[Federal Register Volume 66, Number 246 (Friday, December 21, 2001)]
[Proposed Rules]
[Pages 65861-65865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31479]


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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 20

RIN 2900-AL11


Board of Veterans' Appeals Rules of Practice: Claim for Death 
Benefits by Survivor

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend the Department of Veterans 
Affairs' (VA) Rules of Practice at the Board of Veterans' Appeals 
(Board) to clarify that the general rule that the Board is not bound by 
prior dispositions during the veteran's lifetime of issues involved in 
the survivor's claim does not include claims for ``enhanced'' 
Dependency and Indemnity Compensation (DIC). This amendment is 
necessary to eliminate confusion between the Board's current rule and 
another rule relating to DIC for survivors of certain veterans rated 
totally disabled at the time of death.

DATES: Comments must be received on or before January 22, 2002.

ADDRESSES: Mail or hand-deliver written comments to: Director, Office 
of Regulations Management (02D), Department of Veterans Affairs, 810 
Vermont Ave., NW., Room 1154, Washington, DC 20420; or fax comments to 
(202) 273-9289; or e-mail comments to [email protected]. 
Comments should indicate that they are submitted in response to ``RIN 
2900-AL11.'' All comments received will be available for public 
inspection in the Office of Regulations Management, Room 1158, between 
the hours of 8 a.m. and 4:30 p.m., Monday through Friday (except 
holidays).

FOR FURTHER INFORMATION CONTACT: Steven L. Keller, Senior Deputy Vice 
Chairman, Board of Veterans' Appeals, Department of Veterans Affairs, 
810 Vermont Avenue, NW., Washington, DC 20420 (202-565-5978).

SUPPLEMENTARY INFORMATION: The Board of Veterans' Appeals (Board) is an 
administrative body that decides appeals from denials of claims for 
veterans' benefits.
    The purpose of this document is to comply with the order of the 
U.S. Court of Appeals for the Federal Circuit in National Organization 
of Veterans' Advocates, Inc. v. Secretary of Veterans Affairs, Nos. 00-
7095, 00-7096, 00-7098 (Fed. Cir. Aug. 16, 2001) (``NOVA''). That case 
was a petition challenging VA's January 2000 final rule which amended 
38 CFR 3.22, relating to dependency and indemnity compensation (DIC) 
benefits for survivors of certain veterans rated totally disabled at 
the time of death. See 65 FR 3388 (Jan. 21, 2000).
    While the NOVA court explicitly declined to invalidate the rule, 
NOVA, slip op. at 42, it did note that there was an apparent conflict 
between the new rule and 38 CFR 20.1106. The court concluded that those 
two rules stated conflicting interpretations of two virtually identical 
statutes. The statutes, 38 U.S.C. 1311(a)(2) and 1318, both provide 
benefits to the survivor of a veteran who was at the time of death ``in 
receipt of or entitled to receive'' compensation for a service-
connected disability that was continuously rated totally disabling for 
a specified number of years prior to death. The regulation in 38 CFR 
3.22 interprets the phrase ``entitled to receive'' in 38 U.S.C. 1318 to 
mean that the VA had awarded the veteran a total disability rating for 
the specified period during his or her lifetime, but for some reason 
the veteran did not receive payment based on that rating, or that the 
veteran would have had a total disability rating for that period if not 
for a clear and unmistakable error by VA during the veteran's lifetime. 
The NOVA court concluded that 38 CFR 20.1106 interprets the same 
language in 38 U.S.C. 1311(a)(2) to require a posthumous determination 
of the veteran's ``entitlement'' to compensation without regard to 
whether VA rating decisions during the veteran's lifetime established 
such entitlement. Having concluded that VA established conflicting 
interpretations of the identical language in these two statutes, the 
NOVA court ordered VA to conduct an expedited rulemaking to either 
explain the basis for the differing interpretations or to revise one of 
its regulations to remove any inconsistency. NOVA, slip op. at 43.
    As explained in this notice, VA has not interpreted 38 U.S.C. 1318, 
and 38 U.S.C. 1311 in inconsistent ways. Nevertheless, to eliminate the 
potential ambiguity identified in the NOVA decision, we are amending 38 
CFR 20.1106 to clarify that, as with decisions under 38 U.S.C. 1318, 
decisions under 38 U.S.C. 1311(a)(2) will be decided taking into 
consideration prior dispositions made during the veteran's lifetime of 
issues involved in the survivor's claim. The effect of this change is 
to make VA's position clear that entitlement to benefits under either 
38 U.S.C. 1318 or 38 U.S.C. 1311 must be based on the determinations 
made during the veteran's lifetime, or challenges to such decisions on 
the basis of clear and unmistakable error, rather than on de novo 
posthumous determinations as to whether the veteran hypothetically 
could have been entitled to certain benefits if he or she had applied 
for them during his or her lifetime.

