Source: https://supreme.justia.com/cases/federal/us/303/341/
Timestamp: 2019-04-23 02:09:12+00:00

Document:
Under § 307 of the World War Veterans Act, as amended July 3, 1930, a claim for total permanent disability on a reinstated and converted War Risk policy cannot be contested upon the bare ground that the total and permanent disability existed before the insurance was reinstated. P. 303 U. S. 342.
"issued, reinstated, or converted shall be incontestable from the date of issuance, reinstatement, or conversion, except for fraud, nonpayment of premiums, or on the ground that the applicant was not a member of the military or naval forces of the United States."
The converted policy sued on promised to pay in the event of total permanent disability, upon due proof of such disability "while this policy is in force." Unlike original policies issued under the War Risk Act, it contained no clause expressly excluding liability for total permanent disability incurred before the policy was applied for.
Certiorari, 302 U.S. 676, to review the affirmance of a judgment recovered against the Government on a Veteran's policy of insurance.
January 31, 1918, Stanley J. Patryas (respondent), then a soldier, purchased from the government a $10,000 yearly renewable war risk insurance contract which he permitted to lapse after his honorable discharge from the Army July 29, 1919. June 28, 1927, while a patient at a Veterans' Government Hospital, he obtained reinstatement of his war risk policy and immediately converted it into a five-year renewable term policy upon which he paid premiums to June, 1932. Claiming total permanent disability, the veteran obtained, in the District Court, a verdict and judgment on his reinstated policy. Finding the issues for the veteran, the jury fixed the date of permanent total disability at 1924 -- a date three years before his policy was reinstated.
". . . policies of insurance . . . issued, reinstated, or converted shall be incontestable from the date of issuance, reinstatement, or conversion, except for fraud, nonpayment of premiums, or on the ground that the applicant was not a member of the military or naval forces of the United States."
Can the government, in the absence of fraud or bad faith, "contest" and defeat payment of total permanent disability insurance, sold to a World War veteran, on the ground that the veteran was totally and permanently disabled before the policy was reinstated and converted?
not, . . . authorized . . . insurance benefits for total, permanent disability existing prior to any contract of insurance on which the claim is made."
"That, in order to give to every commissioned officer and enlisted man and to every member of the Army Nurse Corps (female) and of the Navy Nurse Corps (female) when employed in active service under the War Department or Navy Department greater protection for themselves and their dependents, . . . the United States, upon application to the bureau and without medical examination, shall grant insurance against the death or total permanent disability of any such person."
legislative grant to soldiers, sailors, and nurses would take away the benefits Congress intended them to receive. The provisions of the War Risk Insurance Act are sufficiently comprehensive and inclusive to authorize its administrators to grant insurance covering past or future total permanent disability, if such action is found necessary to carry out its far-reaching national plan and purposes.
"shall be incontestable . . . except for fraud, nonpayment of premiums, or on the ground that the applicant was not a member of the military or naval forces of the United States."
"has no application where, as here, the validity of the policy is not questioned and liability under it is denied solely on the ground that a loss has not occurred during the period of insurance protection."
However, it is admitted that this policy did not "expressly exclude total permanent disability occurring prior to insurance protection as did the language of the original term contract."
totally and permanently disabled. Yet his policy is contested on the ground that it does not insure against this disability, because it existed before the policy was issued. If this defense can be interposed, his policy has never actually protected him against total permanent disability. Since permanent total disability is one of the two risks insured against in the policy, any contest (not based on the exceptions) which may prevent the policyholder's recovery for such admitted total permanent disability, existing while the policy is in force, is a "contest" forbidden by the "incontestable" provision.
at any time -- before, when, or after the policy was issued. There was also a sharp conflict of evidence on this disputed fact.
When a policy of disability insurance is issued after complete examination by the insurer and full and fair disclosure by both parties, there is no legal reason why the insurer cannot contract to afford full protection against loss resulting from past as well as prospective disability. This veteran's policy did not expressly limit liability to prospective total permanent disability. The provisions of the policy in this regard contain a promise to pay the veteran "in . . . event of the total, permanent disability . . . [and] Upon due proof of the total permanent disability while this policy is in force. . . ." Original policies issued under the War Risk Act expressly excluded liability for total permanent disability incurred before the policy "was applied for." The deliberate omission, in the converted policies, of this previous exclusion, the language and purport of the original act and its amendments, the administrative interpretations and legislative history, all throw a flood of light on the intention to include liability for disabilities existing prior to the issuance of the policies.
