Case Name: Dan HOWARD and Stephanie Howard, husband and wife, Plaintiffs-Respondents, v. BLUE CROSS OF IDAHO HEALTH SERVICE, INC., an Idaho corporation, Defendant-Appellant
Court: Idaho Court of Appeals
Jurisdiction: Idaho
Decision Date: 1987-10-05
Citations: 114 Idaho 485
Docket Number: No. 16370
Parties: Dan HOWARD and Stephanie Howard, husband and wife, Plaintiffs-Respondents, v. BLUE CROSS OF IDAHO HEALTH SERVICE, INC., an Idaho corporation, Defendant-Appellant.
Judges: 
Reporter: Idaho Reports
Volume: 114
Pages: 485–494

Head Matter:
757 P.2d 1204
Dan HOWARD and Stephanie Howard, husband and wife, Plaintiffs-Respondents, v. BLUE CROSS OF IDAHO HEALTH SERVICE, INC., an Idaho corporation, Defendant-Appellant.
No. 16370.
Court of Appeals of Idaho.
Oct. 5, 1987.
Addendum on Petition for Rehearing June 13, 1988.
Petition for Review Denied Sept. 30, 1988.
Jeffrey A. Strother of Moffatt, Thomas, Barrett & Blanton, Boise, for defendant-appellant.
John C. Hohnhorst and D. Brent Martens of Hepworth, Nungester & Felton of Twin Falls and Buhl, for plaintiffs-respondents.

Opinion:
SWANSTROM, Judge.
Dan and Stephanie Howard filed suit against Blue Cross of Idaho Health Service, Inc., to recover benefits allegedly due under their contract, for medical services furnished to their newborn son. Blue Cross denied liability based in part on the Howards' failure to enroll their son as required by the contract. A magistrate awarded judgment to the Howards with interest, costs and attorney fees. Blue Cross appealed to the district court where the magistrate's decision was affirmed. Blue Cross now appeals to this Court, contending that (1) the magistrate erred in finding that Blue Cross' enrollment requirement for newborns violates I.C. § 41-3437; (2) the Howards' failure to timely enroll their son as required by their contract bars the Howards' claim of coverage; (3) cancellation of the group contract under which the Howards were insured extinguished Blue Cross' contractual liability to the Howards; (4) the district court erred in equating the enrollment requirement with a proof of loss requirement; and (5) both lower courts erred in awarding attorney fees against a non-profit health service corporation. For reasons set forth below, we affirm the magistrate's judgment except as to the award of attorney fees.
In 1980, Dan Howard began work at the Buhl, Idaho, outlet of Roper's, a group of retail clothing stores. Roper's had a contract with Blue Cross to which Roper's employees could subscribe to obtain coverage for health services. Roper's acted as liaison between the employees and Blue Cross, distributing and collecting application forms, submitting requested coverage changes, and deducting monthly subscription charges from the employees' wages, and remitting the charges to Blue Cross.
Beginning in 1981 and continuing through May of 1982, Dan and Stephanie Howard were covered by a "two-party membership" under the contract Blue Cross issued to Roper's. On April 4, 1982, Stephanie gave birth to a son, Stephen. The providers of medical services for Stephanie and Stephen sent bills to Blue Cross as requested by the Howards. In accordance with provisions of the contract, Blue Cross paid hospital and doctor maternity benefits for Stephanie. These benefits paid included the usual incidental services for the newborn child during the mother's maternity confinement. About these benefit payments there is no dispute.
During delivery, complications arose that required Stephen to remain hospitalized for six days, resulting in bills totalling more than $2,700 for his care. Following Stephen's release from the hospital, Dan Howard approached Roper's bookkeeper at the Buhl store to determine the necessary steps to assure Stephen's coverage under the group contract and was told that nothing need be done. In fact, however, the contract stated: "Newborn infants shall be covered hereunder from date of birth for illness, injury or congenital anomaly, provided the infant is added as an eligible dependant within thirty (30) days of birth."
During April, Blue Cross received bills from the doctors and hospitals who treated Stephen while he was, according to the contract, "a patient in his own right." In May, the Howards began receiving notices from Blue Cross advising them that Stephen was not covered under their contract.
Effective June 1, 1982, Roper's terminated its group contract with Blue Cross. Subsequently, Stephanie Howard asked Blue Cross to explain its denial of claims submitted for Stephen's care. Following this inquiry, on June 24, the Howards submitted a formal request to Blue Cross to enroll Stephen under the contract. Blue Cross refused the request due to the expiration of the enrollment grace period and to Roper's termination of Blue Cross group coverage. The Howards brought this action to recover Stephen's medical costs, asserting that Blue Cross is statutorily required to furnish coverage for Stephen from the moment of birth under I.C. § 41-3437. The relevant part of the statute reads as follows:
There shall be a provision that a subscriber's contract, delivered or issued for delivery in this state . which provides coverage for injury or sickness for dependent children of subscribers or other members of the covered group, shall provide coverage for such newborn and infants from and after the moment of birth. Coverage provided in accord with this section shall include, but not be limited to, coverage for congenital anomalies of such infant children from the moment of birth.
