Case Name: COMMONWEALTH of Kentucky, Appellant, v. E. John REINHOLD (d/b/a American Evangelistic Association), Medi-Share, and Christian Care Ministry, Appellees
Court: Supreme Court of Kentucky
Jurisdiction: Kentucky
Decision Date: 2010-08-26
Citations: 325 S.W.3d 272
Docket Number: No. 2008-SC-000839-DG
Parties: COMMONWEALTH of Kentucky, Appellant, v. E. John REINHOLD (d/b/a American Evangelistic Association), Medi-Share, and Christian Care Ministry, Appellees.
Judges: All sitting. MINTON, C.J., ABRAMSON, NOBLE, SCHRODER, JJ., concur.
Reporter: South Western Reporter Third Series
Volume: 325
Pages: 272–283

Head Matter:
COMMONWEALTH of Kentucky, Appellant, v. E. John REINHOLD (d/b/a American Evangelistic Association), Medi-Share, and Christian Care Ministry, Appellees.
No. 2008-SC-000839-DG.
Supreme Court of Kentucky.
Aug. 26, 2010.
Rehearing Denied Dec. 16, 2010.
Jack Conway, Attorney General, Stephan L. Taylor, Special Assistant Attorney General, Frankfort, KY, Counsel for Appellant.
Brent L. Caldwell, Boehl, Stopher and Graves, Lexington, KY, Richard Lynn Masters, Masters, Mullins & Arrington, Louisville, KY, Counsel for Appellee.
Kevin Crosby Burke, Louisville, KY, H. Philip Grossman, Grossman & Moore, PLLC, Louisville, KY, Counsel for Amicus Curiae-Kentucky Justice Association.

Opinion:
Opinion of the Court by
Justice VENTERS.
We granted discretionary review in this case to address two issues. The first issue is whether Appellees, E. John Reinhold, American Evangelistic Association, The Christian Care Ministry, and their Medi-Share program provide a "contract for insurance" as defined by KRS 304.1-030. The second issue is whether Medi-Share, if determined to be a "contract for insurance" under KRS 304.1-030, falls within the Religious Publications Exemption from Kentucky's Insurance Code under KRS 304.1-120(7).
For the reasons stated below, we conclude that the Medi-Share program does provide a "contract for insurance" as defined by KRS 304.1-030. We also con-elude that Medi-Share does not fall within the Religious Publications Exemption. Thus, we reverse the decision of the Court of Appeals, and remand the cause to the Franklin Circuit Court for entry of an appropriate judgment.
FACTS
Medi-Share is a program operated by the American Evangelistic Association and the Christian Share Ministry, which advertises itself as a "sharing ministry" providing "Affordable, Biblical Healthcare." Medi-Share calls itself a "sharing ministry" because people voluntarily join the program, according to Appellees, to help pay the medical bills of other members. In return, the people who join Medi-Share are eligible to receive donations from other members to help pay for their own medical expenses. Since Medi-Share does not consider itself insurance, it is not licensed to sell insurance in the Commonwealth, and it avoids other regulatory requirements and oversight to which conventional insurance companies are subject.
Medi-Share offers several different membership plans for singles, couples, and families, each providing different benefits and financial obligations. To join Medi-Share, a prospective member must first fill out an application form and pay a $175.00 fee. The application form serves a dual purpose. First, the form is a way for Medi-Share to review the applicant's information to determine if that person is eligible to join the program. Second, and more importantly, the application form serves as a "commitment" contract whereby the applicant promises to abide by certain Medi-Share rules and regulations while participating in the program. These rules and regulations include that the applicant be committed to being a Christian, live by "biblical standards," attend church regularly, not use tobacco or illegal drugs, and refrain from abusing legal substances such as alcohol. The "commitment contract" also places the following responsibility on being a Medi-Share member:
I understand that I will be responsible each month to access the member website, which identifies a fellow Christian who will be receiving my gift toward their medical need. I will endeavor to pray for this person and to give him or her encouragement by mail. I understand that my fellow believers in Christ are relying upon the receipt of my monthly share by the first of each month.
