CALIFORNIA PHYSICIANS SERVICE v. GARRISON (1945)

The plaintiff sued under section 1060 of the Code of Civil Procedure for a declaratory judgment. The cause was tried upon a stipulation of facts and a judgment for plaintiff was entered. The appeal was taken on the clerk's transcript.

The plaintiff was incorporated in 1939 as a non-profit corporation under the provisions of section 593 et seq. of the Civil Code. The membership of the corporation is divided into three groups—(1) administrative members comprised of physicians and others in whom is vested the administrative control of the corporation. These are elected by the professional members periodically, and these administrative members in turn elect the board of trustees. (2) Professional members are duly licensed physicians and surgeons practicing in this state. (3) Beneficiary members are those who, upon payment of monthly dues, are entitled to secure from any professional member necessary medical and surgical services. Professional membership is open to any physician or surgeon licensed to practice his profession in this state upon his agreeing to abide by the rules of the corporation that all compensation for services rendered a beneficiary member shall be paid upon a pro rata basis out of the monthly funds collected from the beneficiary members. It is stated in the respondent's brief for the purpose of showing the success of the plan and the importance of the litigation that approximately five thousand of the licensed physicians and surgeons practicing in the state are members of the organization, and that more than one hundred thousand persons have become beneficiary members, this member increasing at the rate of about fifteen hundred each month.

The facts upon which the cause was tried are stated in a comprehensive stipulation which tendered the issues to the trial court as of the date of November 16, 1942, the date upon which the judgment was entered. From this stipulation it appears that ‘the fundamental purpose of plaintiff is to provide an organization through which the physicians of California can render their professional services to groups of persons of low income for compensation within the means of such groups. * * * each professional member has undertaken to render such needed medical services to beneficiary members of plaintiff as may properly be requested of him and has undertaken that as compensation for any medical service that he may render, he will look solely to the available funds of California Physicians' Service, provided only, that each professional member is free to exercise his individual right to refuse to accept any person as a patient.’ Special attention was given to the advantages of group medical service and many beneficiaries were enrolled by the ‘group’ method meaning ‘employees of a common employer, members of a professional organization, members of a lodge, members of a social club or any other existing entity having a means of collecting the monthly dues required for beneficiary membership.’

In 1941 the plaintiff entered into a contract with the Federal Farm Security Administration to furnish medical services and hospital care to rural families. What, if any, services have been performed under the contract does not appear in the record.

A controversy has arisen between the plaintiff and the defendant relative to their respective rights and duties and is stated as follows: ‘Defendant contends that the business and operation of California Physicians' Service constitute the transaction of disability insurance as classified and defined in Section 106 of the Insurance Code [St.1935, p. 501] and that said activities of plaintiff constitute the corporate practice of medicine and surgery, while, on the other hand, plaintiff contends that its business and operations comprise the performance of a personal service by its professional members to its beneficiary members for which plaintiff acts as the mediator or agency for the payment of compensation for such services.’

A supplemental statement of facts contains the certificate of the State Board of Medical Examiners showing plaintiff's compliance with the provisions of section 593a of the Civil Code.

Upon the facts thus stated and upon the controversy thus outlined the trial court decreed as follows:

‘1. That rendition of medical and surgical services by the professional members of plaintiff, California Physicians' Service, and the acceptance of payment for such services by said professional members from funds contributed by the beneficiary members of plaintiff in the manner and within the limits set forth in the articles of incorporation and by-laws of California Physicians' Service, does not constitute the transaction of an insurance business under the insurance laws of the State of California;

‘2. The objects and purposes set forth in the articles of incorporation of plaintiff, California Physicians' Service, and particularly in Article Two thereof, are lawful objects and purposes and the performance or undertaking by plaintiff of any or all of said objects does not and will not violate any of the provisions of the laws of the State of California relating to the business of insurance;

‘3. The rendition of medical and/or surgical services by plaintiff or by plaintiff's professional members does not constitute a violation of the principle that a corporation may not engage in or be licensed to practice one of the learned professions, towit: law, medicine, dentistry, architecture, etc.; and

‘4. Such sums as are collected by plaintiff to be used in the manner and for the purposes outlined in the articles of incorporation of plaintiff cause plaintiff to be subject to regulation by the Attorney General of the State of California in the manner provided and under the provisions of Sec. 605c of the Civil Code of the State of California.’

