James v. United States, 185 F.2d 115, 4th Cir. (1950)

185 F.
2d 115
JAMES
v.
UNITED STATES.
No. 6126.
United States Court of Appeals Fourth Circuit.

Argued October 10, 1950.
Decided November 8, 1950.
William I. Ward, Jr., Statesville, N. C., for appellant.

Thomas E. Walsh, Attorney, Department of Justice, Washington, D. C.
(Thomas A. Uzzell, Jr., U. S. Atty., Asheville, N. C., James B. Craven,
Jr., Asst. U. S. Atty., Morganton, N. C., H. G. Morison, Asst. Atty. Gen.,
and D. Vance Swann, Attorney, Department of Justice, Washington, D.
C., on brief), for appellee.
Before SOPER and DOBIE, Circuit Judges, and TIMMERMAN, District
Judge.
DOBIE, Circuit Judge.
This action was brought against the United States under 38 U.S.C.A. 445,
817, to recover on a $10,000. policy of National Service Life Insurance. A
motion for summary judgment for the United States was not ruled upon, and
the case was tried on the merits before the United States District Court for the
Western District of North Carolina, sitting without a jury. Judgment was
entered for the United States 89 F.Supp. 330, and the plaintiff brought this
appeal.
The issue here is the validity of an alleged contract of insurance held by Clara
Fine James who was, at her death, the wife of plaintiff. This insured had served
as a Wave in the United States Navy prior to May 24, 1946, on which date she
was honorably discharged by reason of her pregnancy. While on active duty in
the Navy, insured held an admittedly valid $10,000 policy of term insurance of
which the beneficiary was someone other than plaintiff. Premiums were paid
by allotment, and this policy lapsed on July 1, 1946, for nonpayment of the
premium first due after insured's discharge.
3
At some time between this lapse and June 10, 1947, insured married the
plaintiff. On June 10, 1947, insured applied for reinstatement of the lapsed
policy and at that time she designated plaintiff as the new beneficiary.
The application for reinstatement contained the following questions:
"1. Are you in as good health as you were on the date of the first premium in
default? (Answer `yes' or `no'.)
"2. Have you been ill, or suffered or contracted any disease, injury, or infirmity,
or been prevented by reason of ill health from attending your usual occupation,
or consulted a physician, surgeon, or other practitioner for medical advice or
treatment at home, hospital, or elsewhere, in regard to your health, since lapse
of this insurance? (Answer `yes' or `no'. If `yes' give ...... particulars ......)".
To question 1, insured answered "yes"; to question 2 no answer was given.

With the exception of the answers to these two questions, it is undisputed that
the procedures of applying for reinstatement of the insurance policy were
complied with, fully, truthfully and correctly.
However, insured's condition on the date of application for reinstatement was

very poor as compared with her health when the first premium was in default.
Although her pregnancy resulted in a still birth on June 13, 1946, two weeks
before default, no serious trouble was found. And another medical examination
on November 9, 1946, four months after default, revealed no unusual
circumstances or conditions. By the time of the application, though, an
operation had been performed upon insured, and large amounts of tissue were
removed from her abdomen. This occurred on April 9, 1947, two months before
application, and the trouble was diagnosed as cancer.
On June 11, 1947, just one day after her application for the reinstatement of her
National Service Life Insurance, insured prompted a doctor to set forth in
writing a description of the cancer from which she was suffering. This
statement was sent on June 25, 1947, to the Veterans' Administration with an
application for compensation for disability resulting from active service. This
application for compensation was sent to the Winston-Salem, North Carolina,
office of the Veterans' Administration, whereas the application for
reinstatement of the insurance policy was sent to the Richmond, Virginia office.
By letter dated October 2, 1947, the Administration stated that it had found
insured to be 100% disabled and that it had awarded her 100% disability
payment from July 7, 1947, the date upon which application for disability
compensation was received. Insured died of cancer on December 18, 1947, a
little more than six months after she made the application for the reinstatement
of her National Service Life Insurance.
10
At the time of insured's death no action had been taken on this application.
Insured was entitled to reinstatement as a matter of right, if she met certain
requirements. She could not meet these requirements. By 38 U.S.C.A. 802 (c)
(2) reinstatement may be denied on the grounds of total disability resulting
from active service. And the ultimate decision of the Veterans' Administration
was to deny reinstatement for this reason.
11
The facts of insured's health were found by the District Court. And it is their
relevancy, rather than their correctness, that is seriously disputed by plaintiff.
Plaintiff argues that, in spite of these facts, he is entitled to recover for the
reason that the application for reinstatement was approved either in fact or by
estoppel, and that the insurance policy thereby became incontestable under 38
U.S.C.A. 802 (w). Had the application been approved, we would agree; but it
is our opinion that an approval of the application was never made.
12
Plaintiff's argument is predicated on alternative theories:
13
(1) The Veterans' Administration indicated by inter-office memoranda, by

correspondence referring to the insurance policy and to plaintiff as beneficiary,
and by its failure to return premiums paid, that it had in fact approved the
application; or
14
(2) Since the Veterans' Administration acted neither to approve nor to deny the
application between its submission and the death of insured, a period of six
months, reinstatement occurred by operation of law as a result of this
unreasonable delay, and the United States is estopped to assert insured's total
disability.
15
There was no approval in fact. It is true that inter-office memoranda of the

