Case Title: WEBER v BLUE CROSS OF MONTANA

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1982-02-04T00:00:00Z

Document:
No. 80-453 I N THE SUPREME C O U R T O F T H E STATE O F M O N T A N A 1981 RICHARD A. W E B E R and JUNE WEBER, P l a i n t i f f s and Respondents, VS . B L U E CROSS O F M O N T A N A , a c o r p o r a t i o n , Defendants and Appellants. Appeal from: D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r i c t , I n and f o r t h e County of Cascade. Honorable H. William Coder, Judge p r e s i d i n g . Counsel of Record: For Appellants: Church, H a r r i s , Johnson and Williams, Great F a l l s , Montana Charles Love11 argued, Great F a l l s , Montana For Respondents: Regnier and Lewis, Great F a l l s , Montana James A. Regnier argued and Thomas L. Lewis argued, Great F a l l s , Montana FEB 4 - 1982 F i l e d : Submitted: September 15, 1981 Decided: FE0 4.m Mr. J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e Court. Richard and J u n e Weber, p l a i n t i f f s and r e s p o n d e n t s , f i l e d t h i s a c t i o n i n t h e Seventeenth J u d i c i a l D i s t r i c t , i n and f o r V a l l e y County, on February 7, 1974, s e e k i n g damages f o r c o n t r a c t b e n e f i t s and wrongful c a n c e l l a t i o n by Blue C r o s s on t h e i r medical p l a n c o n t r a c t . On September 19, 1977, t h e c a s e was t r a n s f e r r e d t o t h e Eighth J u d i c i a l D i s t r i c t i n Cascade County. On February 9, 1979, Webers moved t o add p u n i t i v e damages f o r f r a u d , i n t e n t i o n a l i n f l i c t i o n of emotional d i s t r e s s , and bad f a i t h t o t h e i r o r i g i n a l complaint. S h o r t l y b e f o r e t r i a l Webers a l s o s o u g h t t o add an a d d i t i o n a l c l a i m a l l e g i n g v i o l a t i o n of t h e Montana I n s u r a n c e Code. The c a s e was t r i e d June 23 through 27, 1980, and t h e d i s t r i c t judge allowed t h e c a s e t o go t o t h e j u r y on a l l i s s u e s of l i a b i l i t y . The j u r y r e t u r n e d a v e r d i c t i n favor of p l a i n t i f f s f o r e v e r y d o l l a r i n com- p e n s a t o r y damages sought, $157,137, and f o r a l l b u t one d o l l a r of t h e p u n i t i v e damages, $999,999. Blue Cross f i l e d motions f o r judgment n o t w i t h s t a n d i n g t h e v e r d i c t , a new t r i a l , and t o amend o r a l t e r t h e judgment, a l l of which were denied. Blue Cross now a p p e a l s . Richard and J u n e Weber, p l a i n t i f f s - r e s p o n d e n t s , have n i n e c h i l d r e n and l i v e i n Glasgow, Montana, where Richard Weber h a s a s u c c e s s f u l d e n t a l p r a c t i c e . Blue Cross of Montana, d e f e n d a n t - a p p e l l a n t , is a p r i v a t e , n o n p r o f i t h e a l t h s e r v i c e c o r p o r a t i o n marketing h e a l t h c a r e p l a n s throughout Montana. I n March 1972 Dr. Weber r e c e i v e d an i n f o r m a t i o n a l brochure d e s c r i b i n g t h e "Montana Dental P l a n , " a new group p o l i c y f o r Montana d e n t i s t s . Dr. and Mrs. Weber reviewed the plan, determined that it was less expensive than their current health insurance, and decided to apply for member- ship. Although every dentist in Montana could apply, only medically-qualified applicants were accepted. On April 12, 1972, Jim Burke, a Blue Cross sales representative, met with Dr. Weber at his dental office to complete the membership application. Burke asked Weber questions and filled out the application form as Weber answered the questions. Dr. Weber checked the application for accuracy, and then both Weber and Burke signed the application. The application, which Dr. Weber read once before signing, noted that "there will be a waiting period of 12 months for all preexisting conditions" and that "misrepre- sentations in this application will render the contract void." However, Dr. Weber was not given a copy of the application or the contract and was not advised that the application was part of the contract. Dr. Weber specifically asked Burke if Blue Cross could cancel any member's policy without canceling the whole group plan, and Burke assured him that it was noncancelable. The contract, however, allowed Blue Cross to cancel upon thirty days' notice. The "completed" application was then sent to Blue Cross for processing. Although the application requested the name of the family doctor, and the date, hospital, and physicians that had treated any medical problem, this infor- mation was not provided. Blue Cross nonetheless accepted the application and issued the Webers a membership card and a copy of the application on May 1, 1972. It is not clear whether a copy of the contract was first sent to Webers on May 1, 1972, or in 1973 when their attorney. requested one. In any event, Webers canceled their old insurance shortly after May 1, 1972. On May 25, 1972, and in October 1972, June Weber was hospitalized in Glasgow for what was initially diagnosed as a bleeding ulcer. On both occasions the bills were sent to Blue Cross but were not paid. In November 1972 June Weber went to Billings for extensive testing by Dr. Hurley, an internist. Dr. Hurley diagnosed varices of the esophagus (vericose veins in the esophagus) and a polyp in her duodenum (growth in the small intestine). This bill was also sent to Blue Cross but was not paid. In April 1973 June Weber had another bleed, and an airplane was chartered to fly her to Billings for treatment. She had surgery for the esophageal varices. Again the bill was submitted to Blue Cross and was not paid. Webers first became aware that bills were not being paid in August 1972 when Dr. Weber got a second bill for the May 1972 hospitalization. Dr. Weber contacted the local Blue Cross agent and was told that Blue Cross did not receive a bill. (In fact, Blue Cross had received the bill on June 22, 1972.) Dr. Weber asked the hospital to send Blue Cross another bill, but it too was not paid. In March 1973 Dr. Weber wrote the Montana Dental Association, the Montana legislature and Blue Cross to com- plain about the trouble he was having with Blue Cross. In response to this letter, Blue Cross claims manager Nehus wrote on March 23, 1973, indicating that the April 12, 1972 a p p l i c a t i o n was reviewed, c o n s i d e r e d f o r c a n c e l l a t i o n , b u t r e t a i n e d . Blue Cross t h e n denied payment on grounds of pre- e x i s t i n g