The "commitment" contract also includes the following disclaimer:
I understand that Christian Care Ministry (CCM) matches a Medi-Share member's medical need with other Members who have volunteered, in faith, to share in meeting needs through the biblical concept of Christian mutual sharing. I further understand that all money comes from the voluntary giving of Members, not from the Christian Care Ministry, and that the Christian Care Ministry is not liable for the payment of any medical bills. I will accept the decisions made during the Appeal Process by the 'Seven Member Appeal Panel' described in the Guidelines and will bring no suit, legal claim or demand of any sort against CCM for unpaid medical expenses.
The application form expressly states that a Medi-Share contract is not an insurance policy. The disclaimer provides as follows:
ATTENTION — This publication is not issued by an insurance company, nor is it offered through an insurance company. This publication does not guarantee or promise that your medical bills will be published or assigned to others for payment. Whether anyone chooses to pay your medical bills is strictly voluntary. This publication should never be considered a substitute for an insurance policy. Whether or not you receive any payments for medical expenses and whether or not this publication continues to operate, you are responsible for payment of your own medical bills.
Similar disclaimers appear throughout Medi-Share's subscriber information, member guidelines, promotional materials, and all periodic publications.
An underwriting manual is used by Medi-Share to review each applicant's information. This manual contains information on pre-existing medical exclusions and other exclusions which can keep a person from being granted membership in Medi-Share. Such exclusions frequently appear in the health insurance industry.
If an applicant is approved to join Medi-Share, the member is issued a membership card, and is expected to pay an annual fee of $150 and to make the monthly "share" payment as stated in the "commitment" contract. Medi-Share calculates the member's monthly "share" by applying underwriting standards and interpreting statistical data to fix the contribution based on anticipated future claims. The member's expected monthly "share" can also be increased by Medi-Share based on that member's previous claims history and an actuarial analysis of risk. A member who is late in paying his monthly "share" is assessed an "extra blessing gifts" penalty. Members who fail to pay their monthly "share" within a certain period of time are removed from the Medi-Share program.
The monthly "share" payments are sent directly from the member to Medi-Share. Medi-Share retains a portion of each member's "share" to cover its administrative costs. The remainder of the member's "share" is placed into a trust with sub-accounts designated by individual member. The sub-accounts function in many ways like an escrow account.
When a member has a medical expense, he pays the applicable co-payment to the medical provider, and sends the claim form directly to Medi-Share. Medi-Share's claims adjusters review the claim to see if it is covered under the plan. If the claim is approved to be paid, the payment for the member's medical bills is taken directly from another member's sub-account. Payments of claims are made directly to the medical provider. The determination of which member sub-accounts are used to pay the approved claims is made by Medi-Share. The members have no control over which claims get paid for from their individual sub-account. Thus, a member does not designate any specific recipient of the "donation" from his sub-account. However, the "commitment" contract requires each member to log on to the Medi-Share website each month to see who received the benefit of payments made from his sub-account for that month.
Medi-Share has a series of guidelines for its members which define what types of claims will be paid, provide for deductibles, and outline yearly and lifetime caps on benefits each member may receive. The guidelines also encourage the use of medical services within Medi-Share's "Preferred Provider Organization" by providing penalties for the use of out-of-network providers.
The Commonwealth of Kentucky filed suit in the Franklin Circuit Court on June 21, 2002, alleging that Medi-Share, American Evangelistic Association, and the Christian Care Ministry were engaging in the unauthorized sale of insurance. The Circuit Court held a bench trial on October 25-26, 2006, and ruled that Medi-Share is not a "contract for insurance," as defined by KRS 304.1-030, because its programs do not shift the risk of incurring medical charges from its members to itself. The Circuit Court also ruled that KRS 304.1-120(7), the Religious Publication Exception to our Insurance Code, applied to Medi-Share, and thus even if Medi-Share was a "contract for insurance," it nevertheless is not subject to regulation by the Commonwealth.