The magistrate held that Blue Cross' enrollment conditions for newborns violated I.C. § 41-3437; that Stephen was entitled to automatic coverage from the moment of birth; and that the Howards had made a timely request to Blue Cross to have their son added to their contract. On appeal, the district court affirmed the magistrate's ruling, but held that the "automatic" coverage extended for only thirty days following Stephen's birth. The district court also held that the bills submitted by the hospital and doctors gave sufficient notice to Blue Cross that the Howards were making a claim for Stephen's coverage. The district court did not, however, hold that the enrollment requirement was invalid. Rather, it equated the enrollment requirement with a "proof of loss" requirement. Accordingly, the district court concluded that the Howards' untimely attempt, on June 24, to enroll Stephen would not defeat their claim absent a showing by Blue Cross that the delay had caused some prejudice. This ruling is also challenged by Blue Cross in this appeal.
The first question we address is whether I.C. § 41-3437 mandates "automatic" coverage for newborns. The Ho-wards contend, and the magistrate held, that it does. Blue Cross argues that the statute requires only that coverage for newborns be offered. In deciding this issue we are presented solely with a question of law. Accordingly, we exercise free review, without deferring to the conclusions of either the magistrate or the district judge. Linn v. North Idaho District Medical Service Bureau, Inc., 102 Idaho 679, 638 P.2d 876 (1981).
The principal rule governing statutory interpretation is to give effect to the Legislature's intent. Of course, if the intent is clear from the language used, "there is no occasion for construction." Worley Highway District v. Kootenai County, 98 Idaho 925, 928, 576 P.2d 206, 209 (1978), quoting State v. Riley, 83 Idaho 346, 349, 362 P.2d 1075, 1076-77 (1961). However, where, as here, it is necessary to construe a statute, this Court may examine the language used, the reasonableness of the proposed interpretations, and the policy behind the statute. The legislative purpose in enacting a statute is also a factor to be considered in statutory construction. Mix v. Gem Investors, Inc., 103 Idaho 355, 647 P.2d 811 (Ct.App.1982).
Idaho Code § 41-3437 was enacted as part of 1974 Idaho Sess. Laws, ch. 66. The statement of purpose accompanying this Act noted that most existing disability insurance contracts and subscriber contracts providing coverage for newborn dependent children had a two-week delay before commencement of coverage. It is apparent from the statement of purpose and from the Act itself that the thrust of this legislation was to eliminate this prevalent gap in coverage for dependent children. Nothing in the Act or in its statement of purpose indicates that it was intended to affect whether coverage for dependent children is provided by an insurer or by a service corporation such as Blue Cross. Only if the coverage is provided, it must include coverage for "newborn and infants from and after the moment of birth." Thus, the statute expressly mandates only the time when coverage shall commence if coverage is provided.
In related arguments, the Howards contend that the enrollment requirement contained in the group contract defeats the purpose of the statute to provide automatic coverage and that it is against public policy. In countering this argument Blue Cross relies, in part, upon the fact that the contract in question was submitted to and approved by the Director of the Department of Insurance. Idaho Code § 41-3417(6) provides that "[a]ll proposed forms of subscriber's contracts shall be filed with the director and be subject to his approval, as provided in section 41-3419, Idaho Code." Similar requirements for approval of insurance policies are found in I.C. § 41-1812, 1813.
Recently, in Hansen v. State Farm Mutual Automobile Insurance Company, 112 Idaho 663, 667-68, 735 P.2d 974, 978-79 (1987), our Supreme Court said:
The legislature has delegated to the Director the responsibility of assuring that insurance contracts utilized in this state comport with public policy. In I.C. § 41-113, the legislature has specifically stated that "[t]he business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters____" [Emphasis original.] Thus, the legislature has concomitantly provided the Director of the Department of Insurance with authority to disapprove any insurance policy form which "[c]ontains or incorporates by reference, where such incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses, or exceptions and conditions which deceptively affect the risk purported to be assumed in the general coverage of the contract, or which are unfairly prejudicial to the policy holder." I.C. § 41-1813____ The statutory scheme is clear. The Director of the Department of Insurance is the person entrusted by the legislature to determine whether or not given policies comport with the public interest. Policies approved by the Director are thus presumed to be in harmony with public policy. In the absence of proof that a policy contains provisions which conflict with express legislative directives, the Director's approval of an insurance policy form is an administrative determination that the policy form is in the "public interest." I.C. § 41-113. [Emphasis added.]