c o n d i t i o n s . Blue Cross had o r i g i n a l l y r e c e i v e d t h e May 1972 h o s p i t a l b i l l s on June 22, 1972. On J u l y 14, 1972, Dr. S h u l l , medical d i r e c t o r f o r Blue C r o s s , reviewed t h e b i l l s and r e q u e s t e d a copy of t h e h o s p i t a l h i s t o r y from t h e Glasgow h o s p i t a l i n o r d e r t o d e t e r m i n e whether t h e c l a i m was p r e e x i s t i n g . Blue Cross r e c e i v e d incomplete i n f o r m a t i o n , made s e v e r a l more r e q u e s t s f o r i n f o r m a t i o n , and completed its f i l e s on February 7, 1973, when it determined t h a t June Weber's medical c o n d i t i o n was p r e e x i s t i n g . On March 23, 1973, Blue Cross n o t i f i e d Webers t h a t b i l l s a s s o c i a t e d w i t h esophageal v a r i c e s would n o t be p a i d because t h e c o n d i t i o n was p r e e x i s t i n g . Then, on June 1, 1973, Blue Cross s e n t t h e Webers a l e t t e r u n i l a t e r a l l y d e c l a r i n g t h e c o n t r a c t void because Dr. Weber had misrepre- s e n t e d h i s f a m i l y ' s h e a l t h on t h e a p p l i c a t i o n . T h i s s u i t followed. A t t r i a l t h e r e was voluminous testimony concerning whether o r n o t June Weber's esophageal v a r i c e s were pre- e x i s t i n g . I n g e n e r a l , t h e r e was a g r e a t d e a l of evidence i n d i c a t i n g t h a t t h e y were n o t p r e e x i s t i n g , and l i t t l e c r e d i b l e evidence i n d i c a t i n g t h a t t h e y were p r e e x i s t i n g . The p o i n t became moot, however, when J u r y I n s t r u c t i o n No. 12 was g i v e n , which i n d i c a t e d t h a t a medical c o n d i t i o n should n o t be c o n s i d e r e d p r e e x i s t i n g u n l e s s it m a n i f e s t i t s e l f p r i o r t o t h e e f f e c t i v e d a t e of i n s u r a n c e . A l l t h e evidence Blue Cross p r e s e n t e d i n d i c a t e d t h a t t h e c o n d i t i o n may have e x i s t e d , b u t t h e c o n d i t i o n was unknown p r i o r t o May 1, 1972. Therefore, Blue Cross admitted during closing argument that, based on the jury instructions, there were no preexisting conditions. However, there continues to be a great deal of dis- agreement as to whether Dr. Weber misrepresented the health of his family when completing the application for membership in the Montana Dentists' Group Plan. Dr. Weber did reveal that June Weber had a minor kidney infection twelve years earlier, that June Weber had her spleen and gallstones removed three years earlier, and that seven of his nine children wore glasses. Medical conditions that Dr. Weber did not reveal - include: 1. June Weber's familial (inheritable) anemia; 2. Dr. Weber's heart condition for which he occasionally took medication; and that Dr. Weber also sus- pected his son had a heart problem; 3. June Weber's continuing bladder trouble; 4. Removal of June Weber's ovary; 5. Five or six visits that June Weber had made to the local mental health center in the past year; 6. An ear infection and subsequent dizziness experienced by June Weber; 7. June Weber's chronic diarrhea; 8. Dr. Weber's hiatal hernia; 9. Son's dislocated shoulder; 10. Daughter's broken arm; and 11. Daughter's pneumonia. In each case Blue Cross presented testimony indicat- ing that these conditions constituted a "departure from good health" and, therefore, it was a material misrepresentation to not disclose this information on the application. Webers presented testimony that these conditions, as they affected the Webers, were not a departure from good health and that there was no reason to mention them on the application. Dr. Weber further testified that he considered it a personal judgment call and that in his personal opinion it was not necessary to list that information. In any event, Dr. Weber testified he told Burke about June Weber's hysterectomy and anemia and that Burke did not consider it important enough to record on the application. Evidence was also presented at trial concerning past medical expenses, future medical expenses and emotional distress. Benefits the Webers would have received between May 1, 1972, and June 27, 1980, minus premiums, total $24,250. Currently, June Weber goes to Chicago once a year to treat her esophageal varices, which costs $3,500 a trip. Thus, future medical expenses are estimated at $47,887. Finally, the jury awarded $55,000 to June Weber and $30,000 to Richard Weber for emotional distress. Thus, the total for compensatory damages ($24,250 + $47,887 + $85,000 = $157,137) is $157,137. Evidence was offered, and rejected, showing that Dr. Weber made similar "misrepresentations" on an application for Blue Shield membership following cancellation of the Blue Cross membership. Blue Cross also offered, and had rejected, evidence showing that Webers collected $13,000 from an American Dental Association plan obtained after the Blue Cross cancellation. Six issues are raised on appeal: 1. Are h e a l t h s e r v i c e c o r p o r a t i o n s s u b j e c t t o t h e Montana I n s u r a n c e Code? 2. Did t h e t r i a l c o u r t p r o p e r l y deny t h e d e f e n s e motion f o r d i r e c t e d v e r d i c t on t h e i s s u e s of a c t u a l and c o n s t r u c t i v e f r a u d ? 3. Did t h e t r i a l c o u r t p r o p e r l y deny t h e d e f e n s e motion f o r d i r e c t e d v e r d i c t on t h e t o r t of bad f a i t h ? 4. Did t h e t r i a l c o u r t p r o p e r l y e x c l u d e e v i d e n c e o f i n s u r a n c e r e c e i v e d s u b s e q u e n t l y t o t h e Blue Cross p o l i c y ? 5. Did t h e t r i a l c o u r t p r o p e r l y r e f u s e t o a l l o w Dr. Weber t o be impeached w i t h h i s subsequent Blue S h i e l d a p p l i c a t i o n ? 