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Purpose and Scope

The purpose of this chapter is to discuss Article IV, section 400 through 407 [50 U.S.C. App. §§'' 540-547], of the Soldiers' and Sailors' Civil Relief Act. These sections provide a means by which a service member may have the U.S. Office of Veterans Affairs guarantee payment of premiums on certain types of commercial life insurance contracts. Relatively few service members have applied for benefits under these sections, probably because the law merely provides a moratorium on premiums and does not relieve the service member from liability for repayment of the premiums. The 1991 amendments concerning professional liability insurance, Article VII §' 702 [50 U.S.C. App. §' 592] and reinstatement of health insurance, Article VII §' 703 [50 U.C.C. App. §' 593] also will be discussed.

Article IV, Sections 400-407

General. The sections in Article IV are designed to provide a means by which any person entering the armed services may apply for continued protection by commercial life insurance. Upon proper application, a service member may have the premiums and interest for certain types of commercial life insurance guaranteed for his/her period of military service and for two years thereafter.

The Secretary of Veterans Affairs is charged with supervising the implementation of these sections. Section 407 authorizes and directs the Secretary of Veterans Affairs to promulgate regulations and procedures necessary to implement the provisions of sections 400 through 407. Pursuant to this authority, the administrator has prescribed regulations that may be found in volume 38 of the Code of Federal Regulations, Part 7.

Application. The provisions of the sections apply to commercial life insurance policies taken out by any person in the military service of the United States whose life is insured under and who is the owner of such policy The policy must be in force on a premium paying basis at the time the service member applies for benefits. The service member must have taken out the policy and paid one premium not less than 180 days before the date the insured entered military service. Also, the maximum amount of life insurance guaranteed for any one individual is $10,000.

Attorneys should examine policy provisions to determine eligibility. A policy containing a provision that limits or eliminates liability for death arising from or in connection with military service, or any activity that the insured may be called upon to perform in connection with his military service, is not eligible for protection under the Act. A policy that requires the insured service member to pay an additional premium because of military service is also outside the purview of the Act

Nature and extent of relief. An individual entitled to the benefits of the Act may request governmental guarantee of premiums by filing Veterans Affairs Form 9-380 with his/her insurance company and forwarding a copy of the application to the U.S. Department of Veterans Affairs. The U.S. Department of Veterans Affairs will then determine whether the policy is covered by the sections in Article IV or not. The U.S. Department of Veterans Affairs determination is final and is not subject to review by any other official, agency, or court.

Unlike several other sections, such as sections 201 and 301, which require the court to find that the service member was materially affected by military service, these sections do not require a specific finding of material effect. Hence, any person in military service could apply for relief in accordance with these sections. Relief may be granted regardless of the impact of military service on the individual's ability to pay the premiums.

Once the U.S. Department of Veterans Affairs deems a policy to be covered by Article IV, the policy will not lapse, terminate, or be forfeited because of the service member's failure to make premium payments or pay any indebtedness or interest due during this period of military service or for 2 years after the expiration of such service. During this period, the government does not pay the premiums for the service member but simply guarantees that the premiums will be paid at the end of the period.

The insured service member must repay the unpaid premiums and interest no later than 2 years after the expiration of his/her term of military service. If he/she fails to pay these amounts by the end of this 2-year period, the amount then due is treated by the insurance company as a loan on the policy. This assumes that the policy has a sufficient cash surrender value to cover the amount of the unpaid premiums and interest. If the cash surrender value of the policy is less than the amount owed, the insurance company may terminate the policy and the United States will pay the insurance company the difference between the cash surrender value and the amount of the then outstanding debt. Also, if the policy matures as a result of death or by any other means during the protected period, the insurance company is required to deduct from the amount of the settlement the unpaid premiums and interest that were guaranteed by the U.S. Department of Veterans Affairs.

If the United States is required to pay any amount to an insurance company under the provisions of Article IV, the amount paid becomes a debt due the United States by the insured. This amount may be deducted from any other amounts due the insured by the United States. If there is no other sum of money due the insured by the United States, a civil action may be brought to recover the sum due.

Definitions

Section 400

(50 U.S.C. App. §' 540)

As used in this article--

(a) The term "policy" shall include any contract of life insurance or policy on a life, endowment, or term plan, including any benefit in the nature of life insurance arising out of membership in any fraternal or beneficial association, which does not provide for the payment of any sum less than the face value thereof or for the payment of an additional amount as premiums if the insured engages in the military service of the United States as defined in section 101 of article I of this Act [App. §' 511] or which does not contain any limitation or restriction upon coverage relating to engagement in or pursuit of certain types of activities which a person might be required to engage in by virtue of his being in such military service, and (1) which is in force on a premium-paying basis at the time of application for benefits hereunder, and (2) which was made and a premium paid thereon not less than 180 days before the date the insured entered into the military service. The provisions of this Act shall not be applicable to policies or contracts of life insurance issued under the War Risk Insurance Act, as amended, the World War Veterans Act, as amended, or the National Service Life Insurance Act of 1940, as amended.

(b) The term "premium" shall include the amount specified in the policy as the stipend to be paid by the insured at regular intervals during the period therein stated.

(c) The term "insured" shall include any person in the military service of the United States as defined in section 101, article I, of this Act, whose life is insured under and who is the owner and holder of and has an interest in a policy as above defined.

(d) The term "insurer" shall include any firm, corporation, partnership, or association chartered or authorized to engage in the insurance business and to issue a policy as above defined by the laws of a State of the United States or the United States.

Persons entitled to benefits

Section 401

(50 U.S.C. App. §' 541)

The benefits and privileges of this article shall apply to any insured, when such insured, or a person designated by him, or, in case the insured is outside the continental United States (excluding Alaska and the Panama Canal Zone), a beneficiary, shall make written application for protection under this article, unless the Secretary of Veterans Affairs in passing upon such application as provided in this article shall find that the policy is not entitled to protection hereunder. The Secretary shall give notice to the military and naval authorities of the provisions of this article, and shall include in such notice an explanation of such provisions for the information of those desiring to make application for the benefits thereof. The original of such application shall be sent by the insured to the insurer, and a copy thereof to the Secretary. The total amount of insurance on the life of one insured under policies protected by the provisions of this article shall not exceed $10,000. If an insured makes application for protection of policies on his life totaling insurance in excess of $10,000, the Secretary is authorized to have the amount of insurance divided into two or more policies so that the protection of this article may be extended to include policies for a total amount of insurance not to exceed $10,000, and a policy which affords the best security to the Government shall be given preference.

Form of application

Section 402

(50 U.S.C. App. §' 542)

Any writing signed by the insured and identifying the policy and the insurer, and agreeing that his rights under the policy are subject to and modified by the provisions of this article, shall be sufficient as an application for the benefits of this article, but the Secretary of Veterans Affairs may require the insured and insurer to execute such other forms as may be deemed advisable. Upon receipt of the application of the insured the insurer shall furnish such report to the Secretary concerning the policy as shall be prescribed by regulations. The insured who has made application for protection under this article and the insurer shall be deemed to have agreed to such modification of the policy as may be required to give this article full force and effect with respect to such policy.

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Above Information Courtesy of United States Army JAG Corps