Background on Dependency and Indemnity Compensation

    Since 1957, survivors of a veteran who died in service or as a 
result of a service-connected disability have been entitled to a 
monthly benefit called ``Dependency and Indemnity Compensation'' (DIC). 
38 U.S.C. 1310(a), 1311.

[[Page 65862]]

DIC and Survivors of Veterans Who Die Other Than as a Result of 
Service

    Until 1978, DIC was payable only if the veteran died in service or 
as a result of service. In 1978, Pub. L. No. 95-479, 92 Stat. 1564 
(1978), amended title 38, United States Code to pay the same benefit as 
if the veteran had died of a service-connected disability to survivors 
of a veteran (1) whose death was not caused by service-connected 
disability, but (2) who, at the time of death, ``was in receipt of (or 
but for the receipt of retired or retirement pay was entitled to 
receive)'' compensation for a service-connected disability rated 100 
percent disabling for 10 years immediately preceding death, or for a 
period of at least 5 years extending from date of discharge from 
service until date of death. That provision was codified in 38 U.S.C. 
410(b)(1). In 1979, VA issued 38 CFR 3.22 to implement the statute. 44 
FR 22716-22718 (Apr. 17, 1979).
    In a 1981 opinion, VA's General Counsel concluded that 38 U.S.C. 
410(b)(1) did not permit a DIC award to the survivors of a veteran who 
was not actually in receipt of compensation for a total disability for 
a full 10 years prior to death, but who would have been in receipt of 
such benefits if not for error by VA in a decision rendered during the 
veteran's lifetime. Op. G.C. 2-81 (Mar. 24, 1981).
    In response to that opinion, Congress enacted Public Law 97-306, 96 
Stat. 1429 (1982), which revised 38 U.S.C. 410(b)(1), to amend the 
phrase ``was in receipt of'' to ``was in receipt of or entitled to 
receive * * *'' (emphasis added). The legislative history states that 
the purpose of this amendment was ``to provide that the requirement 
that the veteran have been in receipt of compensation for a service-
connected disability rated as total for a period of 10 years prior to 
death (or for 5 years continuously from the date of discharge) is met 
if the veteran would have been in receipt of such compensation for such 
period but for a clear and unmistakable error regarding the award of a 
total disability rating.'' Explanatory Statement of Compromise 
Agreement, 128 Cong. Rec. H7777 (1982), reprinted in 1982 U.S.C.C.A.N. 
3012, 3013. Accordingly, the amended statute, now codified at 38 U.S.C. 
1318(b), authorizes payment of DIC in cases where the veteran ``was in 
receipt of or entitled to receive (or but for the receipt of retired or 
retirement pay was entitled to receive)'' compensation for a service-
connected disability rated totally disabling for 10 years immediately 
preceding death or a period of 5 years from the date of discharge.
    In 1983, VA revised 38 CFR 3.22 to state that DIC would be payable 
under 38 U.S.C. 410(b)(1) (now 38 U.S.C. 1318(b)) when the veteran 
``was in receipt of or for any reason (including receipt of military 
retired or retirement pay or correction of a rating after the veteran's 
death based on clear and unmistakable error) was not in receipt of but 
would have been entitled to receive compensation at the time of death'' 
for service-connected disability rated totally disabling for 10 years 
prior to death or 5 years continuously from date of discharge to date 
of death. 48 FR 41160, 41161 (Sep. 14, 1983).