This was the case made in the trial court upon which the judgment was based. In his opening brief the appellant attacked the judgment upon the certified record. Thereafter the respondent set forth new matter covering activities such as hospitalization to rural families under the Farm Security contract, which apparently were assumed by the corporation after the judgment was entered. (Reference is made in the stipulation of facts to the contract to provide ‘hospital care’ to rural families, and reference is made to the articles of incorporation of respondent. This exhibit is not in the record, but it is undisputed that the cause was tried on the issues framed in its pleadings.) In his reply brief the appellant indulged in further statements of fact beyond the scope of the record and both parties have asked us to proceed under section 956a of the Code of Civil Procedure and make new findings. The suggestions in the briefs were not followed by motion or a tender of evidence beyond the stipulation upon which the judgment rests, and none of the provisions of Rule 23(b) of the Rules on Appeal have been followed. Appellant's argument on this phase of the case, presented for the first time in his reply brief, is that, if respondent is in fact providing hospitalization for some of its beneficiary members, it must comply with the provisions of section 11491 et seq. of the Insurance Code, St.1937, p. 2438 et seq. The suggestion and the argument accompanying it, prompted the filing of a brief by amici curiae in behalf of the Hospital Service of Southern California, a non-profit corporation which, it is said in the brief, is operating in much the same manner as is the respondent. This brief presents the new point that respondent would be denied equal protection of the law if denied the right to continue its operations. It is supported by an elaborate statement of facts, all of which are outside of the record, relating to other organizations which are operating in a manner somewhat similar to respondent and Hospital Service.

It is settled law that the function of an appellate court is to review the judgment of the trial court upon the record made for that purpose. It is only in rare cases, and to prevent a miscarriage of justice, that the provisions of section 956a, C.C.P. will be applied. There are several cases in our appellate courts holding that such proceedings will be taken only to enable the reviewing court to affirm the judgment and put an end to the litigation. See In re Estate of Wirt, 207 Cal. 106, 111, 277 P. 118; Monson v. Fischer, 107 Cal.App. 55, 289 P. 899; Clough v. Allen, 115 Cal.App. 330, 1 P.2d 545; Kier Corporation v. Treasure Oil Co., 57 Cal.App.2d 829, 838, 136 P.2d 59.

In would appear that the statement in Re Estate of Wirt, supra, was qualified by the later opinion of the Supreme Court in Tupman v. Haberkern, 208 Cal. 256, 280 P. 970, 975, and that the other cases are based upon a misconception of the rule announced in the later case. This rule, as we understand it, is that when the application is made by the appellant under the section for the purpose of a reversal the power of the reviewing court should be used sparingly and ‘should be exercised only when, upon a full consideration of the record, the party against whom the judgment is for the first time entered in the trial court could not successfully meet the contentions of his adversary upon a retrial’, and that as a general rule the reviewing court would use the ‘new power’ sparingly and ‘only when the purpose of the new findings was to constitute a basis for an affirmance of the judgment or a basis for a reversal of the judgment with directions to the trial court to enter a judgment for the appellant.’ Summarizing the elaborate statement in the Tupman case the rule seems to be that the door is open under the code section to both appellant and respondent, but that the application to take additional testimony for the purpose of a reversal of the judgment will be granted only in exceptional cases.

