Travelers Indemnity Company of America v. Tew et al
MEMORANDUM OPINION & ORDER: (1) Defendants' Motion for Declaratory Judgment DE 28 is DENIED; (2) Travelers' Motion for Summary Judgment DE 29 is GRANTED; (3) Travelers is obligated neither to defend nor indemnify Bernard Tew, Andrea Tew, Vincent Tew, Stephanie Tew and Tew LP for any claims asserted against them in the underlying SKAT actions; (4) All claims asserted in Defendants' Counterclaim DE 16 are DISMISSED WITH PREJUDICE; (5) This action is STRICKEN from the Court's active docket; and (6) Judgment SHALL be entered contemporaneously with this Memorandum Opinion and Order. Signed by Judge Joseph M. Hood on 11/17/21.(JLM)cc: COR
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
TRAVELERS INDEMINITY COMPANY
OF AMERICA and TRAVELERS
BERNARD TEW, et al.,
Civil Case No.
Skatteforvaltningen (“SKAT”), the Customs and Tax Administration
of the Kingdom of Denmark, against Defendants Bernard Tew, Andrea
involvement in a tax refund fraud scheme. Unlike Defendants past
cases, the present action was not brought by SKAT. Instead,
Plaintiffs Travelers Indemnity Company of America and Travelers
Indemnity Company (collectively “Travelers”) brought the present
action requesting a declaration of whether the claims asserted by
SKAT against Defendants in what will hereinafter be referred to as
the “SKAT actions” are covered by the insurance policies Travelers
issued to Bernard Tew, Andrew Tew, and Tew LP requiring Travelers
to defend and indemnify Defendants in their SKAT actions in the
United States District Court for the Southern District of New York
and whether the claims by Bernard Tew and Tew LP for compensation
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for alleged lost investment income are covered. [DE 12]. Defendants
then filed a Counterclaim [DE 16] seeking declaratory relief and
Defendants’ Motion for Declaratory Judgment [DE 28] and Travelers’
Motion for Summary Judgment [DE 29]. For the reasons set forth
below, Defendants’ Motion for Declaratory Judgment [DE 28] will be
denied, and Travelers’ Motion for Summary Judgment [DE 29] will be
Pursuant to the Declaratory Judgment Act, “[A]ny court of the
United States, upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any interested
party seeking such declaration.” 28 U.S.C. § 2201(a). However,
this provision “does not provide for its own subject matter
jurisdiction; the plaintiff must establish that the district court
has either diversity jurisdiction or federal question jurisdiction
before the Court will entertain a declaratory action.” Brotherhood
Mut. Ins. Co. v. United Apostolic Lighthouse, Inc., 200 F. Supp.
2d 689, 691 (E.D. Ky. 2002). In the present case, Travelers alleges
Defendants are all either Kentucky citizens or have their principal
place of business in Kentucky, Travelers is an insurer organized
under the laws of Connecticut and has a principal place of business
in Connecticut, and the amount in controversy exceeds $75,000,
exclusive of interest and costs. [DE 12]. Accordingly, there is
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diversity jurisdiction to resolve this action under 28 U.S.C. §
appropriate for declaratory judgment pursuant to the Declaratory
Judgment Act.” Brotherhood, 200 F. Supp. 2d at 692. The Declaratory
Judgment Act “created an opportunity, rather than a duty, to grant
a new form of relief to qualifying litigants.” Wilton v. Seven
Falls Co., 515 U.S. 277, 288 (1995). Thus, “district courts possess
discretion in determining whether and when to entertain an action
under the Declaratory Judgment Act, even when the suit otherwise
satisfies subject matter jurisdictional prerequisites.” Id. at
In deciding whether a case is appropriate for declaratory
judgment, the principal criteria are (1) whether the judgment would
settle the controversy; (2) whether the declaratory action would
serve a useful purpose in clarifying the legal relations at issue;
(3) whether the declaratory remedy is being used merely for the
purpose of “procedural fencing” or “to provide an arena for a race
for res judicata”; (4) whether the use of a declaratory action
would increase friction between our federal and state courts and
improperly encroach upon state jurisdiction; and (5) whether there
is an alternative remedy that is better or more effective. Am.