Payment Under DIC; ``Enhanced Benefit''

    DIC provides a monthly cash benefit to survivors. Until 1993, 
surviving spouses received a monthly benefit based on the veteran's pay 
grade while on active duty.
    In the ``Dependency and Indemnity Compensation Reform Act of 
1992,'' Pub. L. No. 102-568, Title I, Sec. 102 (Oct. 29, 1992), 106 
Stat. 4321, 4322, Congress made substantial changes to the DIC program. 
The primary change was to the payment system. For deaths occurring 
subsequent to January 1, 1993, all surviving spouses are paid at the 
same rate. In addition, the Act provided an ``enhancement'' to the 
benefits paid to some surviving spouses: If the veteran was in receipt 
of or was entitled to receive compensation for a service-connected 
disability rated totally disabling for a continuous period of at least 
eight years immediately preceding death, the surviving spouse receives 
an additional monthly benefit, currently $197 per month. 38 U.S.C. 
1311(a)(2); 66 FR 28598 (May 23, 2001) (adjusted rate).
    In 1993, VA issued a regulation at 38 CFR 3.5(e) to implement 38 
U.S.C. 1311(a)(2). That regulation states that the additional DIC 
amount will be paid ``in the case of the death of a veteran who at the 
time of death was in receipt of or was entitled to receive (or but for 
the receipt of retired pay or retirement pay was entitled to receive) 
compensation for a service-connected disability that was evaluated as 
totally disabling for a continuous period of at least eight years 
immediately preceding death.''

Background on 38 CFR 20.1106

    38 CFR 20.1106--``Rule 1106''--is a Rule of Practice at the Board 
of Veterans' Appeals. Essentially, it sets forth the rule that, in most 
cases, issues involved in a survivor's claim for death benefits will be 
decided without regard to any prior disposition of those issues during 
the veteran's lifetime. Specifically, it provides as follows:

    Sec. 20.1106 Rule 1106. Claim for death benefits by survivor--
prior unfavorable decisions during veteran's lifetime.
    Except with respect to benefits under the provisions of 38 
U.S.C. 1318 and certain cases involving individuals whose Department 
of Veterans Affairs benefits have been forfeited for treason or for 
subversive activities under the provisions of 38 U.S.C. 6104 and 
6105, issues involved in a survivor's claim for death benefits will 
be decided without regard to any prior disposition of those issues 
during the veteran's lifetime.

    This particular version of the rule became effective in February 
1992, 9 months prior to enactment of Pub. L. No. 102-568.
    Rule 1106 was originally proposed in 1989. It was part of a large 
package of revisions to the Board's rules in the wake of enactment of 
the Veterans' Judicial Review Act of 1988, Pub. L. No. 100-687, Div. A, 
102 Stat. 4105 (1988).
    The predecessor to Rule 1106 was Rule 96 (38 CFR 19.196 (1991)). 
That rule provided as follows:

Issues involved in a survivor's claim for death benefits will be 
decided without regard to any prior disposition of those issues 
during the veteran's lifetime.

    When the Board proposed rule 96 in 1980, it explained that the 
purpose was to ``[a]llow the Board to review ``de novo'' service 
connection cause of death cases notwithstanding the fact that a final 
appellate decision had been rendered during the veteran's lifetime.'' 
45 FR 56093 (1980). As indicated, the rule was intended to apply in 
cases where a DIC claim is dependent on a finding that the cause of 
death was service connected, the most common type of DIC claim. It was 
not intended to preclude consideration of decisions during the 
veteran's lifetime in cases where a DIC claim was dependent upon a 
showing that the veteran was entitled to receive compensation during 
his or her lifetime for a service-connected disability rated totally 
disabling for a specified pre-death period. However, it became apparent 
that the language of Rule 96 could be construed as covering such cases. 
Accordingly, in 1989, VA proposed to amend Rule 96 with current Rule 
1106, explaining:

The old rule was inconsistent with 38 CFR 3.22(a)(2) which, in 
effect, requires that it be shown that there was clear and 
unmistakable error in prior rating decisions which failed to give a 
veteran a total rating for the required period of time in order to 
qualify for ``410(b)'' benefits. (Former 38 U.S.C. 410(b) is now 38 
U.S.C. 418, see Section 1403 of Public Law 100-687.) 38 U.S.C. 
3504(c) forbids the payment of benefits to any person after

[[Page 65863]]

September 1, 1959, based on the service of an individual before the 
date of a treasonous act if that individual's Department of Veterans 
Affairs benefits have been forfeited for treason. There is a similar 
prohibition in 38 U.S.C. 3505(a) pertaining to cases involving 
forfeiture for subversive activities. These provisions are now 
recognized. 54 FR 34334, 34338 (Aug. 18, 1989)

    In February 1992, having received no comments on the proposed rule, 
VA published Rule 1106 as a final rule (57 FR 4088, 4103 (Feb 3, 
1992)).