"This is a very sweeping amendment, and will place beyond contest many contracts and policies of insurance which otherwise would be contestable. It is a well recognized principle of commercial insurance companies, however, and in reality is only a clarification of the existing law which was practically nullified by a recent decision of the Comptroller General."
". . . the present World War Veterans' Act of 1924 as amended, contains a provision to the effect that, where a policy is maintained in force for a period of six months, it should be incontestable, except for fraud or nonpayment of premiums. We have followed that, and, in all cases where the policy has remained in force for six months, we have paid the claim, irrespective of the merits of it, unless there was fraud or failure to pay premiums. . . . However, under date of January 16, 1930, notwithstanding the long practice of the bureau, the Comptroller General, in the case of Mabry W. Woodall, held that, if a man was permanently and totally disabled at the time he applied for a reinstatement of insurance, or conversion of insurance, . . . the policy was not incontestable, the statute did not protect it. . . ."
". . . if the insured was in fact dead or permanently and totally disabled at the date of application, reinstatement or conversion, . . . the insurance was subject to subsequent contest. . . ."
"Accordingly, the rule may be stated that, where the Veterans' Bureau has heretofore established or may hereafter establish the condition of permanent total disability at or prior to date of original application for insurance, or application for reinstatement and/or conversion of insurance, . . . the insurance should be considered as invalid. . . ."
"The purpose is to make all contracts or policies of insurance incontestable from date of issuance, reinstatement, or conversion, for all reasons except fraud, nonpayment of premiums, or that the applicant was not a member of the military or naval forces of the United States. This incontestability would protect contracts . . . where the applicant was not in the required state of health, or was permanently and totally disabled prior to the date of application, . . . It is appreciated that this is a broad provision, but it was felt that it was necessary in order to do justice to the veterans . . . and to overcome decisions of the Comptroller General which practically nullified the section as it now exists."
The conclusion is inescapable that Congress enacted the 1930 amendment in order to overcome the effect of the above rulings of the courts and the Comptroller General, and with the intention to sustain the Bureau's previous administrative interpretation and practice under the incontestable provision.
Sec. 307, World War Veterans' Act 1924, as amended July 3, 1930, c. 849, § 24, 46 Stat. 1001.
Section 400, War Risk Insurance Act of Oct. 6, 1917, c. 105, 40 Stat. 409.
See United States v. Arzner, 287 U. S. 470, 287 U. S. 472.
See United States v. Domangue, 79 F.2d 647, 648.
Northwestern Life Ins. Co. v. Johnson, 254 U. S. 96, 254 U. S. 101-102.
General Interest Ins. Co. v. Ruggles, 12 Wheat. 408; see Hooper v. Robinson, 98 U. S. 528, 98 U. S. 537; Pendergast v. Globe, etc., Ins. Co., 246 N.Y. 396, 159 N.E. 183; Hallock v. Ins. Co., 26 N.J.L. 268, 2 Dutch. 268; see Springfield Fire & Marine Ins. Co. v. Nat. Fire Ins. Co., 51 F.2d 714, 718, 719. A valid aleatory contract may be based on an unknown past event. 3 Williston, On Contracts (Rev. Ed.), § 888.
9 Compt.Gen. 291; Jordan v. United States, 36 F.2d 43; United States v. Golden, 34 F.2d 367.
H.R. 10381, 71st Cong., 2d Sess., Hearings Senate Committee on Finance, pages 90-91.
Senate Report No. 1128, 71st Cong., Sess., on H.R. 13174.
See Northwestern Life Ins. Co. v. Johnson, supra, at 254 U. S. 102.
"guilty of mutiny, treason, spying, or any offense involving moral turpitude, or willful and persistent misconduct, of which he was found guilty by a court martial, or that he was an alien, conscientious objector who refused to perform military duty or refused to wear the uniform, or a deserter. . . ."

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