Aside from the form of the application it does not appear that this is a proper case to take new evidence or to make new findings. The suggestion is based upon the statement that since the date of the judgment respondent has engaged in new activities consisting in providing hospitalization for some of its beneficiary members, contracts with federal agencies to furnish rural health service, and emergency service in connection with federal war housing projects. It does not appear whether the evidence would show that hospital service is provided through hospitals owned and operated by the corporation, through leases of hospital space, or by contract to pay the charges fixed by the hospitals. In this connection appellant states in his brief filed after the oral argument that: ‘There is no showing of any contracts with hospitals in the record and the writer of the brief can positively assert that, at least until very recently, there has been none between C.P.S. and the hospitals.’

Exhibit ‘O’ is a contract with the Farm Security Administration, an agency of the federal department of agriculture. It was executed more than a year after the complaint herein was filed. It declares its purpose to be to provide adequate health care for rural families and designates respondent as the agent for its professional members and such hospitals as signify a willingness to participate in the program. The contract has many conditions and exceptions. The respondent corporation does not covenant to secure the participation of hospitals in the program. The service is made available only to those who are eligible for loans from the Farm Security Administration. The latter does not undertake to make such loans unless the Congress makes special appropriations for that purpose. It is stated that the contract is merely experimental and neither party is bound for any extended period of time. It does not appear whether the contract is now or was at the time of the time of the trial in operation or effect. It is clear therefore, as stated by appellant, that the record does not disclose whether any contracts with hospitals were in operation and effect, and it must be conceded that such issue was not tendered to the trial court in a manner to permit a decision on it.

The question as now raised is ‘incidental’ and it was so treated in Jordan v. Group Health Ass'n, 71 App.D.C. 38, 107 F.2d 239, 244. In a note appended to that decision it is said: ‘Appellant singles out the feature of hospitalization for special condemnation. It is clearly incidental in the general scheme as are Group Health's clinical and other services rendered directly. They constitute facilities with which the primary task is done. We think the plan must be taken as a whole, not split up into disconnected parts.’ Though it is not clear from the published report this note seems to have been made by the author of the opinion because in the body of the opinion appears: ‘As we have said, it is the plan as a whole, not artificially disjointed and segregated single phases of it, with which we are concerned.’ In this connection the court discusses the ‘incidental’ functions of such an organization including first aid and preventive relief as a necessary element of the obligation of the association to provide ‘medical service.’

These views are pertinent here because it must be conceded that some forms of hospital service are no different than medical and surgical service, and that some forms of contracts to indemnify or pay the actual cost of such service are insurance. But it must also be conceded that if the activities of the corporation as outlined in the case made and tried do not put the corporation under the Insurance Code the judgment must be affirmed unless the other grounds raised are material. Thus if the judgment is sound upon the record made the question of ‘other activities' subsequent to the trial should be left to future litigation, because it is patent that the respondent may be operating legally in all respects to the matters tried without regard to subsequent activities which may or may not be beyond the scope of its rights under issues presented to the trial court.

The appellant raises the additional point that the judgment goes far beyond the facts before the court in deciding in paragraph 2 thereof that the performance or undertaking by plaintiff of any or all of the objects set forth in plaintiff's articles of incorporation will not violate any of the laws of California relating to the business of insurance. We are in accord with his view that this is beyond the issues tendered and will direct a modification of this portion of the judgment to confine the determination to the case as it was tried on the pleadings and the stipulation of facts.

On the case made by the record the appellant has urged three grounds for a reversal of the judgment: that declaratory relief is not a proper remedy, that the respondent is engaged in the corporate practice of medicine, and that it is engaged in the insurance business.

