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American Nat. Bank & Trust Co. v. United States.

December 13, 1941

AMERICAN NAT. BANK & TRUST CO. OF CHICAGO
v.
UNITED STATES.



Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Charles Edgar Woodward, Judge.

Author: Major

Before EVANS, MAJOR, and MINTON, Circuit Judges.

MAJOR, Circuit Judge.

This is an appeal from a judgment, entered April 5, 1940, in an action to recover on a War Risk Term Insurance contract. The suit was commenced March 7, 1932, by the Administrator of the estate of the insured, Robert Bruce Miller, deceased. On March 15, 1939, an additional count was filed in which the instant plaintiff, Administrator De Bonis Non of the estate of the insured, and Administrator of the estate of Margaret Miller, beneficiary named in the policy, who died December 27, 1929, was substituted.

The insured was inducted into the military service of the United States June 5, 1917, and honorably discharged September 29, 1919, suffering from a compensable disability, for which he had not been compensated. At the time of his death, February 17, 1921, there was due him sufficient unpaid compensation to purchase, if applied to the premiums when due, the insurance in suit. The Government does not dispute - in fact, admits - the situation as stated, but in its answer to the additional count, alleged as an affirmative defense that the insured became totgally and permanently disabled on December 21, 1920, at a time when he was not entitled to any compensation. The plaintiff moved to strike the allegation relative to this affirmative defense and for summary judgment. The court allowed this motion and entered judgment in favor of the plaintiff.

The sole question which we are called upon to decide is whether the Government is entitled to defend upon the ground that the insured became totally and permanently disabled, at a time prior to his death, when there was no compensation dur him.

A solution of the question must be found in a construction of Section 305 of the World War Veterans' Act as amended, Title 38 U.S.C.A. ยง 516, which, so far as here material, provides:

"Where any person has heretofore allowed his insurance to lapse, * * * while suffering from a compensable disability for which compensation was not collected and dies or has died, or becomes or has become permanently and totally disabled and at the time of such death or permanent total disability was or is entitled to compensation remaining uncollected, then and in that event so much of his insurance as said uncollected compensation, * * * would purchase if applied as premiums when due, shall not be considered as lapsed, * * * ."

Plaintiff contends that by reason of this provision there was no lapse of the insurance, while the Government contends to the contrary.

We have considered heretofore and decided contrary to the Government's contention the precise question here presented. Florian v. United States, 7 Cir., 114 F.2d 990. This case was reversed by the Supreme Court on the ground that we were without jurisdiction. 312 U.S. 656, 61 S. Ct. 713, 85 L. Ed. 1105. While we are of the opinion that on the merits we reached the right conclusion in the Florian case, the importance of the question merits further consideration.

In construing Section 305, both sides stress the purpose and intent of Congress in its enactment. We think, therefore, it is pertinent to refer to prior, as well as subsequent, legislation bearing upon the subject. The right to balance unpaid compensation against insurance premiums, so as to prevent the lapse of insurance, was first recognized by an amendment of August 9, 1921, to the War Risk Insurance Act, Sixty-Seventh Congress, 42 Stat. 156, included in a new section numbered 408. This amendment is as follows:

"Provided further, That where any soldier has heretofore allowed his insurance to lapse, while suffering from wounds or disease suffered or contracted in line of service, and was at the time he allowed his said policy to lapse entitled to compensation on account thereof in a sum equal to or in excess of the amount due from him in premiums on his said insurance, and has since died from said wounds or disease without collecting or making claim for said compensation, or being allowed to reinstate his said policy on account of his physical condition, then and in that event said policy shall not be considered as lapsed, and the Veterans' Bureau is hereby authorized and directed to pay to the beneficiaries of said soldier under said policy the amount of said insurance less the premiums and interest thereon at 5 per centum per annum compounded annually in installments as provided by law."

It will be noted that this amendment prevented a lapse only in the event the soldier "has since died" and therefore was for the sole benefit of the beneficiaries. It covers those contingencies where the soldier has died "without collecting or making claim for said compensation, or [without] being allowed to reinstate his said policy on accoutn of his physical condition." It appears to have covered situations where the Government had, upon application, denied reinstatement of lapsed insurance because of the physical condition of the soldier.

The same Congress amended the amendment of August 9, 1921, effective March 4, 1923, 42 Stat. 1521, 1525, by including the following: "* * * and dies or has died from said wounds or disease, or becomes or has become permanently and botally disabled by reason thereof, without collecting said compensation, and at the time of such death or permanent total ...


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