We conclude that the requirement to enroll a newborn child within thirty days of birth is not, per se, against public policy, nor does the requirement offend I.C. § 41-3437.
Having held that the enrollment requirement is valid, we must next determine the role it plays in this case. The magistrate found, on inconclusive evidence, that Blue Cross at no time prior to June 1,1982, advised the Howards of the enrollment requirement. However, on appeal to the district court, the parties stipulated that the Howards' answer to interrogatories would be part of the appellate record. Their answer showed — and the district court found —that the Howards were given an "explanation of benefits" booklet when the Ho-wards became subscribers to the group contract in 1981. The booklet is not a part of the subscriber's contract. Nevertheless, it must be considered for the information which it imparts to the subscriber about the enrollment requirement. The booklet contained the following language: "Care for newborn infants is available from date of birth, provided that the infant is enrolled by the subscriber as a family member within 30 days of birth." As we have already noted, the contract delivered to the Ho-wards merely mentions the need to "[add] . an eligible dependent within thirty (30) days of birth." Because these two documents were timely furnished to the Ho-wards by Blue Cross, the magistrate's finding that the Howards had not received any timely notice of the enrollment requirement cannot be upheld.
Nevertheless, the magistrate's finding suggests a need to examine the adequacy of the information conveyed by Blue Cross to the Howards about how to enroll their newbqrn child. The booklet and the contract, taken together, simply state that, as the "subscriber," Dan Howard has a need to enroll or "add" his newborn infant "as a family member within 30 days of birth" in order for the infant to be covered from date of birth for any "illness, injury or congenital anomaly." No explanation is given about how the enrollment is to be made or to whom the requisite information must be given. Neither is anything said about the particular information that must be furnished with the enrollment, about any special application forms that might be required, or about any additional subscriber fees that might be immediately payable before the enrollment would be accepted by Blue Cross. Dan Howard was aware, of course, that his employer had been deducting subscriber charges for a "two-party membership" and would deduct additional charges when his child was added. Thus, it is not surprising that within thirty days of the child's birth, Dan Howard went to the bookkeeper where he worked and asked what needed to be done to have his child covered. When he was then told that nothing need be done, Dan Howard had received no contrary information from Blue Cross. Under these circumstances, he could reasonably expect that his son would be added to his contract.
We have no quarrel with the enrollment requirement as approved by the Director of Insurance. The problem lies with its implementation. A subscriber is entitled to know not only of the existence of the requirement but also how the subscriber is expected to comply with it in the limited time prescribed by the contract. The party who imposes this requirement must do so clearly and in writing. Otherwise, the procedural steps required by the service corporation, in this instance, may become a hidden barrier to the highly important coverage "from the moment of birth" which our Legislature has said must be available in certain service and insurance contracts. We conclude that the notice given here through the contract and informational booklet was insufficient to inform the Ho-wards of the basic steps they needed to take to enroll their child. Any notice they received subsequent to the birth of their child was not timely. Accordingly, the thirty day time limit imposed by the contract should not be enforced in this instance. The record shows that once the Howards learned of the need to submit an application for enrollment they acted promptly and within a reasonable time. We hold narrowly upon the particular facts of this case that the district court did not err in ruling that the Howards' enrollment application was timely.
In the appeal to us, both parties have argued the question of whether Roper's was acting as the agent of Blue Cross or of the employees in performing services relating to the administration of the group contract. This issue could affect whether the failure to timely enroll Stephen shall be deemed to be the failure of the Howards or of Blue Cross. It is clear from the record that the Howards did not rely on any agency theory at trial. Blue Cross broached the issue in response to certain objections and evidentiary rulings made in the trial court. Blue Cross now asserts that the magistrate erred in rejecting an offer of proof concerning agency. However, the record does not show that these alleged errors were raised in the appeal to the district court. The agency theory was not discussed or relied upon by either the trial court or the district court. Accordingly, we decline to address the issue now in this appeal. See Centers v. Yehezkely, 109 Idaho 216, 706 P.2d 105 (Ct.App.1985).
Finally, we address the award of attorney fees below. The magistrate awarded attorney fees to the Howards based on I.C. § 41-1839 which mandates an award of fees in certain actions brought by claimants who must resort to suit in order to recover on a policy against an "insurer." See, e.g., Hansen v. State Farm Mutual Automobile Insurance Company, 112 Idaho 663, 735 P.2d 974 (1987).