Veterans' Administration indicate that some administrative officials at times
thought that insured's health would not prevent reinstatement, or that the policy
had actually become reinstated. These, however, did not purport to constitute an
approval of the application but merely represented tentative opinions. They are
not inconsistent with a later inter-office memorandum dated April 14, 1948,
stating the decision of the Disability Claims Division that insured was totally
disabled on the date of application and ineligible for reinstatement, or with a
letter sent to plaintiff on June 9, 1948, informing him of this decision, or with
the position the United States now maintains.
16
Correspondence to insured before her death, and to plaintiff thereafter, referring

to the policy, requesting information to facilitate identification of insured's
account, and referring to plaintiff as beneficiary, does not indicate approval of
the application. This correspondence was relative to insured's policy, whatever
its status may have been, and indicated an effort to set the records in order. This
seems to be a reasonable course of action in all cases save where a final
decision has been made to deny the application, and it bears no logical
relevance to the issue of reinstatement before such a decision has been reached.
For the same reason, the fact that the Veterans' Administration did not return
premiums is not indicative of approval. Although their return would evidence a
denial of the application, the converse does not follow. These premiums were
held in suspense as unapplied credits to the account pending action on the
application.
17
Various changes were made in the Veterans' Administration records after the
final decision to deny the application; these do indicate that the status of the
application had changed in the contemplation of the Veterans' Administration.
Since many, if not most, of the applications received by the Veterans'
Administration are granted, however, the inferences as strongly favor a change
of status from "undecided" to "denied", as from "approved" to "denied".
18
Plaintiff's alternative argument, that of reinstatement by estoppel, we conceive

to be the major issue of this case. Even if we assume for the moment that the
application was properly made and that the Veterans' Administration's delay
was unreasonable, still the United States is not estopped to assert the total
disability of the insured. Plaintiff's statement is generally true as to private life
insurance companies that unreasonable delay by an insurer in approving or
rejecting an application for reinstatement of a lapsed policy operates as a
waiver of the insurer's right to assert facts which otherwise would permit him to
deny the application. Froehler v. N. American L. Ins. Co., 1940, 374 Ill. 17, 27
N.E.2d 833; Apostle v. Acacia Mutual L. Ins. Co., 1935, 208 N.C. 95, 179 S.E.
444; Lechler v. Montana L. Ins. Co., 1921, 48 N.D. 644, 186 N.W. 271; Rocky
Mount Savings & Trust Co. v. Aetna L. Ins. Co., 1930, 199 N.C. 465, 154 S.E.
743. This general rule, however, does not apply when the United States, rather
than a private company, is the insurer.
19
It is well settled that the United States is in a position different from that of
private insurers and is not estopped by the laches or unauthorized acts of its
agents. Federal Crop Ins. Corp. v. Merrill, 1947, 332 U.S. 380, 68 S.Ct. 1, 92
L.Ed. 10; Wilbur National Bank v. United States, 1935, 294 U.S. 120, 55 S.Ct.
362, 79 L.Ed. 798; United States v. Norton, 5 Cir., 1935, 77 F.2d 731; United
States v. Loveland, 3 Cir., 1928, 25 F.2d 447. But plaintiff argues that since he
is seeking to base estoppel or waiver on an omission to act, rather than on a
positive act of a government official in excess of his authority, he should
receive different treatment. He draws an artificial distinction. In United States
v. Loveland, last cited, reversed on other grounds by confession of error, 278
U.S. 665, 49 S.Ct. 184, 73 L.Ed. 571, the following appears, 25 F.2d at page
448: "The question here involved is the power of servants of the United States
to place liability upon it by an act of omission when they would be powerless
so to do by an act of commission. The decisions holding that a servant of the
government has, in the absence of statutory warrant and duty, no such power,
are too firmly settled and so providently wise as to forbid our holding that,
when the government broadened its field of operation to new fields, it thereby
broadened the power of those it employed in such new fields to the extent of
allowing them, by acts of neglect or omission, to commit the government to
liability in such field which they had no power to do in other spheres of
government activity."
20
This commends itself to our judgment.
21
The application for reinstatement in the instant case should have been denied
by reason of insured's total disability. Had the Veterans' Administration,
notwithstanding, reinstated the policy by positive action, it is true that liability
would have been placed upon the United States. But this follows by virtue of 38
U.S.C.A. 802(w) which makes reinstated policies incontestable; absent this
section, the United States would not be bound by such unauthorized
reinstatement. And 38 U.S.C.A. 802(w) does not have the effect of reinstating
policies because of an unreasonable delay on the part of the Veterans'
Administration. Thus, the cases cited by plaintiff are not in point. United States
v. Patryas, 1938, 303 U.S. 341, 58 S.Ct. 551, 82 L.Ed. 883; Continental Ill.
National Bank v. United States, 7 Cir., 1945, 153 F.2d 490; Donsing v. United
States, 7 Cir., 1940, 113 F.2d 615. Each of these cases presupposes a contract of
insurance and turns on the issue of incontestability. And, in relying on these
cases, plaintiff assumes the very point he is trying to prove. Standard Oil Co. of
New Jersey v. United States, 1925, 267 U.S. 76, 45 S.Ct. 211, 69 L.Ed. 519, is
not applicable; it merely holds that the United States is liable for interest on a
judgment entered against it on a war risk policy. Lynch v. United States, 1934,
292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434, does not help plaintiff here; it
merely says that United States insurance policies create in the insured property
rights protected by the Fifth Amendment.