Home Assurance Co. v. Evans, 791 F.2d 61, 64 (6th Cir. 1986)
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(citing Grand Trunk W. R.R. v. Consol. Rail Corp., 746 F.2d 323,
326 (6th Cir. 1984)).
Here, declaratory judgment would settle the controversy,
would serve a useful purpose in clarifying the legal relations at
issue, and would not improperly encroach on state jurisdiction.
Moreover, it neither appears that a declaratory judgment is being
sought for any improper purpose nor that there is an alternative
remedy that would be better or more effective. Accordingly, this
is an appropriate case for declaratory judgment.
In addition to Defendants’ Motion for Declaratory Judgment
[DE 28], Travelers’ moves for summary judgment, [DE 29]. “The court
shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A genuine
dispute exists on a material fact, and thus summary judgment is
improper, if the evidence shows ‘that a reasonable jury could
return a verdict for the nonmoving party.’” Olinger v. Corporation
of the President of the Church, 521 F. Supp. 2d 577, 582 (E.D. Ky.
2007) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986)). Stated another way, “[t]he mere existence of a scintilla
insufficient; there must be evidence on which the jury could
reasonably find for the plaintiff.” Anderson, 477 U.S. at 252.
“The central issue is ‘whether the evidence presents a sufficient
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disagreement to require submission to a jury or whether it is so
law.’" Pennington, 553 F.3d at 450 (citing Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 251-52 (1986).
The moving party has the initial burden of demonstrating the
basis for its motion and identifying those parts of the record
that establish the absence of a genuine issue of material fact.
Chao v. Hall Holding Co., Inc., 285 F.3d 415, 424 (6th Cir. 2002).
The movant may satisfy its burden by showing “that there is an
absence of evidence to support the non-moving party’s case.”
Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the movant
has satisfied this burden, the non-moving party must go beyond the
pleadings and come forward with specific facts demonstrating the
existence of a genuine issue for trial. Fed. R. Civ. P. 56; Hall
Holding, 285 F.3d at 424 (citing Celotex, 477 U.S. at 324).
Moreover, “the nonmoving party must do more than show there is
some metaphysical doubt as to the material fact. It must present
significant probative evidence in support of its opposition to the
motion for summary judgment.”
Hall Holding, 285 F.3d at 424
(internal citations omitted).
The Court “must construe the evidence and draw all reasonable
inferences in favor of the nonmoving party.” Pennington v. State
Farm Mut. Automobile Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009)
(citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
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U.S. 574, 587 (1986)). However, the Court is under no duty to
“search the entire record to establish that it is bereft of a
genuine issue of material fact.” In re Morris, 260 F.3d 654, 655
(6th Cir. 2001). Rather, “the nonmoving party has an affirmative
duty to direct the court’s attention to those specific portions of
the record upon which it seeks to rely to create a genuine issue
of material fact.” Id.
In a diversity action such as this one, the Court applies
“the substantive law of the forum state and federal procedural
law.” Hoven v. Walgreen Co., 751 F.3d 778, 783 (6th Cir. 2014).
See also Talley v. State Farm Fire & Cas. Co., 223 F.3d 323, 326
(6th Cir. 2000); Fed. R. Civ. P. 57. Accordingly, Defendants’
Motion for Declaratory Judgment [DE 28] and Travelers’ Motion for
substantive law and the Federal Rules of Civil Procedure.
In Kentucky, the “[i]nterpretation and construction of an
insurance contract is a matter of law for the court.” Kemper Nat’l
Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 871
(Ky. 2002) (citing Morganfield National Bank v. Damien Elder &
Sons, Ky., 836 S.W.2d 893, 895 (1992); Stone v. Kentucky Farm
Bureau Mutual Insurance Company, 34 S.W.3d 809, 810 (Ky. Ct. App.