VA's Interpretation of 38 U.S.C. 1318

    In Wingo v. West, 11 Vet. App. 307 (1998), the United States Court 
of Appeals for Veterans Claims (CAVC) interpreted 38 CFR 3.22(a) to 
permit a DIC award in a case where the veteran had never established 
entitlement to VA compensation for a service-connected total disability 
and had never filed a claim for such benefits which could have resulted 
in entitlement to compensation for the required period. The CAVC 
concluded that the language of Sec. 3.22(a) would permit a DIC award 
where it is determined that the veteran ``hypothetically'' would have 
been entitled to a total disability rating for the required period if 
he or she had applied for compensation during his or her lifetime. 11 
Vet. App. at 311.
    The CAVC's interpretation of Sec. 3.22(a) did not accurately 
reflect VA's intent in issuing that regulation. Section 1318 of the 
statute authorizes DIC where the veteran was ``in receipt of or 
entitled to receive'' compensation for total service-connected 
disability for a specified period preceding death. The statute does not 
authorize VA to award DIC benefits in cases where the veteran merely 
had hypothetical, as opposed to actual, entitlement to compensation. VA 
does not have authority to provide by regulation for payment of DIC in 
a manner not authorized by 38 U.S.C. 1318. Section 3.22(a) is an 
interpretive rule that was intended to explain the requirements of 38 
U.S.C. 1318, and not to establish any substantive rights beyond those 
authorized by section 1318. However, since the language of Sec. 3.22(a) 
apparently caused confusion regarding VA's interpretation of 38 U.S.C. 
1318, VA revised Sec. 3.22(a) to ensure that it clearly expresses VA's 
interpretation of section 1318. See 65 FR 3388 (Jan. 21, 2000).
    Section 1318 authorizes payment of DIC in cases where the veteran 
was, at the time of death, ``in receipt of or entitled to receive (or 
but for the receipt of retired or retirement pay was entitled to 
receive)'' compensation for service-connected disability that ``was 
continuously rated totally disabling for a period of 10 or more years 
immediately preceding death'' or was so rated for 5 years continuously 
from date of discharge to date of death. The phrase ``in receipt of * * 
* compensation'' unambiguously refers to cases where the veteran was, 
at the time of death, actually receiving compensation for service-
connected disability rated totally disabling for the required period. 
VA concluded that the phrase ``entitled to receive * * * compensation'' 
is most reasonably interpreted as referring to cases where the veteran 
had established a legal right to receive compensation for the required 
period under the laws and regulations governing such entitlement, but 
was not actually receiving the compensation.
    Under 38 U.S.C. 5101, ``a specific claim in the form prescribed by 
the Secretary * * * must be filed in order for benefits to be paid or 
furnished to any individual under the laws administered by the 
Secretary.'' No person can have a right to receive compensation from VA 
in the absence of a properly filed claim. Jones v. West, 136 F.3d 1296, 
1299-1300 (Fed. Cir.), cert. denied, 119 S. Ct. 90 (1998). Section 
5110(a) of title 38, United States Code, provides that an award of 
compensation may not be made effective earlier than the date of the 
claimant's application, unless specifically provided otherwise by 
statute. Accordingly, a person cannot have a right to receive 
compensation from VA for any period prior to the date of an application 
for benefits except as expressly authorized by specific statutory 