6 . Was t h e r e s u f f i c i e n t evidence t o s u p p o r t an award of $157,137 i n compensatory damages and $999,999 i n p u n i t i v e damages? I. INSURANCE CODE A r e h e a l t h s e r v i c e c o r p o r a t i o n s s u b j e c t t o t h e Montana I n s u r a n c e Code? W e hold t h e y a r e n o t . I t is e v i d e n t t h a t t h e l e g i s l a t u r e d i d n o t i n t e n d h e a l t h s e r v i c e c o r p o r a t i o n s t o be bound by t h e i n s u r a n c e code. F i r s t , i n 1972, h e a l t h s e r v i c e c o r p o r a t i o n s were r e g u l a t e d by t h e a t t o r n e y g e n e r a l , r a t h e r t h a n t h e i n s u r a n c e commissioner. S e c t i o n 15-2304, R.C.M. 1947, provided: " A l l h e a l t h s e r v i c e c o r p o r a t i o n s organized hereunder s h a l l be s u b j e c t t o s u p e r v i s i o n by t h e p a r t i c u l a r p r o f e s s i o n a l board or h o s p i t a l board o r agency under which members o r hospi- t a l s a r e l i c e n s e d and t h e y s h a l l a t a l l t i m e s be s u b j e c t t o examination by t h e a t t o r n e y g e n e r a l on b e h a l f of t h e s t a t e , t o a s c e r t a i n t h e c o n d i t i o n of a f f a i r s of any such corpora- t i o n , and t o what e x t e n t , i f a t a l l , any such c o r p o r a t i o n may f a i l t o comply w i t h t r u s t s which it h a s assumed o r may d e p a r t from t h e g e n e r a l purposes f o r which it is formed, and i n c a s e o f any such f a i l u r e o r d e p a r t u r e t h e a t t o r n e y g e n e r a l s h a l l i n s t i t u t e , i n t h e name o f t h e s t a t e , t h e p r o c e e d i n g s n e c e s s a r y t o c o r r e c t t h e same; a l l such m e d i c a l , h o s p i t a l o r h e a l t h s e r v i c e c o r p o r a t i o n s h e r e t o f o r e organized and e x i s t i n g under t h e n o n p r o f i t c o r p o r a t i o n laws of Montana s h a l l be s u b j e c t t o t h e p r o v i s i o n s hereof . . ." Second, h e a l t h s e r v i c e c o r p o r a t i o n s were s p e c i f i c a l l y exempt from t h e i n s u r a n c e code by s e c t i o n 40-2611, R.C.M. 1947, which s t a t e d : "This code s h a l l n o t a p p l y t o h e a l t h s e r v i c e c o r p o r a t i o n s , t o t h e e x t e n t t h a t t h e e x i s t e n c e and o p e r a t i o n s of such c o r p o r a t i o n s a r e a u t h o r i z e d by s e c t i o n 15-1401 [now s e c t i o n 15-23011 and r e l a t e d s e c t i o n s of t h e Revised Code of Montana, 1.947." T h i r d , t h e 1971 L e g i s l a t u r e passed House R e s o l u t i o n 20 which recognized t h e unique s t a t u s of h e a l t h s e r v i c e c o r p o r a t i o n s . HR 20, 1971, p r o v i d e s i n p a r t : "WHEREAS, a s of now, h e a l t h s e r v i c e corpora- t i o n s a r e n o t under t h e j u r i s d i c t i o n of t h e i n s u r a n c e commissioner, and "WHEREAS, t h e s a i d c o r p o r a t i o n s a r e n o t amenable t o t h e i n s u r a n c e code, t i t l e 40, RCM 1947 . . ." F o u r t h , t h e 1971 L e g i s l a t u r e k i l l e d House B i l l 253 which would have made h e a l t h s e r v i c e c o r p o r a t i o n s s u b j e c t t o t h e i n s u r a n c e code. W e t h e r e f o r e conclude t h a t t h e l e g i s l a - t u r e , p r i o r t o 1972, d i d n o t i n t e n d h e a l t h s e r v i c e corpora- t i o n s t o be s u b j e c t t o t h e i n s u r a n c e code. F u r t h e r , Blue Cross was s u r p r i s e d by t h e l a t e addi- t i o n o f t h e i n s u r a n c e code claim. Webers s t a t e d i n t h e i r b r i e f i n s u p p o r t of t h e motion f o r l e a v e t o amend t h e com- p l a i n t t h a t , " p l a i n t i f f s a r e n o t a l l e g i n g t h a t a v i o l a t i o n of t h e [ i n s u r a n c e ] code o c c u r r e d . " Y e t , t h e p r e t r i a l o r d e r d a t e d J u n e 23, 1981, t h e day t r i a l began, c o n t a i n e d a l l e g a - t i o n s of i n s u r a n c e code v i o l a t i o n s . Blue Cross was under- s t a n d a b l y s u r p r i s e d and p r e j u d i c e d by t h i s a d d i t i o n i n v i o l a t i o n of Rule 6 0 ( b ) (1) , M.R.Civ.P. A p p e l l a n t c i t e s H a r s h v . B l u e C r o s s o f Montana ( 1 9 7 3 ) , 162 Mont. 546, 514 P.2d 767, an o r d e r denying a s u p e r v i s o r y w r i t , a s s u p p o r t i n g t h e p r o p o s i t i o n t h a t h e a l t h s e r v i c e c o r p o r a t i o n s a r e n o t s u b j e c t t o t h e i n s u r a n c e code. However, s e c t i o n I , p a r t 5 , of t h e Montana Supreme Court I n t e r n a l Operating Rules, p r o v i d e s t h a t "Orders . . . s h a l l n o t b e . . . c i t e d a s a u t h o r i t y i n a n y s u b s e q u e n t proceeding." Thus, t h e Harsh d e c i s i o n is i r r e l e v a n t . Respondents c i t e F a s s i o v. Montana ~ h y s i c i a n s ' s e r v i c e ( 1 9 7 6 ) , 170 Mont. 320, 553 P.2d 998, a s s u p p o r t i n g t h e p r o p o s i t i o n t h a t h e a l t h s e r v i c e c o r p o r a t i o n s a r e s u b j e c t t o t h e i n s u r a n c e code. However, b r i e f s i n t h a t c a s e made no r e f e r e n c e whatsoever t o t h e i n s u r a n c e code. Thus, t h e i n s u r a n c e code was n o t a t i s s u e , and any r e f e r e n c e t o t h e i n s u r a n c e code i n t h e F a s s i o d e c i s i o n is p u r e l y d i c t a . W e conclude t h a t h e a l t h s e r v i c e c o r p o r a t i o n s a r e n o t s u b j e c t t o t h e Montana I n s u r a n c e Code and t h a t J u r y I n s t r u c - t i o n Nos. 17 and 19, binding Blue Cross of Montana t o t h e i n s u r a n c e code, were e r r o n e o u s . 11. DIRECTED VERDICT ON ACTUAL AND CONSTRUCTIVE FRAUD Did t h e t r i a l c o u r t p r o p e r l y deny t h e d e f e n s e motion f o r a d i r e c t e d v e r d i c t on t h e i s s u e s of a c t u a l and c o n s t r u c - t i v e f r a u d ? W e hold t h e d i r e c t e d v e r d i c t was p r o p e r l y d e n i e d . When d e c i d i n g a motion f o r d i r e c t e d v e r d i c t , t h e t r i a l judge must view t h e evidence i n a l i g h t most f a v o r a b l e t o t h e p l a i n t i f f . Ferguson v. Town Pump I n c . ( 1 9 7 8 ) , 177 Mont. 122, 580 P.2d 915. No c a s e should be withdrawn from t h e j u r y i f r e a s o n a b l e men may d i f f e r a s t o t h e c o n c l u s i o n s drawn from t h e e v i d e n c e . S o l i c h v. Hale ( 1 9 6 7 ) , 150 Mont. 358, 435 P.2d 883. R e p r e s e n t a t i o n s designed t o induce one t o e x e c u t e a c o n t r a c t must be made i n good f a i t h . S t a t e ex r e l . Dimler v. D i s t . C t . , Eleventh J . D . , Etc. ( 1 9 7 6 ) , 170 Mont. 77, 550 P.2d 917, 921. I f t h e r e p r e s e n t a t i o n s a r e f a l s e , a c a u s e of a c t i o n would l i e under (1) t h e "breach of o b l i g a t i o n " t h e o r y of s e c t i o n 17-208, R.C.M. 1947, o r ( 2 ) a c t u a l or c o n s t r u c - t i v e f r a u d t h e o r y , s e c t i o n s 13-307 t o 13-309, R.C.M. 1947. S e e , Dimler, 550 P.2d a t 921. The evidence, viewed i n a l i g h t most f a v o r a b l e t o t h e r e s p o n d e n t s , i n d i c a t e s r e a s o n a b l e men could d i f f e r a s t o t h e c o n c l u s i o n s drawn from t h e e v i d e n c e . Burke a l l e g e d l y r e p r e - s e n t e d t h e Blue Cross p o l i c y a s n o n c a n c e l a b l e , y e t it was c a n c e l e d . Blue Cross brochures promised "comprehensive h e a l t h c a r e , " y e t c l a i m s were denied because of p r e e x i s t i n g c o n d i t i o n s t h a t Blue Cross could n o t prove. Other examples e x i s t , b u t t h e p o i n t remains t h e same: r e a s o n a b l e men could d i f f e r a s t o t h e c o n c l u s i o n s drawn from t h e e v i d e n c e . T h e r e f o r e , t h e d i r e c t e d v e r d i c t was p r o p e r l y denied. 