Skelton v. United States

McDERMOTT, Circuit Judge.

This war risk insurance case turns upon a difficult question of statutory interpretation. By a statute first passed in 1921 and several times amended, Congress has enacted that term insurance shall not be considered as having lapsed as long as the insured had compensation due him sufficient to pay the premiums. World War Veterans’ Act 1924, § 305, as amended, 38 U.S. C.A. § 516. Broadly speaking, term insurance ceased on July 2, 1927, the insured having the right to convert it before that date into some form of regular life insurance with reserve values — generally spoken of as “converted” insurance. Section 301, World War Veterans’ Act of June 27, 1924, as amended, 38 U.S.C.A. § 512. Compensation in this case was allowed in 1930 for disabilities existing since discharge; it either must be applied to term insurance or not applied to insurance at all, for concededly it cannot be applied to one of the many types of converted insurance offered by later statutes. Cf. Mikell v. United States (C.C.A.4) 64 F.(2d) 301. Thus is presented the question : Did Congress intend that term insurance should cease in 1927 as to veterans who then had compensation due and unpaid? May such compensation be applied to term insurance until July 2, 1927, only? Did section 301 impliedly repeal section 305 as of July 2, 1927, except where policies had matured prior to that date ?

There is little dispute in 'the testimony. The insured was a potential dementia praecox when he enlisted. He had no manifest symptoms and was passed for service. It is probable that, absent the shock of war service or some other exciting force, he might have gone through life without developing the disease to the point of disablement. He carried on the full duties of a soldier for his four months service on this side, but on the transport the terror of submarines developed the disease; he was locked up in the hatch, and on March 21, 1919, was discharged on a certificate of disability, account dementia praecox with complications. Returning to the quiet life of the farm, he did a man’s full work for several consecutive years. He, then broke-down and was confined to the asylum in the spring of 1929.¹ His condition is incurable. In 1930 the Veterans Bureau rated him ten per tent disabled from the date of discharge until December 29, 1928. He was permanently and totally disabled on the latter date. The compensation so awarded — $10.-50 a month — was sufficient to have kept his term insurance alive.

No premiums were paid after September, 1919. If this unpaid compensation is applicable to insurance premiums after July 2, 1927, the record justifies — probably compels — a finding of permanent and total disability prior to 1930 when compensation was awarded back to the date of discharge.

Appellant argues that if section 301 is construed to repeal the right to have unpaid compensation applied to insurance premiums, it deprives insured of a vested right and is unconstitutional under the doctrine announced in Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434.² We do not agree. When this policy was issued in 1918, there was no right to have premiums paid with uncollected compensation. That privilege was accorded by later statutes, and can be withdrawn without disturbing vested contractual rights. Again, there is no vested right in compensation; since the right to compensation in any form may be withdrawn at the will of Congress, a fortiori the right to apply unpaid compensation in a particular way may be withdrawn.

We thus come squarely to a question of congressional intent which is freighted with doubt. The Act of June 7, 1924, § 301, as amended (38 U.S.C.A. § 512), provides that “all yearly renewable term insurance shall cease on July 2, 1927,” except when it had ripened into a claim before that date, or where mental disability or disappearance prevented conversion into regular life insurance. If this were the only pertinent statute, the answer would be clear: Congress having engrafted two exceptions onto the statute, the courts are not warranted in engrafting a third. But this is not the only pertinent statute, and in ascertaining the intpnt of Congress, the statutory plan should be viewed as a whole.

Soon after the close of the War the attention of Congress was directed to the proposition that many veterans who were entitled to compensation were unable to keep up their insurance; if compensation authorized by Congress had been paid when due, they would not have been forced to lapse their insurance. Accordingly section 27 of the Act of August 9, 1921, 42 Stat. 152, 156, provided that if a veteran, who was entitled to enough unpaid compensation to pay his premiums, died while his insurance was lapsed, his insurance should not be considered as having lapsed. That statute was broadened by the Act of March 4, 1923, 42 Stat. 1521, and again by the Act of June 7, 1924, and now applies to all veterans whose policies lapsed prior to June 7, 1924, and who “dies or has died, or becomes or has become permanently and totally disabled,” and who at the time of death or permanent and total disability was or is entitled to compensation remaining uncollected — that then so much of his insurance as his compensation would pay for should not be considered as lapsed. This section in terms covers this case unless it lost its force on July 2, 1927, when term insurance ceased.