provision.
    Moreover, as set forth above, the legislative history of Public Law 
97-306--which added the phrase ``or entitled to receive'' to what is 
now 38 U.S.C. 1318--clearly shows that Congress made the amendment to 
provide that DIC may be paid in cases where the veteran would have been 
in receipt of compensation for a total service-connected disability for 
the specified period prior to death if not for a clear and unmistakable 
error (CUE) by VA. A ``clear and unmistakable error'' is an error in a 
prior final VA decision which materially affected the outcome of the 
decision. See, e.g., Disabled American Veterans v. Gober, 234 F.3d 682, 
695-97 (Fed. Cir. 2000), cert. denied sub nom. Nat'l Org. of Veterans' 
Advocates v. Principi, 121 S. Ct. 1605 (2001); Bustos v. West, 179 F.3d 
1378, 1381 (Fed. Cir.), cert. denied 120 S. Ct. 405 (1999). Pursuant to 
law and regulation, a decision containing CUE may be revised 
retroactively, and entitlement to benefits may be established 
retroactively as if the error had not occurred. 38 U.S.C. 5109A, 7111; 
38 CFR 3.105(a), 38 CFR 20.1406(a).
    A retroactive award predicated on a finding of CUE is, like all 
awards of VA benefits, subject to the requirement that the veteran have 
filed a claim for benefits under 38 U.S.C. 5101(a). Further, the period 
of the veteran's retroactive entitlement is governed by the effective-
date provisions of 38 U.S.C. 5110, and generally may not be earlier 
than the date of the veteran's claim which resulted in the erroneous 
decision. In using the phrase ``entitled to receive'' to refer to the 
specific class of cases where the veteran's entitlement was established 
by correction of CUE, Congress plainly contemplated that determinations 
concerning the existence and duration of the veteran's entitlement to 
benefits would continue to be governed by the requirements of 38 U.S.C. 
5101(a) and 5110.
    The legislative history also suggests that final decisions 
concerning a veteran's disability rating and effective date would be 
binding for purposes of determinations under 38 U.S.C. 1318(b) unless 
there was CUE in such decisions. Sections 7104(b) and 7105(c) of title 
38, United States Code provide that determinations of the Board of 
Veterans' Appeals and VA regional offices, respectively, are final 
unless a timely appeal is filed. Such final decisions may be revised 
only on the basis of CUE. By clearly stating its intent that DIC 
benefits may be awarded if there was CUE in a prior final decision 
which prevented the veteran from receiving total disability 
compensation for the specified period, Congress plainly contemplated 
that the prior final decision would continue to be binding in the 
absence of CUE. The extensive discussion of CUE in the legislative 
history would have been unnecessary and illogical if Congress had 
intended VA to ignore any final VA decisions during the veteran's 
lifetime. Accordingly, if a regional office or the Board had rendered a 
final decision that the veteran was not entitled to a total rating for 
at least 10 years immediately preceding death (or at least 5 years from 
date of discharge to date of death), such decision would preclude VA 
from reaching a contrary conclusion in adjudicating a claim for DIC 
under 38 U.S.C. 1318(b).
    In view of Congress' clear intent, VA has concluded that 
determinations concerning the existence and duration of the veteran's 
entitlement to compensation for a service-connected disability rated 
totally disabling are governed by the generally-applicable provisions 
of 38 U.S.C. 5101(a), 5110,

