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December 5, 1949


The opinion of the court was delivered by: INCH

This is an action brought by plaintiff, the sister of a deceased veteran, to recover the proceeds of two certificates of level premium term National Service Life Insurance, each in the amount of $ 5,000 and issued to the veteran, of which she is the designated beneficiary.

The veteran, Eugene Morse, was inducted into the Armed Forces on April 21, 1942, and was honorably discharged on December 7, 1945. During that period two certificates of National Service Life Insurance were issued to him, the first certificate (No. N. 282-30-83) was issued, effective May 1, 1942, and the second certificate (No. N. 1270-47-45) was issued effective August 1, 1945.

 The complaint alleges, and it is not disputed, that the veteran paid no premiums on these certificates after March 31, 1947. The veteran died on August 27, 1948, so that for a year and five months after the payment of the last premium the veteran made no effort to pay any premium on his insurance.

 The defendant now moves to dismiss plaintiff's complaint on the ground that it fails to state a claim upon which relief can be granted, in other words, that the said insurance lapsed because of the non-payment of premiums.

 There is not presented any dispute as to the facts, and the motion presents a question of law. The complaint alleges four causes of action, two with respect to each certificate. The first and third causes of action are based on the contention that on March 31, 1947, when the veteran made the last premium payment, the certificates carried both an individual reserve and a general reserve, and unearned premiums, and a divisible surplus which was more than sufficient to pay any unpaid premium to a date beyond the date of the veteran's death on August 27, 1948, and that by reason of the Government's failure to pay the veteran the above money after March 31, 1947, and before his death, and by reason of the fact that the Government used these funds between the aforesaid dates, it waived the payment of any premium subsequent to March 31, 1947, (the date of the last payment by the veteran), and it was estopped to now deny that the insurance was in full force and effect on August 27, 1948, the date of the veteran's death.

 Briefly stated, this insurance was issued by the Government, pursuant to the provisions of the National Service Life Insurance Act of 1940, as amended, 38 U.S.C.A. § 801 et seq., and the rights and obligations of the parties are governed by the provisions of said Act and the Regulations pursuant thereto. The Act provides that under certain conditions insurance thereunder may be granted to members of the Armed Forces upon the payment of premiums. Inasmuch as there is no dispute that the veteran did not pay any premium after March 31, 1947, and for the period thereafter until August 27, 1948, when he died, and no attempt to make any such payment of premiums is shown, it would seem as a matter of law that the veteran's insurance had been allowed by him to lapse.

 It was just this sort of situation that caused widespread warning to soldiers, by veterans organizations and other agencies, not to let their insurance lapse. Various opportunities were given to these men to hold on to this protection in spite of the fact that they had now been honorably discharged from the service. Apparently this veteran ceased to avail himself of this protection and now the effort is being made to collect upon his death because of various theories based on the claim that, regardless of the non-payment of the premiums when due, nevertheless, the insurance should be due to the beneficiary upon the veteran's death.

 Plaintiff's theory that the Government has waived premiums and is estopped to deny that insurance was in effect on the date of the veteran's death because it has failed to pay to certificate holders, or apply to the payment of premiums, 'reserves', 'unearned premiums', a 'divisible surplus' or a 'dividend', seems to be without merit. There is no basis for such a theory of recovery in the Act; rather its provisions are to the contrary.

 The Act created a permanent trust fund in the Treasury to be known as the National Service Life Insurance Fund which was made up of all the premiums paid on account of National Service Life Insurance. The section creating the fund, 38 U.S.C.A. § 805, provides that the fund shall be available for the payment of liabilities under the insurance 'including payment of dividends and refunds of unearned premiums.' The section goes on to specifically provide that 'Payments from this fund shall be made upon and in accordance with awards by the Administrator.' The Act also provides, 38 U.S.C.A. § 802(f), that 'provisions for cash, loan, paid up, and extended values, dividends from gains and savings, refund of unearned premiums, and such other provisions as may be found to be reasonable and practicable, may be provided for in the policy of insurance or from time to time by regulations promulgated by the Administrator'. (Emphasis supplied.)

 Likewise, Public Law 118, 79th Congress, July 2, 1945, 38 U.S.C.A. § 802 note, cited in the complaint, which extended the five-year term National Service Life Insurance policies for an additional three years, provided: 'That the Administrator of Veterans Affairs is authorized to make such adjustments as he may determine to be proper in reserves and any dividends.'

 It is not alleged or claimed that the Administrator has made any official determination or declaration of dividends. As stated in United States v. Huie, 5 Cir., 73 F.2d 305, 306, 'Until he makes his decision, there are no dividends.' Accordingly, the veteran has no interest in the National Service Life Insurance Fund which could be applied to the payment of premiums.

 Even if dividends had been declared by the Administrator, plaintiff is met by a regulation issued by the Administrator pursuant to 38 U.S.C.A. § 808, and which was in effect at the time of the veteran's death, specifically providing that 'Dividend accumulations shall not be available for the payment of insurance premiums * * *'. Sec. 10.3426, 12 Fed.Reg. 2128, 2129, April 1, 1947.

 The veteran died August 27, 1948, and a policy relating to level premium term insurance was promulgated by the Administrator on September 15, 1948, pursuant to the Act, 38 U.S.C.A. § 802(o), the terms and conditions of which are made by the aforesaid section 802(o) to govern the rights and liabilities of the parties, and contains the following specific statement: 'Unpaid dividends may not be applied to premiums except upon the written request of the insured made while this policy is not lapsed * * *'.

 This cannot be availed of by this plaintiff in this action as the veteran neither paid his premiums due, nor made any request prior to the ...

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