111. DIRECTED VERDICT ON BAD FAITH Did t h e t r i a l c o u r t p r o p e r l y deny t h e d e f e n s e motion f o r d i r e c t e d v e r d i c t on t h e t o r t of bad f a i t h ? W e hold t h e d i r e c t e d v e r d i c t was p r o p e r l y denied. T h i s Court noted i n Dimler, s u p r a , t h a t when one p a r t y makes r e p r e s e n t a t i o n s which induce a second p a r t y t o e n t e r i n t o a c o n t r a c t , t h e f i r s t p a r t y ' s " r e p r e s e n t a t i o n s n e c e s s a r i l y c o n t a i n an o b l i g a t i o n t o a c t i n good f a i t h . " 550 P.2d a t 921. I f t h e c o n t r a c t is s u b s e q u e n t l y breached, " [ a ] cause of a c t i o n may sound i n t o r t a l t h o u g h it a r i s e s o u t of a breach of c o n t r a c t , i f a d e f a u l t i n g p a r t y , by breaching t h e c o n t r a c t , a l s o breaches a d u t y which he owes t o t h e o t h e r p a r t y independently of t h e c o n t r a c t . " F i r s t Sec. Bank o f Bozeman v. Goddard ( 1 9 7 9 ) , 1 8 1 Mont. 407, 593 P.2d 1040, 1047, 36 St.Rep. 854. Goddard, u n l i k e t h e i n s t a n t c a s e , i n v o l v e s an i n s u r a n c e c o n t r a c t , b u t t h e l e g a l p r i n c i p l e s a r e t h e same. Blue Cross h a s an o b l i g a t i o n t o a c t i n good f a i t h w i t h its members. T h i s is e s p e c i a l l y t r u e because Blue Cross is i n a much b e t t e r b a r g a i n i n g p o s i t i o n t h a n t h o s e applying f o r membership i n its program. U s u a l l y t h e a p p l i c a n t h a s no v o i c e i n t h e p r e p a r a t i o n of t h e con- t r a c t . F u r t h e r , when a c l a i m is f i l e d , o f t e n t h e member "may be i n d i r e f i n a n c i a l s t r a i t s and t h e r e f o r e may be espe- c i a l l y v u l n e r a b l e t o o p p r e s s i v e t a c t i c s by [ a h e a l t h s e r v i c e c o r p o r a t i o n ] s e e k i n g a s e t t l e m e n t o r r e l e a s e . " Goddard, 593 P.2d a t 1047. I n t h e i n s t a n t c a s e , t h e e v i d e n c e viewed i n a l i g h t most f a v o r a b l e t o t h e respondents i n d i c a t e s t h a t Blue C r o s s d i d n o t g i v e Webers a w r i t t e n copy of t h e i r c o n t r a c t r i g h t s u n t i l t h e Webers h i r e d an a t t o r n e y . F u r t h e r , Blue C r o s s , a r g u a b l y , unreasonably denied t h e Webers' c l a i m s . Thus, r e a s o n a b l e men can d i f f e r a s t o t h e c o n c l u s i o n s reached by t h e e v i d e n c e , and t h e d i r e c t e d v e r d i c t was p r o p e r l y d e n i e d . I V . OTHER INSURANCE CLAIMS Did t h e t r i a l c o u r t p r o p e r l y exclude evidence of i n s u r a n c e r e c e i v e d s u b s e q u e n t l y t o t h e Blue Cross p o l i c y ? There is i n s u f f i c i e n t evidence i n t h e r e c o r d f o r t h i s Court t o d e c i d e t h i s q u e s t i o n , and w e remand. Blue Cross attempted t o i n t r o d u c e evidence showing t h a t $13,000 of Webers' medical b i l l s were p a i d by an American Dental A s s o c i a t i o n i n s u r a n c e p o l i c y r e c e i v e d subse- q u e n t t o t h e Webers' Blue Cross p o l i c y . Such evidence would a f f e c t n o t o n l y compensatory damages f o r medical expenses, b u t a l s o t h e c l a i m s f o r emotional d i s t r e s s and p s y c h o l o g i c a l p a i n caused by t h e mounting medical b i l l s . Is t h e new i n s u r a n c e r e l e v a n t t o t h e q u e s t i o n of damages? Appleman's I n s u r a n c e Law and P r a c t i c e g i v e s some guidance: "The measure o f damages f o r a wrongful breach of i n s u r a n c e c o n t r a c t s must be determined on t h e f a c t s o f each c a s e . . . "If t h e i n s u r e d can s e c u r e i n s u r a n c e of a l i k e c h a r a c t e r and v a l u e t o t h a t c a n c e l l e d , t h e d i f f e r e n c e between t h e c o s t o f c a r r y i n g t h e c a n c e l l e d i n s u r a n c e f o r t h e t e r m s t i p u l a t e d and t h e c o s t of new i n s u r a n c e f o r a l i k e term would be h i s measure of damages. I t should, however, be i n s u r a n c e of p r e c i s e l y t h e same t y p e i n t h e same k i n d o f i n s u r e r , - - s i n c e t h e c o s t of c a r r y i n g i n s u r a n c e i n a f r a t e r n a l a s s o c i a t i o n would n o t be t h e same a s t h a t of an o l d l i n e company." 20 Appleman, I n s u r a n c e Law and P r a c t i c e , 811255. (Emphasis added. ) There is i n s u f f i c i e n t evidence i n t h e r e c o r d t o determine whether t h e new i n s u r a n c e is s i m i l a r t o t h e c a n c e l e d Blue Cross p o l i c y . T h e r e f o r e , w e remand t h i s i s s u e t o t h e t r i a l c o u r t f o r c o n s i d e r a t i o n i n l i g h t of t h i s o p i n i o n . V. SUBSEQUENT INSURANCE APPLICATION Did t h e t r i a l c o u r t p r o p e r l y r e f u s e t o a l l o w Dr. Weber to be impeached with his subsequent Blue Shield appli- cation? We hold the impeachment was properly denied. Immediately after Webers' Blue Cross policy was can- celed, they applied for similar coverage from Blue Shield. On the Blue Shield application, Dr. Weber denied that anyone in the family had ever had anemia and stated that his wife's problem with varices (for which she is still being treated today) was corrected. At trial, Blue Cross tried to intro- duce the Blue Shield application to impeach Dr. Weber with a prior inconsistent statement, and to show Dr. Weber's state of mind when completing the Blue Cross application. Rule 801(d) (1), Mont.R.Evid. Information contained in a subsequent application for insurance