[[Page 65864]]

7104(b), and 7105(c), governing claim-filing requirements, effective 
dates of entitlement, and the finality of regional-office and Board 
decisions. Congress' stated purpose to authorize DIC in cases where 
clear and unmistakable error was the only obstacle to the veteran's 
receipt of total disability compensation for the required period fits 
logically within this well-established statutory scheme.
    In contrast, interpreting 38 U.S.C. 1318(b) to permit DIC awards 
where the veteran ``hypothetically'' could have been entitled to 
benefits would create a substantially broader rule which would be 
inconsistent with the general statutory requirements governing a 
veteran's entitlement to compensation. VA has found no indication in 
section 1318(b) or its legislative history that Congress intended VA to 
ignore those established statutory requirements in making 
determinations regarding the veteran's entitlement to compensation for 
purposes of section 1318(b). To the contrary, Congress indicated that 
the purpose of the phrase ``or entitled to receive'' was to authorize 
DIC awards in a specific class of cases where the veteran's entitlement 
is established under those generally-applicable statutory requirements.
    The language of 38 U.S.C. 1318(b) is consistent with Congress' 
stated purpose. Section 1318(b) authorizes payment of DIC in cases 
where the veteran was entitled to receive compensation for a service-
connected disability that ``was continuously rated totally disabling 
for a period of 10 or more years immediately preceding death.'' The 
requirement that the disability have been ``continuously rated'' 
totally disabling for the specified period is most reasonably construed 
as referring to ratings which had actually been assigned by VA for the 
duration of that period in accordance with the established statutory 
requirements governing claims, ratings, and effective dates. A contrary 
interpretation would render the term ``rated'' wholly unnecessary, for 
Congress could simply have provided that DIC would be payable based on 
a posthumous determination that the veteran had a service-connected 
disability that ``was continuously * * * totally disabling for a period 
of 10 or more years immediately preceding death.'' In cases where a 
rating is assigned retroactively through correction of CUE, the 
statutory requirements for a continuous rating and entitlement at death 
are satisfied, as a matter of law, because Congress has mandated that 
decisions correcting CUE shall have the same effect as if they had been 
issued on the date of the erroneous decision.
    For the foregoing reasons, we conclude that the meaning of section 
1318 is clear from its language, history, and context. Accordingly, 
given the absence of ambiguity in the statute and in view of Congress' 
clear intent, there is no ``interpretive doubt * * * to be resolved in 
the veteran's favor.'' Brown v. Gardner, 513 U.S. 115, 118 (1994).
    This interpretation of 38 U.S.C. 1318(b) is consistent with VA's 
prior interpretation of that provision. In a 1990 precedent opinion 
which is binding on all VA officials and employees, the VA General 
Counsel examined the language and history of section 1318(b) 
(previously section 410(b)), and concluded that the legislative history 
clearly indicated that Congress intended to authorize DIC in cases 
where the veteran had a total service-connected disability rating for 
the specified period, or would have had such a rating but for clear and 
unmistakable error by VA. The General Counsel concluded further that VA 
could not award DIC in cases where the veteran did not have a total 
service-connected rating for the specified period and there was no 
clear and unmistakable error which could have provided a basis for 
retroactively assigning such a rating. VAOPGCPREC 68-90, 55 FR 43255 
(Oct. 26, 1990).

Definition of ``Entitled to Receive''

    In order to clarify the requirements of 38 U.S.C. 1318, VA revised 
38 CFR 3.22 to expressly define the statutory term ``entitled to 
receive.'' VA defined that term to refer to each specific circumstance 
where a veteran could have had a service-connected disability rated 
totally disabling by VA but may not have been receiving VA compensation 
for such disability at the time of death. The revised regulation 
provides seven circumstances:
    (1) VA was paying the compensation to the veteran's dependents;
    (2) VA was withholding the compensation under authority of 38 
U.S.C. 5314 to offset an indebtedness of the veteran;
    (3) The veteran had applied for compensation but had not received 
total disability compensation due solely to clear and unmistakable 
error in a VA decision concerning the issue of service connection, 
disability evaluation, or effective date;
    (4) The veteran had not waived retired or retirement pay in order 
to receive compensation;
    (5) VA was withholding payments under the provisions of 10 U.S.C. 
1174(h)(2);
    (6) VA was withholding payments because the veteran's whereabouts 
was unknown, but the veteran was otherwise entitled to continued 
payments based on a total service-connected disability rating; or
    (7) VA was withholding payments under 38 U.S.C. 5308 but determines 
that benefits were payable under 38 U.S.C. 5309. 38 CFR 3.22(b) (2000).

VA's Interpretation of 38 U.S.C. 1311(a)(2)