The Court of Appeals, in a divided opinion, affirmed the Franklin Circuit Court ruling that Medi-Share was not insurance. However, while the majority opinion stated that the Religious Publication Exemption in KRS 304.1-120(7) applied to Medi-Share, in actuality two of the three judges on the panel believed that Medi-Share did not qualify for that exception, and thus the majority view of the panel was that Medi- Share did not satisfy the requirements for the Religious Publication Exemption.
For the reasons set forth below, we now reverse the decision of the Court of Appeals, and remand to the trial court for entry of a judgment consistent with this opinion.
I. MEDI-SHARE IS A CONTRACT FOR INSURANCE AS DEFINED BY KRS 3011-030
The primary issue in this case is whether Medi-Share provides a contract for insurance as defined by KRS 804.1-030. KRS 304.1-030 defines insurance as "a contract whereby one undertakes to pay or indemnify another as to loss from certain specified contingencies or perils called 'risks,' or to pay or grant a specified amount or determinable benefit or annuity in connection with ascertainable risk contingencies, or to act as surety."
We begin by noting that this case was tried by the circuit court sitting without a jury. It is before this Court upon the trial court's findings of fact and conclusions of law and upon the record made in the trial court. Accordingly, appellate review of the trial court's findings of fact is governed by the rule that such findings shall not be set aside unless clearly erroneous. A factual finding is not clearly erroneous if it is supported by substantial evidence. Owens-Corning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky.1998); Uninsured Employers' Fund v. Garland, 805 S.W.2d 116, 117 (Ky.1991). Substantial evidence is evidence, when taken alone or in light of all the evidence, has sufficient probative value to induce conviction in the mind of a reasonable person. Golightly, 976 S.W.2d at 414; Largent v. Largent, 643 S.W.2d 261 (Ky.1982); CR 52.01. The trial court's conclusions of law, however, are subject to independent de novo appellate determination. A & A Mechanical, Inc. v. Thermal Equipment Sales, Inc., 998 S.W.2d 505, 509 (Ky.App.1999).
Both lower court decisions correctly concluded that the shifting of risk from one party to another was a necessary component of an insurance contract. The United States Supreme Court agrees with this principle, describing insurance as, "an arrangement for transferring and distributing risk." Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S. 205, 211, 99 S.Ct. 1067, 59 L.Ed.2d 261 (1979). The lower court decisions, however, incorrectly determined that the Medi-Share program did not shift risk because each individual member remains personally liable for paying his own medical bills. We note that even under conventional health insurance plans a member remains personally liable to the medical provider for payment. Key to the Court of Appeals decision were the uncontroverted facts that Medi-Share disclaimed any liability for members' medical expenses and guaranteed payment of no claims, that Medi-Share informed its members that it was not a substitute for insurance, that any medical bill payments were considered voluntary donations from other members, and that Medi-Share does not pay member claims, but, rather, claims are paid by the transfer of money from one member's sub-account to another, and from there sent to the medical care provider.
However, the lower court opinions overlook the risk-shifting nature of the "commitment" contract that members enter into when they become a part of the Medi-Share program, and thus the lower courts erroneously concluded that the process does not constitute a "contract for insurance" as defined by KRS 304.1-030. As discussed below, the Medi-Share program fits comfortably within the statutory definition of an insurance contract.
In reviewing the "commitment" contract to evaluate whether it is a contract for insurance, we note that its wording, standing alone, is not controlling.
It is immaterial, or at least not controlling, that the term "insurance" nowhere appears in the contract the nature of which is to be determined; indeed, the fact that it states that it is not an insurance policy is not conclusive, and a company may be found to be engaged in an insurance business even though it expressly disclaims any intention to sell insurance. Neither are the terms or mode of payment of the consideration determinative of the question whether the contract is one of insurance. The nature of a contract as one of insurance depends upon its contents and the true character of the contract actually entered into or issued — that is, whether a contract is one of insurance is to be determined by a consideration of the real character of the promise or of the act to be performed, and by a consideration of the exact nature of the agreement in light of the occurrence, contingency, or circumstances under which the performance becomes requisite, and not by what it is called.