is not admissible. Continental Insurance Co. v. Clayton Hardtop Skiff (3rd Cir. 1966), 367 F.2d 230; Nicoll v. American Ins. Co. (1847), 3 Woodb & M 529, F. Cas. No. 10259. Further, there is no convincing evidence that the Blue Shield application is inconsistent with the Blue Cross application. Dr. Weber testified that he told the Blue Cross agent, Burke, about his wife's anemia, and Burke chose not to put it on the application. There is also evidence that Dr. Weber gave the Blue Shield agent information which the Blue Shield agent chose not to write down. If the applications are not accurate, and not inconsistent, they cannot be used as evidence of a prior inconsistent state- ment. Rule 801(d)(l), Mont.R.Evid. The Blue Shield appli- cation was properly excluded from evidence. V I . DArnGES Was t h e r e s u f f i c i e n t evidence t o s u p p o r t an award of $157,137 i n compensatory damages and $999,999 i n p u n i t i v e damages? The e r r o r s noted above i n v a l i d a t e t h e judgment. T h e r e f o r e , we need n o t a d d r e s s t h i s i s s u e . However, it should be noted t h a t t h e t r i a l c o u r t admitted evidence concerning t h e purchase and s a l e by Blue C r o s s of t h e Rainbow Hotel i n G r e a t F a l l s , Montana. T h i s was completely i r r e l e v a n t , very p r e j u d i c i a l and l i k e l y t o a f f e c t t h e j u r y ' s award o f damages. S e e , R u l e 4 0 2 , Mont .R. Evid. The evidence should n o t have been admitted. I n summary, w e hold t h a t (1) Blue Cross is n o t sub- j e c t t o t h e Montana I n s u r a n c e Code; ( 2 ) d i r e c t e d v e r d i c t s were p r o p e r l y denied on t h e i s s u e s of f r a u d and bad f a i t h ; and ( 3 ) evidence of Dr. Weber's subsequent appl.ication f o r Blue S h i e l d coverage is i n a d m i s s i b l e t o prove i n t e n t . The t r i a l c o u r t , with t h e b e n e f i t of a d d i t i o n a l evidence, s h a l l r u l e on t h e admission of evidence concerning t h e $13,000 t h a t t h e Webers c o l l e c t e d from an American Dental Associa- t i o n h e a l t h i n s u r a n c e p o l i c y . W e do n o t r e a c h t h e i s s u e of damages. W e r e v e r s e i n p a r t , a f f i r m i n p a r t and remand f o r a new t r i a l c o n s i s t e n t w i t h t h i s o p i n i o n . We concur: G i e f Justice Justices Mr. Chief Justice Haswell specially concurring: I concur in the result. I would, however, hold that the District Court properly excluded evidence that $13,000 of Dr. Weber's medical bills were paid under a subsequent policy. The quotation in the majority opinion from Appleman's Insurance Law and Practice simply indicates that the difference in the cost - of the new policy and the cost of the canceled policy is a proper item of damages if the insurance is comparable, not that the benefits paid under the subsequent policy are admissible in evidence. 4A-ad 5 b / , e Chief Justice M r . J u s t i c e Frank B. Morrison, Jr., d i s s e n t i n g : I r e s p e c t f u l l y d i s s e n t . With r e s p e c t t o t h e t r i a l c o u r t ' s i n s t r u c t i o n s No. 17 and 1 9 , wherein t h e jury was i n s t r u c t e d with r e s p e c t t o provisions of t h e Montana insurance code, t h e majority opinion frames t h e i s s u e a s follows: "Are h e a l t h s e r v i c e corporations s u b j e c t t o t h e insurance code?" The majority concludes t h a t Blue Cross i s , a s a h e a l t h insurance corporation, n o t s u b j e c t t o t h e Montana insurance code. I b e l i e v e t h a t t h e i s s u e has been misstated. The i s s u e is: " I s Blue Cross a h e a l t h s e r v i c e corporation?" Health s e r v i c e corporations a r e s p e c i f i c a l l y exempt from t h e insurance code t o t h e e x t e n t t h a t t h e i r operations a r e authorized by s t a t u t e . It should be noted p a r e n t h e t i c a l l y t h a t Blue Cross f a i l e d t o o f f e r evidence showing it was engaging i n s t a t u t o r i l y authorized " h e a l t h s e r v i c e " opera- t i o n s . Under t h e evidence i n t h e record, t h e exemption f o r such organizations was n o t shown t o apply. However, I f e e l we must n o t avoid t h e i s s u e on t h i s b a s i s , b u t r a t h e r we should determine whether Blue Cross i s , i n f a c t , a "health s e r v i c e corporation" o r whether it is an insurance company. The c o u r t ' s i n s t r u c t i o n No. 1 7 provided: "You a r e i n s t r u c t e d t h a t a s e c t i o n of Montana law known a s Montana Insurance Code r e q u i r e s t h a t each group h e a l t h insurance policy s h a l l contain i n substance t h e following provision: " ' A provision t h a t t h e i n s u r e r w i l l f u r n i s h t o t h e policyholder f o r d e l i v e r y t o each em- ployee o r member of t h e insured group, a statement i n summary form of t h e e s s e n t i a l f e a t u r e s of t h e insurance coverage of such employee o r member and t o whom b e n e f i t s there- under a r e payable. I f dependents a r e includ- ed i n t h e coverage, only one c e r t i f i c a t e need be issued t o each family u n i t . ' "If you find that Blue Cross of Montana violat- ed this provision of Montana law by not includ- ing the provision in the policy of insurance issued to Richard and June Weber, no essential feature of insurance coverage not contained in a written statement delivered to a member of the Weber family may be enforced against Richard and June Weber." The court's instruction No. 19 provided: "You are instructed that a section of Montana law known as the Montana Insurance Code re- quires that each group health insurance policy shall contain in substance the following provi- sion: "'A provision that, in the absence of fraud, all statements made by applicants or the policyholder or by an insured person shall be deemed representations and not warranties, and that no statement made for the purpose of ef- fecting insurance shall avoid such insurance or reduce benefits unless contained in a writ- ten instrument signed by the policyholder or the insured person, a copy of which has been furnished to such policyholder or to such person or his beneficiary.'" If Blue Cross is an insurance company then instructions Nos. 17 and 19, quoted above, were proper instructions to be given in this case. Facts bearing upon this question are contained in the record. Section A-I of the Blue Cross policy states