Opinion
Argued October 20, 1942 —
Decided January 22, 1943.
Where a corporation contracts with licensed physicians under which the latter agree to render professional services in accordance with the terms of the contracts, for a certain stipulated compensation, to those members of the general public who contract with the corporation, for a specified sum of money, for the services of a doctor, the physicians receiving their compensation whether or not they render services, the subscribers being entitled to a physician's services whether or not they are needed, and the corporation not undertaking to pay such debt as the subscriber may incur for medical services, such contract is not one of insurance, and the business of the corporation so contracting cannot be construed as the business of insurance.
On appeal from a judgment of the Supreme Court, entered on postea signed by Judge Oliphant, sitting as Supreme Court Commissioner, who filed the following opinion:
"This matter was submitted to the court for judgment without pleadings. It is an action brought by the State of New Jersey on the complaint of the Commissioner of Banking and Insurance to recover the statutory penalty against the defendant for conducting an unlicensed insurance business. R.S. 17:33-2. The facts have been stipulated and the sole question for determination is one of law, namely, whether the business conducted by the defendant is one of insurance.
"The defendant is a corporation. It is not licensed to transact the business of insurance. It makes contracts with licensed physicians under which they agree to render professional services in accordance with the terms of the contracts for a certain stipulated compensation to those members of the general public who contract with the defendant, for a specified sum of money, for the services of a doctor. The physicians receive their compensation whether or not they render services therefor. The subscribers are entitled to a physician's services whether or not they are needed. The defendant does not undertake to pay such debt as the subscriber may incur for medical services. The contract is not one of indemnification. The defendant does not promise to indemnify the subscriber against any loss. The business of the defendant differs entirely in principle from that of insurance. The Company cannot be called upon to meet any loss because of any risk, hazard or the happening of any contingency. The physicians are engaged and stand ready to render their services. The Company cannot be called upon to expend further money than that already paid or agreed to be paid to them. The subscriber incurs no debt to the physician. Neither as between the corporation and the physician, nor as between the physician and the subscriber is the compensation or any other element of the arrangement between them affected by any contingency, hazard or risk.
"The state contends that the contracts between the defendant and its subscribers are aleatory, that there is a gamble. It contends that the corporation in effect wagers that the subscriber will not need or seek medical attention. If he avails himself of the services offered the defendant must pay the doctor. If he does not, the defendant profits and wins its wager.
"This is not so according to the agreed statement of the case wherein it is set forth 'The physicians' services agreed to be rendered to the contract holders of Community Health Service, Inc., are furnished by physicians licensed to practice medicine in New Jersey, whose services are contracted for by the defendant in writing in advance of any sales to subscribers. These physicians' services are engaged for a period of one year and from year to year thereafter for a fixed consideration which varies with the number of contract holders served but not with the amount of services rendered by the physician to any or all of the contract holders.' Though the case of Moresh v. O'Regan, 120 N.J. Eq. 534, was reversed on jurisdictional grounds, 122 Id. 388, it was there held that 'a contract which for a consideration, undertakes to do anything other than to pay a sum of money upon the destruction or injury to something in which the other party has an interest, is not a contract of insurance.' This pronouncement was apparently based on the definition of insurance as contained in 32 C.J. 975, § 1; 'broadly defined, insurance is a contract by which one party, for a compensation called the premium, assumes particular risks of the other party and promises to pay to him or his nominee a certain ascertainable sum of money on a specified contingency.'
"Tested by this rule the business of the defendant is not that of insurance, but I believe the definition therein contained is too narrow. I prefer that found in the Mass. Gen. Laws 175, § 2. It is 'an agreement by which one party for a consideration promises to pay money or its equivalent or to do an act valuable to the insured upon the destruction, loss or injury of something in which the other party has an interest.' Of this definition, the Massachusetts Supreme Judicial Court has recently said, in Attorney-General, ex rel. Monk v. Osgood Co., 249 Mass. 473. 'This statutory definition does not differ in any essential from the common-law definition.'
"The case of State v. Universal Service Agency (Wash.), 151 Pac. Rep. 768, closely parallels the one sub judice. There insurance is defined as a contract 'whereby one party, called the insurer, for a consideration, undertakes to pay money or its equivalent, or to do an act valuable to another party, called the insured, or his beneficiary, upon the happening of the hazard or peril insured against, whereby the party insured or his beneficiary suffers loss or injury.' The court was confronted with a case wherein a corporation contracted with its subscribers to procure for them medical service, drugs and merchandise at a relatively low rate, not guaranteeing performance by the individuals who were to furnish services and goods, and it held that there was no hazard or peril whereby the purchasers of contracts might suffer a loss or injury which the corporation insured against and that therefore, it was not engaged in the insurance business subjecting it to the authority of the insurance commissioners.
"In Sisters of the Third Order of St. Francis v. Frances Guillaume's Estate, 22 III. App. 543, it was held that a contract made by a corporation conducting a hospital, providing that for a stated consideration a certain person should be received into the hospital and cared for during the remainder of her life, was not in the nature of life insurance.
"In the case of Stern v. Rosenthal, 128 N.Y. Supp. 711, the court makes the presence of a risk against which indemnity is given the test of insurance. The certainty of the obligation to pay the plaintiff for his labor was noted and in both these respects the case resembles the instant one. The court said 'The defendants' obligation was merely to pay the plaintiff for his labor * * *.' 'In no event was the obligation of the defendant to pay contingent upon any risk.'
"The cases cited by the state, among which are, Allin v. Motorists Alliance of America, Inc., 234 Ky. 714; 29 S.W. Rep. (2 d) 19, and National Auto Service Corp. v. State, 55 Id. 209, do not appear to be in point.
"I am of the opinion that the contract as contained in the agreed statement of the case is not one of insurance, that, the business of the defendant cannot be construed as the business of insurance and that a judgment of no cause for action should be rendered."
For the appellant, Louis J. Cohen.
For the respondent, Louis B. LeDuc.
The judgment under review will be affirmed, for the reasons expressed in the opinion of Judge Oliphant.
For affirmance — THE CHANCELLOR, CHIEF JUSTICE, BODINE, DONGES, HEHER, PERSKIE, PORTER, COLIE, DEAR, HAGUE, JJ. 10.
For reversal — CASE, WELLS, RAFFERTY, THOMPSON, JJ. 4.