    Section 1311(a)(2) was enacted in 1992. In view of the nearly 
identical language in 38 U.S.C. 1311(a)(2) and the earlier-enacted 38 
U.S.C. 1318, and the similar purpose of the two statutes, VA believes 
those statutes should be interpreted in the same manner. The NOVA court 
reached the same conclusion, noting that the well-established rule that 
identical words used in different parts of a statute are intended to 
have the same meaning ``applies with equal force where, as here, the 
words at issue are used in two different sections of a complex 
statutory scheme and those two sections serve the same purpose, namely, 
the award of DIC benefits to survivors.'' Slip op. at 23-24.
    The legislative history of section 1311(a)(2) makes clear it was 
modeled on section 1318 and intended to have the same meaning. H.R. 
Rep. 753, 102d Cong. 17 (1992) (discussing application of sections 
1311(a)(2) and 1318).
    The legislative history further supports the conclusion that 
section 1311(a)(2), like section 1318, was intended to require that the 
veteran's entitlement to total disability ratings be based on ratings 
during the veteran's lifetime, rather than posthumous determinations 
regarding the veteran's ``hypothetical'' entitlement to benefits. The 
joint explanatory statement on the compromise agreement resulting in 
section 1311(a)(2) explained that it was intended to provide an 
additional amount of compensation for survivors of veterans who were 
``rated totally disabled while married to the surviving spouse.'' 138 
Cong. Rec. 17376 (1992).
    In 1993, VA issued a regulation to implement 38 U.S.C. 1311(a)(2). 
That regulation, codified at 38 CFR 3.5(e), states that the additional 
DIC amount will be paid ``in the case of the death of a veteran who at 
the time of death was in receipt of or was entitled to receive (or but 
for the receipt of retired pay or retirement pay was entitled to 
receive) compensation for a service-connected disability that was 
evaluated as totally disabling for a continuous period of at least 
eight years immediately preceding death.''
    For the reasons stated above with respect to 38 U.S.C. 1318, VA has 
consistently construed 38 U.S.C.

[[Page 65865]]

1311(a)(2) and 38 CFR 3.5(e) as requiring that the veteran's 
entitlement to total disability compensation be established by ratings 
during the veteran's lifetime or by CUE challenge to a decision or 
decisions rendered during the veteran's lifetime. Because this 
construction comports with the language, legislative history, and 
principles of construction discussed above, VA will continue to 
interpret both 38 U.S.C. 1311(a)(2) and 38 U.S.C. 1318 in this manner.

The NOVA Case: Revision of Rule 1106

    The NOVA court concluded that VA has interpreted 38 U.S.C. 1318 and 
38 U.S.C. 1311(a)(2) differently because the rule in 38 CFR 20.1106 
concerning disregard of decisions during the veteran's lifetime 
contains an exception for section 1318 but not for section 1311(a)(2). 
As explained above, VA has consistently interpreted 38 U.S.C. 
1311(a)(2) and 1318 in the same manner. The cited inconsistency between 
38 CFR 3.22(a) and Rule 1106 is a function of time, not of VA's 
interpretation of the two statutes at issue in the NOVA case.
    Despite the court's characterization of Rule 1106 as the 
``implementing'' regulation for 38 U.S.C. 1311, NOVA, slip op. at 9-10; 
37, the fact is that Rule 1106 was proposed three and one-half years 
before, and published as final 9 months before, the amendments to 38 
U.S.C. 1311 were enacted. Simply put, Rule 1106 was not, and could not 
have been, drafted with the enhanced DIC benefits of 38 U.S.C. 
1311(a)(2) in mind. VA implemented 38 U.S.C. 1311(a)(2) in a different 
regulation, 38 CFR 3.5(e), published in April 1993, after enactment of 
Pub. L. No. 102-568. 58 FR 25561 (Apr. 27, 1993).
    Rule 1106 was intended to apply to claims for DIC where the 
veteran's death is service connected. It was never intended to preclude 
consideration of decisions during the veteran's lifetime in cases where 
the veteran's death is not service connected and, therefore, a 
survivor's entitlement to DIC is dependent upon a showing that the 
veteran was entitled to receive compensation during his or her lifetime 
for a service-connected disability rated totally disabling for a 
specified pre-death period. In view of the purpose of Rule 1106 and the 
clear requirements of 38 U.S.C. 1311(a)(2) and 38 CFR 3.5(e), VA has 
not interpreted Rule 1106 to preclude reliance on decisions during the 
veteran's lifetime in determining entitlement to enhanced DIC benefits.
    VA has interpreted 38 CFR 3.22 and 38 CFR 20.1106 to preclude 
``hypothetical'' determinations of eligibility for nonservice-connected 
DIC under 38 U.S.C. 1318, an explicit exclusion in Rule 1106 recognized 
by the Federal Circuit in Hix, 225 F.2d at 1380. In the same way, under 
Rule 1106, we interpreted the exact same language--``in receipt of or 
entitled to receive''--in 38 U.S.C. 1311(a)(2) to preclude hypothetical 
determinations of eligibility for the enhanced DIC benefit. In Hix, the 
court declined to defer to VA's interpretation because Rule 1106 
mentions 38 U.S.C. 1318, but does not mention 38 U.S.C. 1311(a)(2). As 
indicated above, the reason for this omission is that Rule 1106 became 
final 9 months before the current 38 U.S.C. 1311(a)(2) was enacted. 
There is, frankly, no basis for concluding that VA meant to exclude a 
statute that did not yet exist. Although we recognize that further 
revision of Rule 1106 to include express reference to 38 U.S.C. 
1311(a)(2) will help clarify VA's position, this revision does not 
reflect any change in VA's interpretation of the governing statutes.
    Nevertheless, because of the apparent confusion, and in accordance 
with the court's order in NOVA, we propose to amend 38 CFR 20.1106 to 
add a specific exception for 38 U.S.C. 1311(a)(2). In our view, the 
statutory language does not support paying either DIC or enhanced DIC 
benefits where the veteran never made a claim for total disability 
benefits in his or her lifetime, or where a survivor cannot show clear 
and unmistakable error in decisions made during the veteran's lifetime.