It is argued that provisions of section 1060 et seq. of the Code of Civil Procedure are not applicable to a state agency or public officer. The argument falls in two separate lines. First, that it is unwise to permit a judicial proceeding which has the effect of putting judicial approval upon a controversial type of new business enterprise. Second, that since the state and its agencies are not specially mentioned the procedure violates the rule of immunity of the sovereign from suit. In support of the first point Hayden Plan Co. v. Wood, 97 Cal.App. 1, 275 P. 248, and Hayden Plan Co. v. Friedlander, 97 Cal.App. 12, 275 P. 253, are cited. The first case was one against the state superintendent of banks seeking a determination that the type of business proposed by the plaintiff did not come under the supervision of the commissioner. The court denied the relief sought on the ground that plaintiff had an ample remedy under the general laws and that no question of public interest was involved. The second case was one against the corporation commissioner and followed the same course. In each the court apparently overlooked the express provision of section 1062 that the remedy through declaratory relief is cumulative and not restrictive of any other remedy provided by law. Wollenberg v. Tonningsen, 8 Cal.App.2d 722, 48 P.2d 738; Gunn v. Giraudo, 48 Cal.App.2d 622, 120 P.2d 177. The ruling that the remedy should be denied in both cases because no question of public interest was involved is not controlling. Section 1061 provides that the court may refuse to grant the relief if not necessary or proper under all the circumstances. In view of the discretion here imposed in the trial court its determination will not be disturbed on appeal unless a clear abuse of that discretion is shown. Cal.Jur. 10 yr. Supp. Vol. 5, p. 109. In the two cases cited the relief was denied in the trial court and the affirmance of the judgments was in effect a determination that this discretion was not abused. Here the trial court, in the exercise of that discretion, determined that it was a proper case for declaratory relief and the public interest involved in the controversy is conceded.

To the second point the appellant cites Bayshore Sanitary Dist. v. San Mateo County, 48 Cal.App.2d 337, 119 P.2d 752; Irvine v. Sacramento, etc., Drainage Dist., 49 Cal.App.2d 707, 122 P.2d 320. In the first case it was held that the use of the term ‘person’ in the code sections was too general to include the state or any of its political subdivisions citing Balthasar v. Pacific Electric Ry. Co., 187 Cal. 302, 202 P. 37, 19 A.L.R. 452, and Lossman v. City of Stockton, 6 Cal.App.2d 324, 44 P.2d 397. The second case merely followed on the authority of the former. No petition was filed in either case to transfer the cause to the supreme court, but within a year after the first decision the supreme court rejected these views and expressly overruled both cases in Hoyt v. Board of Civil Service Comm., 21 Cal.2d 399, 405, 132 P.2d 804, 806. It was there held that the rule of sovereign immunity applied only in the interpretation of statutes giving the right to use, that the declaratory relief statute involved matters of practice and procedure only that: ‘Where governmental bodies are already subject to suit, however, it is clear that procedural statutes may be made applicable to such bodies without causing any interference with rights of sovereignty. Cf. Superior Oil Co. v. Superior Court, 6 Cal.2d 113, 118, 56 P.2d 950. If an acceptance of liability and subjection to suit on the part of a sovereign body is found elsewhere in the statutes of the state and the declaratory judgment procedure is not barred by the provisions of the waiver of immunity, we think it clear that a determination of the legal issue in an action for declaratory relief in no way constitutes an impairment of governmental sovereignty.’

Here the insurance commissioner is authorized to ‘prosecute and defend any and all suits and other legal proceedings.’ Insurance Code, sec. 1037(f), St.1939, p. 2633. The language generally used to waive the right of sovereign immunity as to cities and counties is that they may ‘sue and be sued.’ Deering's Gen. Laws 1937, Act 5233, sec. 19 et seq.; Pol.Code, sec. 4003; and see the numerous Municipal Charters. This language is of a kind with that noted in the Insurance Code. Furthermore it is settled law that an action will lie against a public officer, or a public agency, to compel the performance of an official duty, or to restrain the performance of an act not authorized by law. Such action does not offend the sovereign immunity principle. It was so held in Los Angeles County v. Riley, 20 Cal.2d 652, 662, 128 P.2d 537, 543, where the court said: ‘The rule is well established in this state that where the action is one simply to compel an officer to perform a duty expressly enjoined upon him by law, it may not be considered a suit against the state. 23 Cal.Jur. 583; Board of Directors v. Nye, 8 Cal.App. 527, 97 P. 208; Kingsbury v. Nye, 9 Cal.App. 574, 99 P. 985; U'Ren v. State Board of Control, 31 Cal.App. 6, 159 P. 615.’ For these reasons it must be held that the insurance commissioner is not immune from suit in matters pertaining to the exercise of his official duties and that the cumulative remedy for a declaratory judgment is a proper procedure.