22
For another reason, insured's policy was not reinstated by estoppel. Waiver or
estoppel will not operate to reinstate a policy unless the insured has performed
the necessary conditions precedent and has perfected his application.
Willingham v. Equitable L. Assurance Soc. of the United States, 5 Cir., 1936,
86 F.2d 72; Broughton v. Equitable L. Assur. Soc. of United States, 5 Cir.,
1934, 71 F.2d 821. Here the insured failed to give evidence of insurability as
required by the regulations.
23
The National Service Life Insurance Act, 38 U.S.C.A. 808, gives the
Veterans' Administrator broad authority in the administration of the Act.
Pursuant to this authority, it has been provided, Code of Federal Regulations,
1946 Supp., Title 38, Sec. 10.3422, that National Service Life Insurance "* * *
may be reinstated by written application * * * accompanied by evidence of
insurability * *." Sec. 10.3423(a) provides that National Service Life Insurance
may be reinstated "* * * provided the applicant be in as good health on the date
of application * * * as he was on the due date of the premium in default and
furnish evidence thereof satisfactory to the Administrator." Sec. 10.3424
provides that "(the) applicant for reinstatement * * * must furnish evidence of
insurability at the time of application satisfactory to the Administrator * * *."
and that "(applicant's) own statement of comparative health may be accepted as
proof of insurability for the purpose of reinstatement under Sec. 10.3423(a) * *
*."
24
Although by Sec. 10.3424 the Veterans' Administration "may" accept insured's

incorrect answer to question 1 of the application as proof that she was in as
good health on the date of application as on the date of default, it is evident that
this statement of comparative health was not accepted. Furthermore, question 2
of the application intended to elicit details of illness was left unanswered;
therefore evidence of insurability as required by Secs. 10.3422 and 10.3424 is
completely lacking. It is our opinion that insured, by reason of her failure to
give evidence of insurability as required by these regulations, did not perfect
her application.
25
For a third reason there was no reinstatement by estoppel. The Veterans'

Administration, under the circumstances, did not delay for an unreasonable
length of time. We shall assume as true that six months will normally constitute
an unreasonable delay where a private insurance company is concerned.
However, it is generally known that the Administration does not handle its
business with the dispatch of a private insurer. And at the time of insured's
application it was confronted with an enormous volume of work connected with
its program of decentralizing records. Also, the Administration was receiving

large numbers of unidentified remittances; and in this connection it should be
observed that some of the insured's remittances did not sufficiently identify her
account, necessitating requests by the Administration for further information.
These requests are a part of the same correspondence on which plaintiff bases
his claim that the policy had in fact been reinstated. Also, insured's failure to
give the required evidence of insurability in all probability contributed to the
delay. We will not hear plaintiff's assertion of an unreasonable delay for which
the insured was responsible to a significant degree.
26
Since reinstatement did not occur prior to insured's death, the Veteran's
Administration properly denied reinstatement of her insurance policy on the
basis of its finding that insured was totally disabled. The judgment of the
District Court is affirmed.
27
Affirmed.

James v. United States, 185 F.2d 115, 4th Cir. (1950)

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

James v. United States, 185 F.2d 115, 4th Cir. (1950)

Uploaded by

Copyright:

Available Formats

185 F.

United States Court of Appeals Fourth Circuit.

William I. Ward, Jr., Statesville, N. C., for appellant.

The application for reinstatement contained the following questions:

To question 1, insured answered "yes"; to question 2 no answer was given.

However, insured's condition on the date of application for reinstatement was

Plaintiff's argument is predicated on alternative theories:

(1) The Veterans' Administration indicated by inter-office memoranda, by

There was no approval in fact. It is true that inter-office memoranda of the

Correspondence to insured before her death, and to plaintiff thereafter, referring

Plaintiff's alternative argument, that of reinstatement by estoppel, we conceive

This commends itself to our judgment.

rights protected by the Fifth Amendment.

Although by Sec. 10.3424 the Veterans' Administration "may" accept insured's

For a third reason there was no reinstatement by estoppel. The Veterans'

its program of decentralizing records. Also, the Administration was receiving

You might also like