4B Am.Jur.2d Insurance § 4 (1982) (footnotes omitted); see also Barberton Rescue Mission, Inc. v. Insurance Division of the Iowa Department of Commerce, 586 N.W.2d 352 (Iowa 1999). It is the actual nature and effect of the "commitment" contract that determines whether it is one for insurance. See Wheeler v. Ben Hur Life Ass'n., 264 S.W.2d 289, 291 (Ky.1953) ("Broadly speaking . when a company, society, or association, either voluntary or incorporated, and known as a relief, benevolent or benefit society, or by some similar name, contracts for a consideration to pay a sum of money upon the happening of a certain contingency, and the prevalent purpose and nature of the organization is that of insurance, it will be regarded as an insurance company, and its contracts as insurance contracts, regardless of the manner or mode of payment of consideration or of loss or benefit"); Allin v. Motorists' Alliance of America, 234 Ky. 714, 29 S.W.2d 19, 23 (1930) (holding that one cannot change the nature of insurance business by declaring in the contract that it is not insurance).
The "commitment" contract, as previously quoted, obligates Medi-Share members to pay their monthly "share" by the first of each month because their "fellow believers in Christ" rely upon that payment to satisfy their medical needs. In return for paying their monthly "share," Medi-Share members remain eligible to receive payment for their medical needs through the program. This process clearly shifts the risk of payment for medical expenses from the individual member to the pool of sub-accounts from which his expenses will be paid. Thus, regardless of how Medi-Share defines itself or what disclaimers it includes in its literature, in the final analysis, there is a shifting of risk.
Moreover, as Medi-Share's advertising materials tout, all members' medical needs have thus far been satisfied through the program. This level of success in paying claims, the record reflects, is due to Medi-Share, using actuary tables, and setting each member's monthly "share" at a level commensurate with anticipated future member medical claims. Medi-Share utilizes statistical actuarial tables to shift risk the same way a traditional health insurance company sets its premiums. Clearly, this arrangement entered into via the "commitment" contract shifts risk between Medi-Share members in the same manner traditional health insurance contracts shift risk between policyholders.
Thus, through the "commitment" contract Medi-Share's members "undertake [ ] to pay or indemnify another as to loss from certain specified contingencies or perils called 'risks'." KRS 804.1-030. Further, Medi-Share "undertakes" to actually pool the members' monthly "shares" together and pay the actual medical bills as claims for payment are submitted. Thus, the "commitment" contract is, in practice and function, one for insurance.
Medi-Share argues, however, that the disclaimer in the "commitment" contract which states that Medi-Share takes no responsibility for the payment of the members' medical bills indicates that no risk shifting occurs. Nevertheless, this disclaimer, while perhaps shielding Medi-Share from any liability for its members' medical bills, does not overcome the fact that through the Medi-Share program the individual members pool resources together to distribute the risk of major medical bills amongst each other. As previously stated, one cannot change the nature of an insurance business by simply declaring in the contract that it is not insurance. Allin, 29 S.W.2d at 23.
Medi-Share also argues that a member who joins their program is actually undertaking a charitable endeavor and not attempting to shift risk. Medi-Share compares a member's participation in their program to one who throws a dollar into a fireman's boot during the annual WHAS Crusade for Children, or makes a monthly donation to the United Way. The facts presented do not support this contention. A person in the above examples generally provides his or her gift altruistically. The giver receives no financial benefit from the gift. The only direct benefit is the joy derived from helping a person in need or supporting a worthy cause. While we do not doubt the claim that Medi-Share members are altruistically inspired, neither do we doubt that they pay "shares" with the expectation of a financial return based on Medi-Share's history of claims payments in the form of the payment of their own medical bills.
Medi-Share's advertising, examples of which are included in the record, supports this conclusion. Medi-Share advertisements call itself an "alternative to expensive health insurance [which] could save [its members] $2,000 to $4,000 a year or more." If one does qualify for Medi-Share one "enjoy[s] significant savings." Further, member testimonials tout the monetary amount of their medical bills which were paid through Medi-Share and make claims such as "the medical bills would have destroyed us financially, except for Medi-Share." If Medi-Share was a pure charity, it is doubtful that its advertising would focus so heavily on the personal benefits one can receive by becoming a member. Indeed, the thrust of the advertising is that it is an economical alternative to conventional health insurance programs. The conclusion that Medi-Share functions not as a charity, but as a type of insurance is well supported by the evidence in the record.