2000)). “Where the contract’s language is clear and unambiguous,
the agreement is to be given effect according to its terms, and
‘[the] court will interpret the contract’s terms by assigning
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language its ordinary meaning and without resort to extrinsic
evidence.’” Smithfield Farms, LLC v. Riverside Developers, LLC,
566 S.W.3d 566, 570 (Ky. Ct. App. 2018) (quoting Frear v. P.T.A.
Industries, Inc., 103 S.W.3d 99, 106 (Ky. 2003)). “[T]he party
seeking to establish coverage bears the burden of establishing
that the incident at issue was within the scope of the policy.”
Secura Ins. Co. v. Gray Const., Inc., 717 F. Supp. 2d 710, 714–15
(W.D. Ky. 2010) (citing North American Acc. Ins. Co. v. White, 258
Ky. 513, 80 S.W.2d 577, 578 (Ky. 1935)). However, the burden then
shifts to the insurer to establish that an exclusion bars coverage.
Id. at 715 (citing Travelers Property Cas. Co. of America v. B &
W Resources, Inc., No. 6:05–CV–355 KKC, 2006 WL 3068810, at *4
insured.” Id. (citing Travelers Property Cas. Co. of America, 2006
WL 3068810, at *4).
“The Kentucky Supreme Court has set forth two principles of
insurance contract interpretation: ‘(1) the contract should be
liberally construed and all doubts resolved in favor of the
insureds; and, (2) exceptions and exclusions should be strictly
construed to make insurance effective.’” Id. (quoting Kentucky
Farm Bureau Mut. Ins. Co. v. McKinney, 831 S.W.2d 164, 166 (Ky.
1992)). This rule of liberal construction does not mean every doubt
must be resolved against the insurer. Instead, “the policy must
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receive a reasonable interpretation consistent with the parties'
object and intent or narrowly expressed in the plain meaning and/or
language of the contract.” St. Paul Fire & Marine Ins. Co. v.
Powell–Walton–Milward, Inc., 870 S.W.2d 223, 226 (Ky. 1994); see
also Stone, 34 S.W.3d at 811. In construing an insurance policy,
the policy should be considered as a whole. Sun Life Ins. Co. v.
Taylor, 56 S.W. 668 (Ky. 1900).
Here, out of the fifteen complaints filed against Defendants
by SKAT, Defendants assert, and Travelers agrees, that Defendants
are now only seeking reimbursement of defense costs incurred in
the defense of five of the SKAT complaints and damages they
incurred because of Travelers’ failure to assist them with their
defense.1 [DE 30, at 2-3; DE 34, at 3]. Defendants do not seek
Defendants specify that the five SKAT complaints at issue are as follows:
(1) SKAT v. Tew LP Retirement Plan and Vincent Tew, 5:18-CV-00400-DCR in the
United States District Court for the Eastern District of Kentucky as Amended by
SKAT v. Tew LP Retirement Plan and Vincent Tew, 1:18-cv-09492-LAK DN 74 in the
United States District Court for the Southern District of New York;
(2) SKAT v. Tew Enterprises, LLC Retirement Plan & Andrea Tew, 5:18-CV-00401DCR in the United States District Court for the Eastern District of Kentucky as
Amended by SKAT v. Tew Enterprises, LLC Retirement Plant & Andrea Tew 1:18-cv09494-LAK DN 71 in the United States District Court for the Southern District
of New York;
(3) SKAT v. SV Holding, LLC Retirement Plan and Stephanie Tew, 5:18-CV-00404DCR in the United States District Court for the Eastern District of Kentucky as
Amended by SKAT v. SV Holding, LLC Retirement Plan and Stephanie Tew, 1:18-cv09509-LAK DN 71 in the United States District Court for the Southern District
of New York;
(4) SKAT v. Bluegrass Retirement Group Trust, Bluegrass Investment Management,
LLC and Bernard Tew, 5:18-CV-00406-DCR in the United States District Court for
the Eastern District of Kentucky as Amended by SKAT v. Bluegrass Retirement
Group Trust, Bluegrass Investment Management, LLC and Bernard Tew 1:18-cv09511-LAK DN74 in the United States District Court for the Southern District of
New York; and
(5) SKAT v. Bluegrass Investment Management, LLC Retirement Plan and Bernard
Tew, 5:18-CV-00407-DCR in the United States District Court for the Eastern
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reimbursement of defense costs in the other SKAT cases and agree
with Travelers that the issue of indemnity is moot because the
claims against Defendants have been resolved. Id. The Parties agree
the only remaining issues are (1) whether the five SKAT complaints
triggered an obligation to defend under the policies issued by
Travelers; (2) whether Travelers must reimburse Defendants for
defense costs; and (3) whether Defendants are entitled to damages
for Travelers’ alleged failure to defend. [DE 30, at 4; DE 34, at
5; DE 38, at 2].