Throwing some light on the question is the fact that this section has been amended since July 2, 1927. On May 29, 1928, Congress provided that compensation uncollectible by reason of provisions limiting the amount of back pay, should nevertheless be considered uncollected compensation for the purposes of this section. That is, while a veteran allowed compensation for disability since discharge could not be paid in cash except for a limited period, nevertheless back pay should be applied on his insurance without any limitation as to time. 45 Stat. 971 (38 U.S.C.A. § 516). Appellee explains this amendment by saying that it was passed to protect those insureds who had become permanently and totally disabled prior to July 2, 1927; to which appellant replies that such claims had become vested and needed no such amendment for their protection. Neither the argument nor reply is conclusive. The 1928 amendment commences thus: “That section 305 of the World War Veterans’ Act, 1924, as amended * * * is amended,” etc. 45 Stat. 971, § 17. This phrasing is some indication that Congress did not think that section 305 had spent its force.

In the Economy Act of 1933 there is a proviso in section 17, 38 U.S.C.A. § 717, which refers to “contracts of yearly renewable term insurance which have matured prior to March 20, 1933.” If appellee is correct, no term insurance could mature after July 2, 1927, except in the rare instance of disappearance or mental incompetency. It seems to be a reasonable conclusion that Congress, in these two enactments since 1927, had in mind that the right to apply compensation to insurance premiums did not cease on July 2, 1927.

The reasoning which with us has tipped the scales so balanced with doubt is this: By statutes enacted from 1921 to 1928, Congress has made clear its general intent that a veteran should not lose his insurance rights because the government was derelict in paying him compensation it owed. Appellee’s argument runs counter to that clear intent. One veteran to whom compensation was paid when due before 1927 keeps his insurance alive and could thus convert on July 2, 1927; another, entitled to compensation prior to 1927 but not receiving it, is forced to lapse his term insurance before July 2, 1927, and on that date has nothing to convert. One has his converted insurance and the other does not, just because the government was derelict in paying compensation when due. The veteran thus loses his right to convert because of the neglect of the government. The right to convert is one of the most valuable features of term insurance — both in dollars and cents and because the veteran might be unable to procure insurance elsewhere. We do not believe Congress intended to depart from its settled policy and discriminate against the veteran whom the government had neglected to pay on time.

If this construction be erroneous, appellant then urges that his case falls within the clause in the Act of June 2, 1926, 38 U.S.C.A. § 512, which provides that the director may extend the time for continuing and converting term insurance where conversion on July 2, 1927, is “impracticable or impossible due to the mental condition or disappearance of the insured,” and Reg. 77, § 4050(c), which provides that term insurance shall not lapse in the case of a mental incompetent without a legal guardian. The regulation further provides that such waiver shall be automatic and retroactive.

This contention is bottomed upon the assumption that insured was mentally incompetent on or before July 2, 1927. We are not a trial court and cannot make such a finding of fact. Upon the new trial, the facts and law of this contention may be explored if appellant is so advised.

The judgment is reversed and the cause remanded for a new trial.

Reversed and remanded.

1 The trial court denied recovery on the ground that insured was disabled when he entered the service. The evidence conclusively shows he' was not permanently and totally disabled when he enlisted nor for several years afterward. His work record for at least seven years after discharge refutes any finding of permanent and total disability during that period. United States v. Perkins (C.C.A. 10) 64 F.(2d) 243. Appellant concedes in the briefs that permanent and total disability did not exist in 1919 or for several years thereafter, and appellee does not undertake to sustain the judgment on this ground.

2 Appellant states that Wilner v. United States, decided with the Lynch Case, is squarely in point in that there the insured died after 1927. But counsel overlook the fact that the policy matured by permanent and total disability in 1919.