Comment Period

    We are providing a comment period of 30 days for this proposed 
rule. In its August 16, 2001, order in the NOVA case, the Federal 
Circuit directed VA to issue its final rules on this matter within 120 
days after the date of issuance of the court's mandate in that case. 
The Federal Circuit further ordered VA to stay all proceedings on 
claims for DIC under 38 U.S.C. 1318 until such final rules are issued. 
Although the Federal Circuit indicated that VA may request an extension 
of time, if necessary, we believe that the Court intended that VA would 
make every effort to issue final rules within the specified 120-day 
period. A shortened comment period of 30 days is necessary to help us 
meet the objecive of the Court. Further, we believe that prompt 
completion of the rulemaking process is necessary to ensure that the 
court-ordered stay of proceedings does not result in prolonged delays 
in pending claims that may be affected by this rule.

Executive Order 12866

    This document has been reviewed by the Office of Management and 
Budget under Executive Order 12866.

Paperwork Reduction Act

    This document contains no provisions constituting a collection of 
information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

Regulatory Flexibility Act

    The Secretary hereby certifies that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities as they are defined in the Regulatory Flexibility Act, 5 
U.S.C. 601-612, inasmuch as this rule applies to individual claimants 
for veterans' benefits and does not affect such entities. Therefore, 
pursuant to 5 U.S.C. 605(b), this proposed rule is exempt from the 
initial and final regulatory flexibility analyses requirement of 
sections 603 and 604.
    There is no Catalog of Federal Domestic Assistance number for this 
proposed rule.

List of Subjects in 38 CFR Part 20

    Administrative practice and procedure, Claims, Veterans.

    Approved: November 26, 2001.
Anthony J. Principi,
Secretary of Veterans Affairs.

    For the reasons set out in the preamble, VA proposes amending 38 
CFR part 20 as follows:

PART 20--BOARD OF VETERANS' APPEALS: RULES OF PRACTICE

    1. The authority citation for part 20 continues to read as follows:

    Authority: 38 U.S.C. 501(a) and as noted in specific sections.

    2. Section 20.1106 is revised to read as follows:


Sec. 20.1106 Rule 1106.  Claim for death benefits by survivor-prior 
unfavorable decisions during veteran's lifetime.

    Except with respect to benefits under the provisions of 38 U.S.C. 
1311(a)(2), 1318, and certain cases involving individuals whose 
Department of Veterans Affairs benefits have been forfeited for treason 
or for subversive activities under the provisions of 38 U.S.C. 6104 and 
6105, issues involved in a survivor's claim for death benefits will be 
decided without regard to any prior disposition of those issues during 
the veteran's lifetime.

    Authority: 38 U.S.C. 7104(b).

[FR Doc. 01-31479 Filed 12-20-01; 8:45 am]
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