A. DUTY TO DEFEND
“‘Under Kentucky law, an insurer's duty to defend is broader
than its duty to indemnify, and consequently, if there is no duty
to defend, then there is no duty to indemnify.’” Ohio Sec. Ins.
Co. v. Rockford Auto., Inc., 509 F. Supp. 3d 960, 964 (W.D. Ky.
2020) (quoting Auto Club Prop.-Cas. Ins. Co. v. Adler, No. 1:14CV-00046-JHM, 2015 WL 4934200, at *3 (W.D. Ky. Aug. 18, 2015));
see also Nautilus Ins. Co. v. Structure Builders & Riggers Mach.
Moving Div., LLC, 784 F. Supp. 2d 767, 771 (E.D. Ky. 2011); United
Specialty Insurance Company v. Cole's Place Inc., 936 F.3d 386,
403 (6th Cir. 2019). “Kentucky courts determine whether an insurer
District of Kentucky as Amended by SKAT v. Bluegrass Investment Management, LLC
Retirement Plan and Bernard Tew 1:18-cv-09515-LAK DN72 in the United States
District Court for the Southern District of New York.
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has a duty to defend its insured by comparing the language of the
underlying complaint to the terms of the policy.” Id. (citing Auto
Club Prop.-Cas., 2015 WL 4934200, at *3). “Insurers must provide
possibly, or might be covered.” Id. (citing Aetna Cas. & Surety
Co. v. Kentucky, 179 S.W.3d 830, 841 (Ky. 2005)). “‘[A]llegations
in a complaint are not by themselves sufficient to trigger the
duty to defend, but rather, the obligation to defend arises out
DiBeneditto v. Med. Protective Co., 3 F. App'x 483, 485 (6th Cir.
2001)). “If the insurer makes a determination that the claim is
not covered under the policy, it may either defend the claim under
a reservation of rights or refuse to defend the claim.” Id. (citing
Aetna Cas. & Sur., 179 S.W.3d at 841). “‘However, should coverage
be found, the insurer will be liable for all damages naturally
flowing from the failure to provide a defense.’” Id.
Here, Defendants do not argue they were entitled to coverage
under any policy for the fraud claims alleged by SKAT. Instead,
they contend, “Travelers was obligated to provide a defense because
the negligence allegations possibly fall within the scope of
coverage afforded by the Travelers’ policies.” [DE 28-1, at 7
(emphasis added)]. Specifically, the claims arise from allegations
Defendants in each of the complaints filed in the SKAT actions.
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The policies at issue in this case state that Travelers will have
the right and duty to defend the insured Defendants against any
suit seeking damages for “bodily injury” or “property damage.” See
[DE 28-1, at 15; DE 29-1, at 13]. Under the policies, the following
relevant terms are defined as follows:
‘Bodily injury’ means bodily injury, sickness or
disease sustained by a person and includes death
resulting from any of these at any time.
