS BY THE GOVERNMENT ON SUCH INSURANCE AFTER JUNE 30, 1951, UNDER PROVISIONS OF PRIOR STATUTES SPECIFICALLY AUTHORIZING IT TO PAY PREMIUMS IN CERTAIN INSTANCES.

IN CONSIDERING THE QUESTION WHETHER THE AUTHORIZATION CONTAINED IN SECTION 602 (M) OF THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940, AS AMENDED, FOR THE ADVANCEMENT FROM CURRENT APPROPRIATIONS OF THE FIRST PREMIUM DUE UNDER A NATIONAL SERVICE LIFE INSURANCE POLICY CONSTITUTED AUTHORITY FOR THE PAYMENT OF ANY PREMIUMS OTHER THAN THE FIRST PREMIUM, IT WAS STATED IN DECISION OF JUNE 7, 1946, B-40951, TO THE SECRETARY OF THE NAVY, CLARIFYING A PRIOR DECISION, THAT---

AS ABOVE INDICATED, THE SAID DECISION OF JANUARY 29, 1945, DID NOT RELATE TO PAYMENT OF ANY PREMIUM SUBSEQUENT TO THE FIRST. MOREOVER, I FIND NO BASIS FOR HOLDING THAT, WITH RESPECT TO SUBSEQUENT PREMIUM PAYMENTS, THE ALLOTMENT OPERATES AS AN ASSIGNMENT OF AN INSURED'S FUTURE PAY, SO AS TO CONSTITUTE A LIEN ON SUCH PAY AS EARNED AND THUS RENDER APPROPRIATIONS OF THE NAVY DEPARTMENT CHARGEABLE WITH THE PAYMENT OF SUCH PREMIUMS EVEN THOUGH DEDUCTION THEREOF IS NOT MADE FROM THE INSURED'S PAY. SUCH HOLDING WOULD, IN EFFECT, BE TANTAMOUNT TO RENDERING APPROPRIATIONS OF THE NAVY DEPARTMENT PRIMARILY CHARGEABLE FOR THE PAYMENT OF PREMIUMS ON POLICIES OF INSURED SERVICE PERSONNEL, AND, IN THE ABSENCE OF LEGISLATION SPECIFICALLY SO PROVIDING WOULD BE OF DOUBTFUL VALIDITY. FURTHERMORE, WHILE SECTION 406 OF THE SOLDIERS' AND SAILORS' RELIEF ACT OF 1940, AS AMENDED, 50 APP. U.S.C. 546, PROVIDES FOR THE GUARANTY BY THE UNITED STATES OF INSURANCE PREMIUM PAYMENTS FOR SERVICEMEN UNDER CERTAIN CONDITIONS, SECTION 400 OF THE ACT, 50 APP. U.S.C. 540, EXPRESSLY PROVIDES THAT SUCH PROVISIONS SHALL NOT APPLY TO POLICIES ISSUED UNDER THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940. HENCE, THERE WAS NO LEGAL BASIS FOR THE SECRETARIES CONCERNED TO ENTER INTO AN AGREEMENT WITH THE VETERANS ADMINISTRATION TO GUARANTEE THE PAYMENT OF PREMIUMS FOR SUCH INSURANCE FROM APPROPRIATED FUNDS, EVEN THOUGH APPLICANTS MAY HAVE EXPRESSED AN INTENTION OF PAYING THE PREMIUMS BY ALLOTMENT OF SERVICE PAY. ACCORDINGLY, IN OUR OPINION ANY PAYMENTS MADE FROM APPROPRIATED FUNDS AS THE RESULT OF SUCH AGREEMENT WERE IMPROPER. ON SUCH BASIS, THE SECOND QUESTION IS ANSWERED IN THE NEGATIVE.

WITH RESPECT TO THE FIRST QUESTION, THE RIGHTS AND LIABILITIES OF THE PARTIES UNDER A NATIONAL SERVICE LIFE INSURANCE CONTRACT ARE GOVERNED BY THE NATIONAL SERVICE LIFE INSURANCE ACT OF 1940 AND THE AUTHORIZED ADMINISTRATIVE REGULATIONS PROMULGATED IN CONFORMITY WITH THE ACT. UNDER SUCH REGULATIONS (38 CFR 8.2-8.20) THE INSURANCE NEVER WOULD BECOME EFFECTIVE OR WOULD LAPSE, AS THE CASE MIGHT BE, UNLESS THE PREMIUM WAS TIMELY TENDERED OR AN ALLOTMENT OF PAY FOR ITS PAYMENT ,ESTABLISHED.'