II. MEDI-SHARE DOES NOT QUALIFY FOR THE RELIGIOUS PUBLICATION EXCEPTION PROVIDED IN KRS 301.1-120(7)
Medi-Share argues that if it is found to be a "contract for insurance" it is still exempt from state regulation because it qualifies for the Religious Publication Exception from the Kentucky Insurance Code provided by KRS 304.1-120(7). KRS 304.1-120(7) states:
No provision of [the Kentucky Insurance Code] shall apply to .
(7) A religious publication (as identified in this subsection), or its subscribers, that limit their operations to those activities, and:
(a) Is a non-profit religious organization;
(b) Is limited to subscribers who are members of the same denomination or religion;
(c) Acts as an organizational clearinghouse for information between subscribers who have financial, physical, or medical needs and subscribers who choose to assist with those needs, matching subscribers with the present ability to pay with subscribers with a present financial or medical need;
(d) Pays for the subscribers' financial or medical needs by payments directly from one (1) subscriber to another;
(e) Suggests amounts to give that are voluntary among the subscribers, with no assumption of risk or promise to pay either among the subscribers or between the subscribers and the publication; and
(f) Provides the following verbatim written disclaimer as a separate cover sheet for all documents distributed by or on behalf of the exempt entity, including all applications, guidelines, promotional or informational' materials, and all periodic publications:
'This publication is not issued by an insurance company nor is it offered through an insurance company. This publication does not guarantee or promise that your medical bills will be published or assigned to other for payment.
Whether anyone chooses to pay your medical bills will be totally voluntary. This publication should never be considered as a substitute for an insurance policy.
Whether you receive any payments for medical expenses, and whether or not this publication continues to operate, you will always remain liable for any unpaid bills.'
It is clear from the statutory language of KRS 304.1-120(7) that for Medi-Share to qualify for the Religious Publications Exception, it must meet every criterion listed. Harris v. Commonwealth, 793 S.W.2d 802, 809 (Ky.1990) ("This conclusion is inescapable because otherwise the General Assembly would have used the disjunctive 'or' instead of the conjunctive 'and' "). Medi-Share does not.
Subsection (d) requires that the publication subscribers' needs be paid "directly from one (1) subscriber to another." Therefore to satisfy the requirement of subsection (d), the religious publication must be set up so that one subscriber sends the money for assistance to the other subscriber without having the money passing through an intermediary. Medi-Share does not operate in this manner. Medi-Share serves an intermediary by which monthly "shares" from members are collected and held until being used to pay other members' needs. Medi-Share determines which needs are paid, how they are paid, and when they are paid. Each "subscribers' needs" are thus not paid directly from one subscriber to another, but through Medi-Share. Since Medi-Share does not satisfy KRS 304.1-120(7)(d), it does not qualify for the Religious Publication Exception.
CONCLUSION
For the above stated reasons, the opinion of the Court of Appeals is reversed, and the cause is remanded to the Franklin Circuit Court for entry of a judgment consistent with this opinion.
All sitting. MINTON, C.J., ABRAMSON, NOBLE, SCHRODER, JJ., concur.
SCOTT, J., dissents by separate opinion in which CUNNINGHAM, J., joins.
. E. John Reinhold is the Chairman of the American Evangelistic Association and the Christian Share Ministry.
. We note that an application form included in the record which predates the above quoted one used the following language:
I understand that I will receive notice by the 20th of each month, identifying a fellow Christian who will be receiving my gift toward their medical need that month. I promise to pray for this person and may give him/her full encouragement by phone or mail. Because this fellow Believer-In-Christ is counting on me, [Christian Care Ministry] must get my Monthly Share by the first of each month.
. The record reflects that according to the Medi-Share website the monthly "share" payments are not tax-deductible.
. At the time of the Franklin Circuit Court trial, about 17 to 20 % of the monthly "share" payments were expended for administrative costs. However, the record reflects that percentage has been reduced since Medi-Share cancelled the stop-loss insurance protection it once held.