Respondent brought this suit in the District Court for Southern California to recover total permanent disability benefits under a contract of war risk term insurance. While in the military service of the United States in the World War, he acquired a term policy of war risk insurance. On November 1, 1919, availing himself of the benefits of section 404 of the War Risk Insurance Act of October 6, 1917, c. 105, 40 Stat. 398, 410, he converted his term insurance into a twenty-payment life policy of United States government insurance. He paid premiums on this policy until January 31, 1920, when it was allowed to lapse for nonpayment of premiums. On the date of the conversion of his first policy, he was suffering from a 'compensable disability,' and, after the lapse of the second, on June 6, 1925, he was rated by the Veterans' Bureau as totally and permanently disabled. At that time he was entitled to disability compensation from the government in the sum of $312.25.
On the trial in the District Court a jury was waived and the case was heard on an agreed statement of facts. The court gave judgment for the respondent for permanent disability benefits under his first policy, with respect to so much of the insurance as the $312.25 of disability compensation, remaining uncollected at the time of total permanent disability, would have purchased if applied to the payment of premiums due upon the original policy between the date of its conversion and the date of total disability. The Circuit Court of Appeals for the Ninth Circuit affirmed, 85 F.(2d) 609, holding that respondent was entitled, under sections 305, 307 of the World War Veterans' Act (38 U.S.C.A. §§ 516, 518), to revive the original term insurance and to recover under it the permanent disability benefits awarded by the trial court. We granted certiorari, 299 U.S. 538, 57 S.Ct. 320, 81 L.Ed. --, because of the importance of the decision of the Court of Appeals, which conflicts with the consistent rulings of the Administrator of Veterans' Affairs, and affects, adversely to the government, a large number of pending insurance claims.
Section 305 of the World War Veterans' Act of June 7, 1924, c. 320, 43 Stat. 624, 626, as amended July 2, 1926, c. 723, 44 Stat. 790, 799, 38 U.S.C. § 516 (38 U.S.C.A. § 516), applies to lapsed, canceled, or reduced insurance policies. It provides:
'Where any person has heretofore (prior to June 7, 1924), allowed his insurance to lapse, or has canceled or reduced all or any part of such insurance, while suffering from a compensable disability for which compensation was not collected and dies or has died, or becomes or has become permanently and totally disabled and at the time of such death or permanent total disability was or is entitled to compensation remaining uncollected, then and in that event so much of his insurance as said uncollected compensation, * * * would purchase if applied as premiums when due, shall not be considered as lapsed, canceled or reduced; and the United States Veterans' Bureau (Veterans' Administration) is hereby authorized and directed to pay to said soldier, or his beneficiaries, as the case may be, the amount of said insurance.'
Section 307, as amended July 3, 1930, 46 Stat. 991, 1001, 38 U.S.C. § 518 (38 U.S.C.A. § 518), relates to all insurance policies 'heretofore or hereafter issued, reinstated, or converted.' It declares that all such policies shall be incontestable and provides:
'That the insured under such contract or policy may, without prejudicing his rights, elect to make claim to the bureau (Veterans' Administration) or to bring suit under section 19 of this Act (section 445 of this title) on any prior contract or policy, and if found entitled thereto, shall, upon surrender of any subsequent contract or policy, be entitled to payments under the prior contract or policy.'
Respondent elected to claim under his original policy, presumably because the rate of premiums for the term insurance was lower than for the twenty-payment life policy, and the $312.25 of disability compensation would purchase a larger amount of the former type than of the latter. The government admits that the respondent is entitled, under section 305, to revive the twenty-payment life policy which has lapsed, but contends that he is not entitled to revive the earlier term insurance which he had converted, because section 305 omits any reference to converted insurance, such as appears in section 307.