The argument that the respondent is engaged in the corporate practice of medicine is supported by citation of Painless Parker v. Board of Dental Examiners, 216 Cal. 285, 14 P.2d 67; People ex rel. State Board of Medical Examiners v. Pacific Health Corporation, 12 Cal.2d 156, 82 P.2d 429, 119 A.L.R. 1284; Benjamin Franklin Life Assur. Co. v. Mitchell, 14 Cal.App.2d 654, 58 P.2d 984, and similar cases all holding that a corporation may not engage in the practice of such professions as law, medicine or dentistry. Respondent does not dispute the rule of the cases cited but contends that its practices are specially sanctioned by section 593a of the Civil Code enacted in 1941. Appellant expressly concedes that this new section was ‘intended to apply to respondent.’ This section reads:

‘A nonprofit corporation may be formed under this article for the purposes of defraying or assuming the cost of professional services of licentiates under any chapter of Division 2 of the Business and Professions Code or of rendering any such services but it may not engage directly or indirectly in the performance of the corporate purposes or objects unless:

‘(1) At least one-fourth of all licentiates of the particular profession become members;

‘(2) Membership in the corporation and an opportunity to render professional services upon a uniform basis is available to all licensed members of the particular profession;

‘(3) Voting by proxy and cumulative voting are prohibited; and

‘(4) A certificate has been issued to the corporation by the particular professional board, whose licentiates have become members, finding compliance with the foregoing requirements.

‘Any such nonprofit corporation shall be subject to supervision by the particular professional board under which its members are licensed and shall also be subject to the provisions of Section 605c of this code. This section, except as expressly permitted herein, does not authorize the formation of any corporation for the purpose of rendering the professional services regulated by Division 2 of the Business and Professions Code.’

Section 605c referred to therein provides for supervision by the attorney general of the conduct of a non-profit corporation which holds property ‘subject to any public or charitable trust.’ It was stipulated that respondent held a certificate from the Board of Medical Examiners of full compliance with the section, and the trial court found that its operations brought it within the terms of section 605c.

Respondent relies upon the statement in People v. Pacific Health Corporation, supra [12 Cal.2d 156, 82 P.2d 431], that the rule against corporate practice of medicine did not apply to fraternal, religious, hospital, labor and similar benevolent organizations furnishing medical services to members; that the distinguishing feature was whether the corporation or association was organized for profit; that the activities of these non-profit organizations were ‘not comparable to those of private corporations operated for profit and, since the principal evils attendant upon corporate practice of medicine spring from the conflict between the professional standards and obligations of the doctors and the profit motive of the corporation employer, it may well be concluded that the objections of policy do not apply to nonprofit institutions. This view almost seems implicit in the decisions of the courts and it certainly has been the assumption of the public authorities, which have, as far as we are advised, never molested these organizations.’ To the same effect are United State v. American Medical Ass'n, 72 App.D.C. 12, 110 F.2d 703, 714; and Group Health Ass'n v. Moor, D.C., 24 F.Supp. 445.

Appellant argues that section 593a cannot have the effect of validating the activities of respondent since it merely authorizes the incorporation for the purposes stated, whereas respondent was organized two years prior to the enactment. If this case involved prosecution for acts committed before the statute was passed there would be some merit in the argument. But it is concerned only with a declaration of the right of respondent to continue under the section free from the supervision of the appellant. Since it is conceded that the legislature intended the statute to apply to respondent it is a fair inference that the legislature had some knowledge of the practice and mode of operation of the respondent and hence that, if there were any uncertainty as to the rule of the cases cited, the legislative intent was to permit the respondent to continue in those activities under the terms of the code section.

