Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-01319/USCOURTS-ca10-88-01319-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

---

( 

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

LINDA UNDERWOOD, 

Plaintiff-Appellee, 

F 1 LED 

UnireJ Stares Court of APPe ,._ ·- h " . . a.J ., PnL (Jrrui: 

DEC 2 3 1989 

ROBERT L. HOECKER 

Clerk 

v. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

No-. 88-1319 

SERVICEMEN)S GROUP INSURANCE, 

Defendant-Appellant. 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF UTAH 

(D.C. No. 87-0361-G) 

Richard B. Ferrari (Carolyn Cox with him on the brief), of Watkiss 

& Campbell, Salt Lak~ City, Utah, for Defendant-Appellant. 

Stephen L. Johnston, Salt Lake City, Utah, for Plaintiff-Appellee. 

Before BALDOCK, BRORBY, and EBEL, Circuit Judges. 

PER CURIAM. 

This appeal is takeri fro~ a judgment of the United States 

District Court for the District of Utah determining that plaintiff 

was entitled to an additional $15,000 in insurance pro~eeds from 

the defendant. The amount represents an increase in coverage 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 1 
authorized by Congress after plaintiff's husband was discharged 

from the United States Army but before he died. 

The facts are undisputed. Plaintiff's husband was a member 

of the United States Army, insured under a Servicemen's Group L{fe 

Insurance policy as described in 38 U.S.C. § 765, et ~ 

Sergeant Underwood was discharged on November 18, 1985, as one 

hundred percent disabled. As of that date, ·the insurance policy 

limitation was $35,000. 38 O.s.c. § 767(a) (1981) .. 

On December 3, 1985, Co~greSs amended the statute to increase 

the policy amount to $50,000. The effective date of that 

amendment (with 

January 1,. 1986. 

effect for one 

a specific exception explained infra) was 

Sergeant Underwood, whose policy continued in 

year after his separation from the service, 38 

U.S.C. § 768(a)(l)(A), died on January 30, 1986. 

Defendant paid plaintiff the $35,000 in April of 1986, and 

she then filed this action claiming entitlement to $15,000, the 

difference between the $35,000 paid and the $50,000 provided for· 

in the 1985 amendment. Servicemen's Group Insurance defended the 

claim on the ground ihat the statute entitling members of the 

~nifoFmed service on active duty to $50,000 in iife insurance 

coverage instead of the previous $35,000 did not apply to 

plaintiff's decedent because he was not on active duty at the time 

the policy increase became effective. The district ·court . found 

that the increase in coverage inures to the benefit of a policy 

holder who holds a policy when the increase becomes effective, 

whether or not that insured remains eligible to be issued a 

policy. We disagree and reverse. 

2 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 2 
The district court's interpretation of the statutory 

provisions 38 U.S.C. § 765, et~' is a question of law, subject 

to de novo review by this court. Marshall v. El Paso Natural· Gas 

Co., 874 F. 2d 1373, 1382 (10th Cir. 1989); E.E.O.C. v. Cherokee 

!'Jation, _871.F.2d 937, 938 n.l (10th Cir. 1989). 

As initially enacted in 1965, the statute provided for 

$10,000 in insurance coverage. to members of the armed services. 

Since then, Congress has amended the statute on several occasions 

for a number of reasons. In 1970, 1974, 1981, and 1985 the amount 

of insurance available to service personnel was increased to 

$15,000, $20,000, $35,000 and $50,000, respectively. Insurance 

coverage is effective the first day of active duty ''or the date. 

certified by the [Veteran's Administration] Administrator to the 

Secretary concerned as the date Servicemen's Group Life Insur~nce 

or group concerned takes effect, whichever is the later da~e.'' 38 

u.s.c. §. 767(a) (1986). 

Pursuant to this section of the statute, the Administrato~ 

has promulgated (and amended) corresporiding regulations governing 

the effective d~te of the increases in insurance coverage. 38 

C.F.R. § 9.4 (1988). 

For example, accompanying the 1970 increase, the 

Administrator revised 38 C.F.R. § 9.4 to read that each member of 

the armed forces "on duty on or after June 25, 1970, is 

automatically insured against death in the amount of 

$15,000 .... " 36 Fed. Reg. 3808, 3809 (February 27, 1971). 

The June 25, 1970, date is the enactment date of the amendment 

increasing the amount of coverage from $10,000 to $15,000. 

3 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 3 
Similarly, the regulations were amended in January of 1975 to 

reflect the 1974 i~crease to $20,000. Section 9.4 was changed to 

provide that "(e]ffective May 24, 1974, Servicemen's Group Life 

Insurance is issued in the ·amount of $20,000 .... " 40 Fed. 

Reg. 4135, 4137 (January 28, 1975). Again, the May 24, 1974, date 

is the effective date of the 1974 amendments to the statute. 

The effective date of · the 1981 increase in coverage ( to 

$35,000) wis December 1, 1981. Pub. L. No. 97-66, 95 Stat. 1026, 

1037 (approied October 17, 1981). The corresponding amendments to 

the regulations, however, specifically provided that "[t]he 

$35,000 coverage does not apply to those members separated or 

released prior to December 1, 1981 .. II 38.C.F.R. § 9.4 

( 1987). See 48 Fed. Reg. 8069, 8070 (February 25, 1983). 

Finally, the December, 1985, amendment increasing coverage to 

$50~000 lists the effective date as January 1, 1986. Pub. L. No. 

