Kernea v. Shinseki, 724 F.3d 1374 (Fed. Cir. Aug. 1, 2013)
Regulation that bars claims for enhanced dependency and indemnity compensation (DIC) benefits based on hypothetical entitlement can be applied retroactively.
World War II veteran was service connected for diabetes, with a 40% disability rating. In 1961, VA increased his disability rating to 60%. In 1965, VA increased his rating to 100%. Veteran died in 1969. Veteran’s widow was awarded DIC benefits under 38 U.S.C. § 1310 that allows for benefits to survivors of veterans who die from a service-connected condition. In 2003, Mrs. Kernea applied for increased (“enhanced”) DIC benefits, under 38 U.S.C. § 1311(a)(2), which allows for such benefits if a veteran received “or was entitled to receive . . . compensation for a service-connected disability that was rated totally disabling for a continuous period of at least eight years immediately preceding death.” VA denied enhanced DIC benefits because the veteran had not been totally disabled for eight years prior to his death. While Mrs. Kernea appealed this decision, VA issued a new regulation that interpreted the phrase “entitled to receive” as prohibiting “hypothetical entitlement.” Mrs. Kernea argued that this new regulation did not apply to her because it was issued after she filed her claim.
The Board of Veterans’ Appeals determined that the regulation could be retroactively applied to her claim under the retroactivity analysis in Princess Cruises, Inc. v. United States, 397 F.3d 1358 (Fed. Cir. 2005). The Veterans Court and the Federal Circuit affirmed the Board’s decision. In Princess Cruises, the Federal Circuit identified three factors to consider in assessing whether applying an agency’s regulation to conduct that predated the regulation’s issuance would have an improper retroactive effect. The factors are: (1) “the nature and extent of the change of the law”; (2) “the degree of connection between the operation of the new rule and a relevant past event”; and (3) “familiar considerations of fair notice, reasonable reliance, and settled expectations.” Princess Cruises, 397 F.3d at 1364. The Federal Circuit assessed these three factors and determined that all three weighed in favor of retroactive effect and against Mrs. Kernea’s position.