Karnas v. Derwinski — Apply the version of law or regulation most favorable to the claimant when the law changes during an ongoing appeal

The appellant sought restoration of a 100-percent service-connected rating for schizophrenia after VA reduced the evaluation to 70 percent based largely on a single reexamination. The Court held that the Board committed reversible error in finding material improvement where the record did not show any meaningful change between the examinations used to support the prior 100-percent award and the later reduction. The Court also held that 38 C.F.R. § 4.16(c), which became effective during the pendency of the appeal, applied to the claim because it was the version of law most favorable to the veteran and there was no contrary congressional or regulatory directive. Because the record showed that the veteran had not worked for years and his only compensable service-connected disability was a mental disorder rated at 70 percent, the Board should have considered whether § 4.16(c) compelled a 100-percent schedular evaluation. The Court further discussed 38 C.F.R. § 3.344(a), emphasizing that psychiatric ratings generally may not be reduced on the basis of one examination unless the evidence shows sustained improvement under the ordinary conditions of life. The Court reversed and remanded with instructions to restore the 100-percent rating retroactive to the effective date of reduction.

When the law or regulation governing a pending claim changes before the administrative or judicial review process is complete, VA must apply the version most favorable to the claimant unless Congress or the Secretary has clearly directed otherwise; in addition, a reduction in a stabilized or total disability rating requires evidence of material, sustained improvement under the ordinary conditions of life.

Karnas is the classic authority for applying favorable regulatory changes to pending claims and for challenging rating reductions that rely on insufficient evidence of improvement.

The case is central to effective-date and pending-law arguments, especially where a new regulation can change the outcome of an appeal already in process. It also provides strong support for attacking reductions in psychiatric ratings when VA relies on one examination or fails to compare the full record.

Reducing a total or stabilized psychiatric rating based on inadequate evidence of sustained improvement and failing to apply an intervening regulation favorable to the veteran.

A veteran appeals a 70-percent psychiatric rating, and during the appeal VA issues a new regulation that would require a 100-percent rating if the disorder prevents substantially gainful employment. The Board must consider the new rule if it is more favorable and no law bars retroactive application.

Use Karnas to argue for application of the most favorable version of a regulation in any still-pending appeal, and to challenge reductions where VA did not show sustained improvement under the ordinary conditions of life.

Thorpe v. Housing Authority of Durham, Bradley v. School Bd., Bennett v. New Jersey, Bowen v. Georgetown University Hospital, Akles v. Derwinski, Fugere v. Derwinski, Bentley v. Derwinski