the various services available to subscribers at "member" hospitals. However, paragraph A-I1 states that Blue Cross will provide payment of 100% of the charges at any hospital which is registered with the American Medical - Association or listed by the American Hospital Association. A subscriber is entitled to be "indemnified" for any hospital charges that the member should incur in any licensed hospital in the country. Section B of the policy provides for direct reimbursement to the subscriber for medical and surgical expenses. Section C of the policy provides for direct payment to the subscriber under a supplemental benefit plan. Section D of the policy provides for direct reimbursement under a major medical provision. The subject of "indemnity" and its relationship to a determination of insurance carrier status was discussed by the California Supreme Court in People v. California Mutual Association (1968), 68 Cal.Rptr. 585, 441 P.2d 97. In that case, California Mutual was a non-profit, unincorporated association. Its stated purpose was to make payments in limited amounts for medical and hospital services rendered to its members using funds derived from periodic dues. Subscribing members were primarily enlisted from labor unions. There were approximately 1,500 members. The question presented to the California court was whether California Mutual Association was an "insurer" or a "health care service plan." In resolving this issue, the California Supreme Court said: ". . . We, therefore, conclude that where indemnity is a significant financial propor- tion of the business, the organization must be classified as an 'insurer' for the purposes of the Knox-Mills Plan Act. The principle object and purpose test as enunciated in the California Physicians Service case does not provide for adequate financial security." Prior to this 1968 decision, California determined whether a provider was a health service organization or an insurance company on the basis of "the principle object and purpose" of the corporation or association. In People v. California Mutual Association, this test was rejected and the Supreme Court determined that the insurance code governed if indemnity was a significant feature of the business. Under either California test Blue Cross would be classified as an insurance company. Blue Cross makes payments directly to its policyholders, rather than making them to a member health care provider. This is, of course, indemnification. Indemnity is not only a significant proportion of the business, but it is the principle business of Blue Cross. The more r e s t r i c t i v e r u l e previously e x i s t i n g i n C a l i f o r n i a , t h a t being t h e "primary purpose" r u l e , has been adopted and followed i n a number of cases. For example, s e e Cleveland Hospital Service Association v. Ebright (Ohio 1953), 45 N.E.2d 157, a f f . 49 N.E.2d 929; Associated Hospital Service v. Mahoney (1965), 161 M e . 391, 213 A.2d 712; Michigan Hospital Service v. SharpZ(1954), 339 Mich. 63 N.W.2d 638, 43 A.L.R.2d 1167; Shapira v. united S t a t e s Medical Services (1965), 15 N.Y.2d 200, 205 N.E.2d 293; S t a t e ex r e l . Fishback v. Universal Service Agency (1915), 87 Wash. 413, 151 P. 768. The undisputed evidence i n t h i s record shows t h a t Blue Cross indemnifies its policyholders a s a "primary" function of its business. Blue Cross, a s it operates i n Montana, is an insurance company whether we apply t h e " s i g n i f i c a n t " test of C a l i f o r n i a o r whether w e apply t h e "primary" test of o t h e r j u r i s d i c t i o n s . I n s t r u c t i o n s Nos. 17 and 19, set f o r t h above, w e r e properly given i n t h i s case. I a l s o d i s s e n t from Section - IV. Other Insurance Claims, of t h e majority opinion. The quotation from Appleman's Insurance -- Law and P r a c t i c e i s n o t applicable. The a u t h o r i t y c i t e d i n t h e majority opinion r e l a t e s t o t h e measure of damages f o r a wrongful breach of insurance c o n t r a c t . The i s s u e i n t h i s case i s whether t h e t r i a l c o u r t e r r e d i n r e f u s i n g t o admit evidence of a c o l l a t e r a l source where such evidence might be r e l e v a n t t o a determination of emotional d i s t r e s s suffered by t h e p l a i n t i f f s . The defendant contends t h a t t h i s otherwise inadmissible c o l l a t e r a l source evidence should be admitted because, s i n c e t h e medical b i l l s were paid by o t h e r insurance, t h e p l a i n t i f f s d i d n o t s u f f e r t h e mental and emotional distress claimed. This is a close question. The trial court was faced with a situation where the fact of plaintiffs' medical bills being paid by another insurance carrier was a collateral source and under our rules of evidence not admissible. On the other hand, such payment may have been relevant to a determination of whether the plaintiffs in fact suffered the degree of mental and emotional distress claimed. The trial court made a determination that the prejudicial effect of admission outweighed any probative value the evidence had. I would affirm this discretionary ruling on the part of the trial court. The majority admonishes the trial court to not receive evidence concerning the purchase and sale by Blue Cross of the Rainbow Hotel in Great Falls, Montana. This is consistent with the majority's holding that, as a matter of law, Blue Cross is a health service organization. In my view, Blue Cross, as a matter of law, is an insurance company. However, if the status of Blue Cross were to be determined a jury issue, its dealing in real estate would be relevant to a determination of whether, in fact, Blue Cross was a "health service organization." The evidence is overwhelming, including the evidence of its real estate dealing, that Blue Cross operated as an insurance company and not as a "health service organization." I would affirm the plaintiffs' judgment. M r . J u s t i c e John C. Sheehy, dissenting: I j o i n with J u s t i c e Morrison i n h i s d i s s e n t , and I wish t o make a f u r t h e r statement concerning t h e f l a t holding of t h e majority t h a t "Blue Cross i s n o t s u b j e c t t o t h e Montana Insurance Code." It w i l l come a s a b i t of s u r p r i s e t o Blue Cross premium payers, including s e v e r a l thousand s t a t e employees, t h a t t h e c o n t r a c t under which they make premium payments, o r have them deducted