99-166; ~9 Stat. 941, 957 (approved December 3, 1985). Again the 

accompanying regulation provides that the $50,000 coverage ~does 

not apply to those members separated or released prior to January 

1, 1986 .. 

18, 1988). 

II . .. 38 C.F.R. § 9.4 (1988); 53 Fed. Reg. 17,698 (May 

··~he Administrator published the 1983 and 1988 regulations as 

final, without opportunity for public comment, because the 

amendments "merely reflect statutory changes in the law" and 

therefore providing for public comment would have no effect on the 

changes mandated by Congress. 48 Fed. Reg. 8069 (February 25, 

1983); 53 Fed. Reg. 17,698 (May 18, 1988). It therefore appears 

that, in the Administrator's view, the · amendments to the 

4 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 4 
regulations were clear· and presumably not subject 

misinterpretation. 

The language of 38 U.S.C. § 767(a) reads· as follows: 

(a) Any policy of .insurance purchased by the 

Administrator under section 766 of this title shall 

automatically insure against death --

(1) any member of a uniformed service on 

active duty, active duty for training, or 

inactive duty training scheduled in 

advance by competent authority; 

(2) any member of the Ready 

uniformed service who 

qualifications set forth 

765(5)(B) of this title; and 

Reserve of a 

meets · the 

in section 

(3) any member assigned to, or who upon 

application would be eligible for 

assignment to, and Retired Reserve of a 

uniformed service who meets the 

qualifications set forth in section 

76~(5)(C) of this title; 

.in the amount of $50,000 unless such member elects in 

writing (A) not to be insured under this subchapter, or 

(B) to be insured in an amount less than $50,000 that is 

evenly divisible by $10,000. The insurance shall be 

effective the first day of active duty or · active duty 

for training, or the beginning of a period of inactive 

duty training scheduled in advance by compet~nt 

authority, or the first day a member of the Ready 

Reserve meets the qualifications set forth in section 

765(5)(B) of this title, or the first day a member of 

the Reserves, whether or not assigned to the Retired 

Reserve of a uniformed service, meets the qualifications 

of section 765(5)(C) of this title, or the date 

certified by the Administrator to the Secretary 

concerned as the date Servicemen's Group Life Insurance 

under this subchapter for the class or group concerned 

takes effect, whichever is the iater date. 

to 

We cannot read this language to mean anything other than that 

the increased policy coverage inures to the benefit only of those 

people who are "member[s] of a uniformed service on active duty" 

and is effective either on the first day of active duty or the 

5 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 5 
date certified by the Administrator as the date that the life 

insurance class or group takes effect, whichever is later. The 

district court read this language as referring only to the 

member's eligibility to receive a policy and determined that once 

the policy is in effect, the individual is entitled to whatever 

increased coverage Congr~ss provides. 

However, the language simply does not say eligibility but 

refers to automatic insurance under the policy. James Underwood's 

policy was for $35,000. Nothing in the intervening Congressional 

action changes the coverage of an already issued policy. Indeed, 

the language of the statute has no effect on an individual who is 

no longer in active service and who is insured under a previously 

issued policy at the lower level .. 

Certainly, had Congress intended the increases to apply 

retroactivity to former service members still covered by their 

policies under 38 U.S.C. § 768(a)(l)(l988), it could have so 

stated when the 1985 amendments were made. And indeed,· by a later 

amendment 

extended 

(approved December 28, 

the $50,000 coverage 

1985), Congress 

to members who 

specifically 

died after 

December 12, 1985, but before January 1, 1986. 

Pub. L. 99-227, § 3 (December 28, 1985), 99 Stat. 1745, 1746. 

We conclude that the proviso that the $50,000 coverage does 

not apply to members 6f a uniformed service separated before 

Jdnuary 1, 1986, means t;!xactly what it says, i.e., that in order 

to qualify for the increased amount, Sergeant Underwood had to 

have been on·active duty as of January 1, which he was not. We 

further see no reason to depart from the analysis of Garvey v. 

6 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 6 
Servicemen's Group Life Insurance, 584 F. Supp. 623, 625 "(M.D. Pa. 

1984)(Congress only intended to cover under increase those 

qualifying members), which research indicates is the only other 

decision on the subject. 1 

In denying defendant's motion for reconsideration of its 

earlier ruling in plaintiff's favor, the district court noted and 

apparently relied on the fact that as of December of 1987 there 

existed no regulation specifying that the $50,000 coverage did not 

apply to those members separated prior to January- 1, 1986. 

Indeed, not until several months later did the Administrator 

finally promulgate ·the change to 38 C.F.R. § 9.4 covering the 1985 

statutory amendment. We note that the change in the re~ulatiori 

accompanying the October 17, 1981, amendment to 38 U.S.C. 

§ 767(a)(increasing the amount of coverage from $20,000 to 

$J~,U00) was not adopted until February 25, 1983. 38 C.F.R. § 9.4 

(1987)($35,000 coverage does not apply to members separated prior 

to December 1, ,1981). It appears the Administrator simply has not 

been prompt in promulgating these regulations. 

Because Sergeant Underwood was not on active duty at the time 

-the increase in insurance from $35,000 to $50,000 became 

effective, his beneficiary is only entitled to the $35,000. 

REVERSED, 

1 I~ Garvey, the court held that the 1981 amendment increase in 

coverage was not applicable to plaintiff's decedent, who had been 

tr~nsferred from the Ready Reserve of the United States Navy as 

not physically qualified prior to the effective date of_ the 

increase. 

7 

Appellate Case: 88-1319 Document: 010110195539 Date Filed: 12/28/1989 Page: 7