"Occurrence" means an accident, including continuous
or repeated exposure to substantially the same general
"Property damage" means:
a. Physical injury to tangible property, including all
resulting loss of use of that property. All such loss
of use shall be deemed to occur at the time of the
physical injury that caused it; or
b. Loss of use of tangible property that is not
physically injured. All such loss of use shall be deemed
to occur at the time of the "occurrence" that caused it.
[DE 29-1, at 13]; see also [DE 28-1, at 16].
Defendants do not assert that the SKAT complaints alleged
there was a bodily injury or physical injury to tangible property.
Complaints can be read to allege a loss of use of tangible property
‘occurrence.’” Id. Specifically, Defendants posit the following:
[E]ach of the Complaints makes an allegation to the
effect that, “[t]he Authorized Representatives of the
claimants, such as Defendant Tew, who, among other
things, executed at the direction of, and on behalf of,
the claimants’ documents authorizing the Payment Agents
to submit the claimants’ tax refund claims and to receive
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from SKAT payments in respect of those claims;” and that
“[t]he Defendants did know or should have known that
these arrangements would cause SKAT to make payments to
which the Defendants were not entitled.” The allegations
can certainly be read to indicate that SKAT is alleging
that each of the individuals accidentally submitted
inaccurate paperwork that resulted in a tax refund
payment to a retirement fund that was improper.
Id. at 17-18. In sum, Defendants ask the Court to find that an
improper payment of a tax refund constitutes a loss of tangible
property, i.e., money. Id. at 18.
The policies do not define the term “tangible property.”
However, Black’s Law Dictionary defines “tangible property” as
“[t]hat which may be felt or touched, and is necessarily corporeal,
although it may be either real or personal.” Black’s Law Dictionary
1627 (Revised 4th Ed. 1968). On the other hand, “intangible
property” is defined as “such property as has no intrinsic and
marketable value, but is merely the representative or evidence of
value, such as certificates of stock, bonds, promissory notes, and
franchises.” Id. at 946. In essence, tangible property is something
Kentucky state courts have not addressed whether the loss of
money constitutes the loss of tangible property. However, courts
in other jurisdictions have found that the loss of money does not
equate to the loss of tangible property. See Travelers Indem. Co.
of Am. V. Coleman Auto. of Columbia, LLC, 236 F. Supp. 2d 513,
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515-16 (D. Md. 2002) (“It is clear law that a loss of money by way
of fraud or trick, or other purely economic loss resulting from
the insured’s conduct, without any damage or injury to tangible
property, is not an ‘accident’ or ‘property damage’ as defined by
this and other such policies.”); Mack v. Nationwide Mut. Fire Ins.
Co., 517 S.E.2d 839, 840-41 (Ga. Ct. App. 1999) (finding money is
not tangible property because it “exists only as a number recorded
on a computer” and “[t]he coins and notes which represent money
Instead, money is intangible property, as it does nothing more
than represent value while having no intrinsic value of its own.
This is exemplified by the fact that money can be deposited and
intangible. That money may also come in a physical form, such as
a United States Dollar, or in this case, a Danish Kroner, is
because the tangible embodiment of money can be converted to an
inarguably intangible medium without losing its value, meaning the
Danish Kroner itself is not what has value. Since money is not
triggering Travelers’ duty to defend and, thus, no breach of that
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duty entitling Defendants to either defense costs or damages. For
the forgoing reasons,
IT IS ORDERED as follows:
(1) Defendants’ Motion for Declaratory Judgment [DE 28] is
(2) Travelers’ Motion for Summary Judgment [DE 29] is GRANTED;
(3) Travelers is obligated neither to defend nor indemnify
Bernard Tew, Andrea Tew, Vincent Tew, Stephanie Tew and Tew LP for
any claims asserted against them in the underlying SKAT actions;
(4) All claims asserted in Defendants’ Counterclaim [DE 16]
are DISMISSED WITH PREJUDICE;
(5) This action is STRICKEN from the Court’s active docket;
(6) Judgment SHALL be entered contemporaneously with this
Memorandum Opinion and Order.
This 17th day of November, 2021.
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