Finally it is argued that the respondent is engaged in the insurance business and hence subject to the supervision and control of the appellant. The respondent's reply takes two lines of argument. First, that its method of operations is not that of insurance. Second, that if it be such it is not subject to the supervision of the insurance commissioner.

Insurance is defined in section 22 of the Insurance Code as ‘a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.’ St.1935, p. 498. It is defined in 29 Am.Jur. p. 47 as ‘an agreement by which one person for a consideration promises to pay money or its equivalent, or to perform some act of value, to another on the destruction, death, loss, or injury of someone or something by specified perils.’ The appellant cites no authority directly in point. His argument is that the obligation to the beneficiary members assumed by respondent looks like insurance and should be so interpreted. On the other hand the respondent argues that it is similar to a producer-consumer cooperative organization, that it does not indemnify or compensate for the cost of an illness or injury, that it does not assume any risk, that its professional members do not assume any risk, that the beneficiary members do not receive any indemnity or compensation. The respondent emphasizes that its obligation is that of an agent to collect and administer the funds, to pay its professional members upon the unit basis out of these funds only, but that the beneficiary members receive the professional services notwithstanding the condition of the treasury. The respondent denied the implication in appellant's brief that the beneficiary members must look to the pooled fund for indemnity against medical bills and emphasizes that they merely pay for such services on a periodic basis rather than in a lump sum.

As the operations of respondent are comparatively new there is little authority on the direct question whether these operations are to be classed as insurance. The decided cases favor the position of respondent. Butterworth v. Boyd, 12 Cal.2d 140, 82 P.2d 434, 126 A.L.R. 838, involved a portion of the San Francisco charter providing compulsory health service to all municipal employees paid by monthly pay roll deductions on all salaries to maintain a fund to cover medical, surgical and hospital care. Physicians eligible to render service were paid on the unit system similar to that used by the respondent. In an action brought to test the validity of the charter the state insurance commissioner appeared specially to raise the question whether the activities proposed were a form of insurance and as such subject to the state insurance code. The court rejected the contention saying that the Insurance Code dealt only with the private business of insurance.

In Commissioner of Bank and Insurance v. Community Health Service 129 N.J.L. 427, 30 A.2d 44, 45, the sole question was whether the corporation was engaged in the insurance business. It was incorporated to provide medical services to its subscribers. It made contracts with licensed physicians to render professional services for a stipulated compensation. The subscribers were entitled to the services whether or not they needed them. The corporation did not undertake to pay such debt as the subscribers might incur and did not indemnify them against any loss. The court there said: ‘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.’ In holding that the business conducted by the corporation was not one of insurance the New Jersey court cited with approval State ex rel. Fishback v. Universal Service Agency, 87 Wash. 413, 151 P. 768, Ann.Cas.1916C, 1017; Sisters of Third Order of St. Francis v. Guillaume's Estate, 222 Ill.App. 543; and Stern v. Rosenthal, 71 Misc. 422, 128 N.Y.S. 711.