from t h e i r paychecks, is n o t a h e a l t h insurance policy, b u t something else t h a t looks very much l i k e insurance. I t i s s a i d t h a t i n Eden, Adam was given t h e job of naming a l l t h e animals. When he named t h e elephant, he w a s asked "Why elephant?" Adam responded, "Well it looks l i k e an elephant." The Blue Cross c o n t r a c t looks s o much l i k e insurance t h a t t h e majority i n its opinion cannot h e l p r e f e r r i n g t o it as a "policy," o r t o t h e b e n e f i t s as "coverage," o r t h a t t h e coverage i n t h e American Dental Association policy should be "insurance of p r e c i s e l y t h e same type i n t h e s a m e kind of i n s u r e r " t o determine a d m i s s i b i l i t y of evidence i n t h i s case. What Blue Cross does - not look l i k e i s a " h e a l t h s e r v i c e corporation," t h e kind of corporation r e l i e d on by t h e majority t o take Blue Cross o u t of t h e operation of t h e insurance code. Blue Cross o f f e r s no medical o r h e a l t h s e r v i c e of any kind, even t o t h e issuance of a s p i r i n . What Blue Cross does o f f e r a r e b e n e f i t s o r indemnity f o r medical, d e n t a l o r drug b i l l s incurred, on s e r v i c e s d i s - pensed by medical providers, i n r e t u r n f o r premiums assumably based o n t h e a c t u a r i a l likelihood t h a t such b i l l s w i l l be incurred. It i s nothing i f it is n o t an " i n s u r e r . " C a l i f o r n i a -22- Physicians' Service v. Garrison (1946), 28 Cal.2d 790, 172 P.2d 4, See People v. CMA et a1 (1967), 61 Cal.Rptr. 852. Blue Cross is statutorily an insurer, writing insurance contracts. "Insurance" is a contract whereby one undertakes to indemnify another or pay or provide a specified or deter- minable amount or benefit upon determinable contingencies. Section 33-1-201(5), MCA. "Insurer" includes every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance. Section 33-1-201(6), MCA . Blue Cross is writing "insurance" contracts, by statutory definition. It is an "insurer" by statutory definition. If in earlier years the legislature interpreted Blue Cross as something other than an insurer, it corrected that error in 1975 when it brought Blue Cross and all other "health service organizations" under the aegis of the commissioner of insurance. Chapter 30, Title 3 3 , MCA. Under Chapter 30 of the insurance code, Blue Cross is now amenable, as it always has been, to all the provisions of the insurance code, except where the provisions of Chapter 30 are incompatible with the remainder of Title 33, MCA. (Section 33-30-102, MCA.) The majority has been led merely upon suggestion, as Hamlet led Polonius, to see a "camel" or a "whale" in what is really an insurer. Likewise, the majority sees something other than an insurer in dismissing as dicta the effect of our decision in Fassio v. Montana Physician's Service (1976), 170 Mont. 320, 553 P.2d 998. That case involved an insurance contract issued by Montana Physicians Service, another "health service organization." The Fassio case turns upon the application to that case of statutory requirements found in the insurance code. Section 40-4102(2), R.C.M. 1947 (now section 33-22- 502(2), MCA) provided for delivery to the employee covered i n t h e group c o n t r a c t a summary statement of t h e " e s s e n t i a l f e a t u r e s of t h e insurance coverage . . ." The turning p o i n t of our decision i n Fassio was t h a t t h e r e must be n o t i c e of t h e coverage provided so a s t o allow t h e insured t o procure excluded coverage elsewhere. 553 P.2d a t 1001, 1002. The c a s e t h i s Court r e l i e d on i n deciding Fassio was Hayes v. Equitable L i f e Assur. Soc. (1941), 235 Mo.App. 1261, 150 S.W. 2d 1113, an insurance case. 553 P.2d a t 1002. In t h i s case, t h e majority dismisses t h e c l e a r a p p l i c a t i o n of insurance law t o a h e a l t h s e r v i c e organization c o n t r a c t i n Fassio a s " d i c t a . " Why? Because " b r i e f s i n t h a t case made no reference whatsoever t o t h e insurance code." B r i e f s , and not t h e language i n t h e published opinions of t h i s Court, a r e now deciding what i s " d i c t a " f o r t h e majority here. J u s t i c e Morrison, i n h i s accompanying d i s s e n t , has s e t f o r t h i n f u l l i n s t r u c t i o n no. 17. That i n s t r u c t i o n i s based on s e c t i o n 40-4102 ( 2 ) , R.C.M. 1947 (now s e c t i o n 33-22-502 ( 2 ) , MCA). I t was properly given by t h e court. I t i s c l e a r t h a t t h e majority has n u l l i f i e d t h e a p p l i c a t i o n of s e c t i o n 40-4102 ( 2 ) , R.C.M. 1947 (now s e c t i o n 33-22-502 ( 2 ) , MCA) t o Blue Cross i n d i r e c t opposition t o our holding i n Fassio, where w e s a i d t h a t s e c t i o n 4 0 - 4 1 0 2 ( 2 ) , R.C.M. was c o n t r o l l i n g . The t r i a l c o u r t i n t h i s case, reading Fassio had no choice b u t t o g i v e i n s t r u c t i o n no. 17. I t was t h e decided law. N o d i s t r i c t judge could have t h e prescience necessary t o see t h i s same c o u r t make " d i c t a " o u t of t h e c o n t r o l l i n g s t a t u t e and t h e decided case. So much f o r s t a r e d e c i s i s . The people of Montana can now be w e l l advised, i f t h e f l a t statement of t h e majority is taken a t f a c e value, t h a t t h e r e i s no l a w i n Montana t o p r o t e c t them from t h e vagaries of Blue Cross when it decides their coverage. The repudiation by the majority of Fassio, though not directly stated, is legally traumatic, but even that is overpassed by the majority's broadaxe treatment of the long-cherished collateral source rule. There can be no logic in applying a rule for the measure - of damages as authority for the admissibility of the receipt by Webers of benefits from another insurance policy. If Blue Cross were trying to demonstrate that the same coverage claimed by Webers could have been obtained elsewhere for a different premium, then perhaps under the majority's citation of Appleman, the evidence of the cost of such claimed coverage would be admissible to establish a measure of damages. Blue Cross was not trying to establish a measure of damages in offering the evidence that Webers had received $13,000 from another insurer. Its effort was to reduce Webers' claimed damages by showing Webers had received moneys from a collateral source. Until now, this Court