IT HAS BEEN HELD THAT, WHERE A SERVICE MEMBER DID NOT HAVE IN EFFECT AN ALLOTMENT OF HIS SERVICE PAY TO COVER THE PREMIUMS ON NATIONAL SERVICE LIFE INSURANCE, PAYMENTS MADE BY THE ARMY TO THE VETERANS' ADMINISTRATION TO COVER SUCH PREMIUMS WERE OVERPAYMENTS IN THE ACCOUNTS OF THOSE AGENCIES MADE UNDER MISTAKE OF FACT AND DID NOT CONSTITUTE PAYMENT OF PREMIUMS. SEE UNITED STATES V. JONES, 101 FED. SUPP. 128. ALSO IT HAS BEEN HELD THAT PAYMENT OF AN ALLOTMENT TO THE WIFE OF AN OFFICER WITHOUT SPECIFIC AUTHORITY OF LAW AND WITHOUT HIS CONSENT OR AUTHORIZATION DID NOT CONSTITUTE PAYMENT OF PAY AND HE THEREFORE COULD RECOVER THE AMOUNT WITHHELD FROM HIS PAY ON ACCOUNT OF SUCH ALLOTMENT PAYMENTS. MELVILLE V. UNITED STATES, 23 C.1CLS. 74.

FOR THESE REASONS, IT IS OUR OPINION THAT UNLESS THE SERVICE MEMBER ACTUALLY MADE AN ALLOTMENT OF HIS PAY TO COVER THE PREMIUMS FOR NATIONAL SERVICE LIFE INSURANCE GRANTED HIM BY THE VETERANS' ADMINISTRATION OR RATIFIED THE PAYMENT OF PREMIUMS ON HIS BEHALF BY KNOWINGLY ACCEPTING A BENEFIT, SUCH AS AN INSURANCE DIVIDEND, ARISING OUT OF SUCH PAYMENT, THE AMOUNT OF THE PREMIUMS ON SUCH INSURANCE PAID BY THE SECRETARIES CONCERNED TO THE VETERANS' ADMINISTRATION MAY NOT BE CONSIDERED AN OVERPAYMENT OR ERRONEOUS PAYMENT TO THE SERVICE MEMBER SO AS TO CONSTITUTE AN INDEBTEDNESS TO THE UNITED STATES WHICH WOULD BE PROPERLY FOR COLLECTION UNDER THE PROVISIONS OF PUBLIC LAW 497, 83D CONGRESS, APPROVED JULY 15, 1954, 68 STAT. 482, 5 U.S.C. 46D.

IT IS INDICATED IN THE ASSISTANT SECRETARY'S LETTER THAT THE NATIONAL SERVICE LIFE INSURANCE FUND HAS BEEN ADVERSELY AFFECTED BY THE NONRECEIPT OF THE ALLOTMENT PAYMENTS CONCERNED AND THE PAYMENT OF DEATH CLAIMS UNDER NATIONAL SERVICE LIFE INSURANCE POLICIES ISSUED ON THE PREMISE THAT THE ALLOTMENTS WOULD BE PAID. HOWEVER, IT WOULD APPEAR THAT THE UNITED STATES WOULD SUFFER NO LOSS BY VIRTUE OF PAYMENTS MADE TO BENEFICIARIES ON LAPSED OR NONEFFECTIVE NATIONAL SERVICE LIFE INSURANCE POLICIES ON MEMBERS DYING IN THE SERVICE AFTER JUNE 26, 1950, SINCE UNDER THE PROVISIONS OF THE SERVICEMEN'S INDEMNITY ACT OF 1951 PERSONS IN THE ACTIVE SERVICE OF THE ARMED FORCES AFTER JUNE 26, 1950, WERE AUTOMATICALLY INSURED BY THE UNITED STATES, WITHOUT COST TO THEM, IN THE PRINCIPAL AMOUNT OF $10,000 AND PAYMENT OF ANY CLAIMS ARISING AFTER THAT DATE IN SUCH CASES WHERE THE NATIONAL SERVICE LIFE INSURANCE POLICY HAD LAPSED OR WAS NONEFFECTIVE WOULD BE PROPERLY CHARGEABLE TO THE SERVICEMEN'S INDEMNITY APPROPRIATION. NO OBJECTION IS PERCEIVED TO THE VETERANS' ADMINISTRATION EFFECTING THE NECESSARY ADJUSTMENT BETWEEN THE NATIONAL SERVICE LIFE INSURANCE FUND AND THE SERVICEMEN'S INDEMNITY APPROPRIATION ON ACCOUNT OF ANY SUCH PAYMENTS.

THE REIMBURSEMENT OF THE NATIONAL SERVICE LIFE INSURANCE FUND FOR ANY LOSS RESULTING FROM NONRECOVERABLE PAYMENTS MADE TO BENEFICIARIES ON OTHER LAPSED OR NONEFFECTIVE POLICIES, THE RELIANCE ON THE UNAUTHORIZED GUARANTEES BY THE SECRETARIES OF THE ARMY AND THE NAVY, WOULD APPEAR TO BE A MATTER FOR CONSIDERATION BY THE CONGRESS.

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