In Jordan v. Group Health Ass'n, 71 App.D.C. 38, 107 P.2d 239, a declaratory judgment was sought against the insurance commissioner of the District of Columbia to determine whether the activities of the Association were subject to the supervision of the commissioner. The Association was a non-profit corporation organized to provide without profit medical services, surgery and hospitalization for its members. Its membership was limited to civil service employees of the executive branch of the government and its general plan was similar to that provided in the San Francisco charter. In holding that the Association was not engaged in the insurance business the Circuit Court of Appeals for the District of Columbia had his to say: ‘Although Group Health's activities may be considered in one aspect as creating security against loss from illness or accident, more truly they constitute the quantity purchase of well-founded, continuous medical service by its members. Group Health is in fact and in function a consumer co-operative. The functions of such an organization are not identical with those of insurance or indemnity companies. The latter are concerned primarily, if not exclusively, with risk and the consequences of its descent, not with service, or its extension in kind, quantity or distribution; with the unusual occurrence, not the daily routine of living. Hazard is predominant. On the other hand, the cooperative is concerned principally with getting service rendered to its members and doing so at lower prices made possible by quantity purchasing and economies in operation. Its primary purpose is to reduce the cost rather than the risk of medical care; to broaden the service to the individual in kind and quantity; to enlarge the number receiving it; to regularize it as an every-day incident of living, like purchasing food and clothing or oil and gas, rather than merely protecting against the financial loss caused by extraordinary and unusual occurrences, such as death, disaster at sea, fire and tornado. It is, in this instance, to take care of colds, ordinary aches and pains, minor ills and all the temporary bodily discomforts as well as the more serious and unusual illnesses. To summarize, the distinctive features of the cooperative are the rendering of service, its extension, the bringing of physician and patient together, the preventive features, the regularization of service as well as payment, the substantial reduction in cost by quantity purchasing, in short, getting the medical job done and paid for; not, except incidentally to these features, the indemnification for cost after the service is rendered. Except the last, these are not distinctive or generally characteristic of the insurance arrangement. There is, therefore, a substantial difference between contracting in this way for the rendering of service, even on the contingency that it be needed, and contracting merely to stand its cost when or after it is rendered.’ And again 71 App.D.C. at page 47, 107 F.2d at page 248: ‘But obviously it was not the purpose of the insurance statutes to regulate all arrangements for assumption or distribution of risk. That view would cause them to engulf practically all contracts, particularly conditional sales and contingent service agreements. The fallacy is in looking only at the risk element, to the exclusion of all others present or their subordination to it. The question turns, not on whether risk is involved or assumed, but on whether that or something else to which it is related in the particular plan is its principal object and purpose.’ We find in that case the express admission 71 App.D.C. at page 47, 107 F.2d at page 248), ‘that the identical plan and service rendered here would not be ‘insurance’ or ‘indemnity’ if offered by an organization owned, operated and controlled by physicians. It would then be a contract ‘for service on contingency’, though the same element of risk and avoidance of its possible consequences would be present.' Other authorities giving support to these views are State v. Universal Service Agency, 87 Wash. 413, 151 P. 768, Ann.Cas.1916C, 1017, supra; and Commissioner of Bank and Insurance v. Community Health Service, 129 N.J.L. 427, 30 A.2d 44.

There is no essential difference between the Group Health Association, the San Francisco Health Service, and California Physicians' Service in so far as the scheme of operations is concerned except that in the first two the administrative management is in a board selected by the beneficiary members, whereas in the latter it is in a board selected by the professional members. All are non-profit, semi-charitable organizations conducted for the primary purpose of affording necessary medical care to those of small income. None is organized to insure good health or freedom from disease. All primarily provide service as distinguished from indemnity. We are satisfied that upon the authorities cited it must be held that respondent is not engaged in the insurance business and is not subject to the supervision of the commissioner under the Insurance Code.

The judgment is modified by substituting for paragraph two thereof the following: ‘The objects and purposes set forth in the articles of incorporation of plaintiff, California Physicians' Service, and particularly in Article Two thereof, are lawful objects and purposes and the performance or undertaking by plaintiff of any or all of said objects in the manner set out in said written stipulation of facts dated June 16, 1941 does not and will not violate any of the provisions of the laws of the State of California relating to the business of insurance.’

The judgment as modified is affirmed each party to bear its costs.

NOURSE, Presiding Justice.

STURTEVANT, J., and DOOLING, J. pro tem., concur. Hearing granted; TRAYNOR and SPENCE, JJ., not participating.