has never allowed that. The only real issue in this case is whether the jury acted excessively in granting the amount of punitive damages we find here. The majority has sidestepped that issue, but the result is some very bad law. M r . J u s t i c e Daniel J. Shea s p e c i a l l y concurring: I join t h e majority i n reversing t h e judgment and ordering a new t r i a l . I do n o t believe, however, t h a t t h e opinion has adequately analyzed and t r e a t e d any of t h e i s s u e s r a i s e d . I w i l l , nonetheless, confine m y comments t o t h e i s s u e of whether it was proper t o i n s t r u c t t h e jury t h a t Blue Cross was governed by t h e insurance code. Technically, one can agree with J u s t i c e s Morrison and Sheehy t h a t t h e coverage provided by Blue Cross is more i n the n a t u r e of indemnity and t h e r e f o r e t h a t it is insurance. The question is, however, whether Blue Cross, a t t h e t i m e of t h e t r a n s a c t i o n involved i n t h i s case--1972--believed i n good f a i t h t h a t it was n o t an insurance company i n t h e sense t h a t it would be s u b j e c t t o t h e insurance code. U p t o t h e t i m e t h i s lawsuit was presented t o t h e jury, no one involved with insurance believed t h a t Blue Cross w a s s u b j e c t t o t h e insurance code. A t t h e t i m e of t h e claimed insurance code v i o l a t i o n s (1972), h e a l t h insurance corporations w e r e regulated by t h e a t t o r n e y general r a t h e r than t h e insurance commissioner. Section 15-2304, R.C.M. 1947 (set o u t i n f u l l i n t h e majority o p i n i o n ) . And i n 1971 t h e l e g i s l a t u r e k i l l e d House B i l l 253 which would have made h e a l t h s e r v i c e corporations s u b j e c t t o t h e insurance code. The same l e g i s l a t u r e passed a r e s o l u t i o n which, although not having t h e f o r c e of l a w , c l e a r l y enunciated a l e g i s l a t i v e p o s i t i o n t h a t it t o o d i d not consider h e a l t h s e r v i c e providers t o be under t h e insurance code, and t h a t it d i d not want them t o be under t h e insurance code. U n t i l t h e t r i a l c o u r t r u l e d i n 1981 t h a t Blue Cross was covered by t h e insurance code, and s o i n s t m c t e d t h e jury, s t a t e o f f i c i a l s and t h e companies involved, believed t h a t Blue Cross and s i m i l a r companies w e r e n o t s u b j e c t t o t h e insurance code. The a t t o r n e y general assumed, t h e insurance commissioner assumed, and Blue Cross assumed, t h a t Blue Cross was not s u b j e c t t o t h e insurance code. In d e a l i n g with t h e Webers, Blue Cross d i d not comply i n many r e s p e c t s , with t h e insurance code. But it i s f a i r t o say t h a t it d i d n o t comply with t h e code because it believed t h e code d i d n o t apply. N o s t a t e o f f i c i a l had ever t o l d Blue Cross t h a t it was an insurance company r a t h e r than a h e a l t h s e r v i c e provider, and t h e r e f o r e s u b j e c t t o t h e insurance code. But i n permitting t h e jury t o apply t h e insurance code t o Blue Cross, t h e p l a i n t i f f s w e r e given an u n f a i r advantage. I n s t r u c t i o n s nos.17 and 19 were extremely p r e j u d i c i a l t o Blue Cross. By i n s t r u c t i o n no. 17, t h e jury was t o l d t h a t i f Blue Cross had n o t furnished " a statement i n a form of t h e e s s e n t i a l f e a t u r e s of t h e insurance coverage of such employee o r member . . ." t h a t "no e s s e n t i a l f e a t u r e of insurance coverage not contained i n a w r i t t e n statement. . . may be enforced a g a i n s t " t h e p l a i n t i f f s . The e f f e c t of t h i s i n s t r u c t i o n i s t o s t a t e t h a t i f Blue Cross had n o t provided t h i s summary form t o t h e p l a i n t i f f s , Blue Cross could n o t r e l y on any of t h e exclusions o r exceptions from coverage contained i n t h e policy. Because Blue Cross had not given t h i s statement t o t h e p l a i n t i f f s , Blue Cross was e s s e n t i a l l y defenseless in.contending t h a t i t s policy provisions excluded o r excepted from coverage, those claims made by t h e p l a i n t i f f s . I n s t r u c t i o n no. 1 9 was even more p r e j u d i c i a l . By t h i s i n s t r u c t i o n , Blue Cross had a duty t o obtain a w r i t t e n instrument signed by t h e p l a i n t i f f s , t o t h e e f f e c t t h a t any statements made by t h e p l a i n t i f f s could avoid insurance coverage o r reduce b e n e f i t s . I f t h i s w r i t t e n statement was not obtained, and it was n o t , Blue Cross could n o t i n t h e absence of fraud, avoid coverage o r reduce t h e b e n e f i t s . Blue Cross d i d not o b t a i n t h i s w r i t t e n , signed statement from t h e p l a i n t i f f s because Blue Cross d i d n o t b e l i e v e it was s u b j e c t t o t h e insurance code. P l a i n t i f f s ' counsel r e l i e d heavily on t h e s e i n s t r u c t i o n s i n arguing t h e case t o t h e jury. Not only d i d they argue t h a t Blue Cross v i o l a t e d t h e insurance code, b u t a l s o they w e r e a b l e t o argue t h a t coverage under t h e policy could not be avoided o r reduced because Blue Cross had not complied with t h e insurance code i n furnishing t o p l a i n t i f f s a "summary form of t h e e s s e n t i a l f e a t u r e s of t h e insurance coverage" ( i n s t r u c t i o n no. 17) and had n o t obtained a w r i t t e n , signed statement from t h e p l a i n t i f f s acknowledging t h a t any statements made f o r t h e purpose of obtaining insurance,could r e s u l t i n avoidance of coverage o r a reduction i n coverage. P l a i n t i f f s , then, had an immense advantage i n explaining t h e i r many f a i l u r e s t o give t h e c o r r e c t information t o t h e Blue Cross r e p r e s e n t a t i v e . O n t h e o t h e r hand, Blue Cross could argue only t h a t t h e p l a i n t i f f s had made fraudulent r e p r e s e n t a t i o n s i n t h e a p p l i c a t i o n s f o r insurance. That is t h e only way (because of i n s t r u c t i o n no. 19) t h a t Blue Cross could avoid coverage o r reduce t h e coverage. I would g r a n t a new t r i a l because i n s t r u c t i o n s nos.17 and 19 bringing Blue Cross under t h e insurance code, should never have been given, and they were manifestly p r e j u d i c i a l .