An award of attorney fees against Blue Cross based on I.C. § 41-1839 cannot be sustained. Blue Cross is not an "insurer" as defined by I.C. § 41-103 and 41-3301(2). Rather, Blue Cross is a non-profit "service corporation" as defined by I.C. § 41-3403(2). Only for certain limited specified purposes is a service corporation "deemed to be an 'insurer.' " I.C. § 41-3423, -3426. And only particular designated chapters and sections of the Idaho Code dealing with "insurers" and "insurance companies" are applicable to service corporations such as Blue Cross. I.C. § 41-114, -115, -3404, -3434. This clear differential treatment by our Legislature between service corporations, such as Blue Cross, on the one hand and insurance companies on the other is not an Idaho anomaly. Other states have made similar statutory distinctions. See, e.g., Kent General Hospital, Inc. v. Blue Cross and Blue Shield of Delaware, Inc., 442 A.2d 1368 (Del.1982); Blue Cross Hospital Service, Inc. of Missouri v. J.H. Frappier, 681 S.W. 2d 925 (Mo.1984); Obstetricians-Gynecologists, P. C. v. Blue Cross and Blue Shield of Nebraska, 361 N.W.2d 550 (Neb.1985); New Mexico Life Insurance Guaranty Association v. Moore, 93 N.M. 47, 596 P.2d 260 (1979); New Hampshire-Vermont Hospitalization Service v. Commissioner, Department of Banking and Insurance, 133 Vt. 333, 339 A.2d 453 (1975). Idaho Code § 41-1839, providing for an award of fees against an "insurer," is not included among those sections applicable to non-profit "service corporations."
In spite of these clear statutory provisions, the Howards argue that fees have been awarded against non-profit service corporations. The Howards point to Linn v. North Idaho District Medical Service Bureau, Inc., 102 Idaho 679, 638 P.2d 876 (1981). It is true that the Supreme Court in Linn, after reversing the trial court on the main issue, directed the trial court on remand to enter a judgment for Linn that included attorney fees. The fees were presumably awarded under I.C. § 41-1839 against Medical Service Bureau, a medical service corporation. The Howards also point to certain language in Linn stating that "the same basic principles of insurance law apply to service corporations as to any other insurance company." Id. at 687, 638 P.2d at 884 (emphasis added). This quotation was in a discussion of an issue totally unrelated to the award of attorney fees. The statutes we have mentioned which control this issue here were not considered. Our research indicates that the applicability of § 41-1839 was not made an issue in the Linn appeal. The failure of the service corporation in Linn to raise the issue does not prevent Blue Cross from raising the issue here, as it did in the trial court. We do not view Linn as controlling here.
The district court also concluded that the magistrate erred in awarding fees under I.C. § 41-1839. However, holding that this action was brought on an "open account," the district court held that, under former I.C. § 12-120(2) — as it existed prior to a 1987 amendment — the Howards were entitled to the fees awarded by the magistrate.
Section 12-120 allows a prevailing party to recover attorney fees in an action brought for recovery on an open account. We have defined "open account" as "an account with a balance which has been ascertained . [and which] is kept open in anticipation of future transactions." Kugler v. Northwest Aviation, Inc., 108 Idaho 884, 702 P.2d 922 (Ct.App.1985). The Ho-wards would have us hold that the open account relative to this case consists of the billings submitted to Blue Cross by the various health care facilities for services rendered to Stephen. We decline to so hold. No "open account" was maintained by the Howards. Nor was any open account maintained by Blue Cross for the Howards. This was simply an action brought on a contract to recover certain contract benefits. We hold that former I.C. § 12-120 does not provide a basis for awarding fees to the Howards.
In summary, we affirm the order of the district court upholding the magistrate's judgment for benefits payable to the Ho-wards. We reverse the order allowing attorney fees incurred in the magistrate division and in the district court. The trial court's judgment as modified will bear interest at the judgment rate from the date of its original entry. Costs for this appeal are awarded to the Howards. No attorney fees are awarded.
. In administering its group contract Blue Cross set up procedures with the employer Roper's for handling applications for enrollment of new subscribers and eligible dependents. Blue Cross furnished Roper's with its "Group Administrator's Manual" which instructed Roper's how to enroll new members, make membership changes, adjust the monthly billings accordingly, remit monthly payments and other matters. The manual specified that application and payment were to be submitted with either the first or second monthly group billing coming due following the date of birth. Normally, this procedure would extend the enrollment time beyond thirty days. Certain designated employees of Roper's were furnished with the Group Administrator's Manual. However, the bookkeeper at the Buhl store where Howard worked was not familiar with the requirements for enrolling newborn infants. Howard, of course, had no knowledge of the procedures contained in the manual. Moreover, cancellation of the group contract effectively eliminated the extended enrollment opportunity in this case. Therefore, Howard gained no benefit from these enrollment procedures.