RENDERED: FEBRUARY 10, 2023; 10:00 A.M. NOT TO BE PUBLISHED 

# Commonwealth of Kentucky Court of Appeals

NO. 2022

- CA

- 0338

- MR BERNARD TEW, PH.D.; ANDREA TEW; STEPHANIE TEW; AND VINCENT TEW APPELLANTS

v. APPEAL FROM WOODFORD CIRCUIT COURT

HONORABLE BRIAN PRIVETT, JUDGE ACTION NO. 20

- CI

- 00066

KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY ; AND ACUITY, A MUTUAL INSURANCE COMPANY APPELLEES

OPINION AFFIRMING
**   **  **
BEFORE: CETRULO, JONES, AND M C NEILL, JUDGES. CETRULO, JUDGE: Th is is an appeal from summary judgments granted in favor
of two insurers

. The trial court ruled that there was no duty to defend nor any obligation to indemnify the appellants under any of the applicable insurance policies. Because the facts are somewhat convoluted, we begin there.- 2

- Dr. Bernard Tew and his wife, Andrea, (“the Tews ”) ran a small investment management limited liability company , Bluegrass Investment Management Company (“Bluegrass”) , which they started to provid e financial
services for several retirement funds for busines s es owned by George Hofmeister. Through a rather complex investment strategy called dividend arbitrage, the Tews 1
associated with a London

- based investment banker , ED&F Man Capital Markets Limited (“ED&F”) , to purchase shares of stock in European businesses just prior to the stock’s dividend payment. After the dividend was paid to retirement fund accounts, the shares were promptly sold.

Pursuant to Danish law, the Customs and Tax Administration of
Denmark ( “ SKAT ” ) withhold s a 27% tax on dividend payments made to
retirement fund accounts. Tax treaties between the U nited States and Denmark
allowed those U.S. f

unds to obtain a tax refund of any dividend tax withheld. To
obtain thos e tax refunds, documentation had to be provided to SKAT . Th e Tews,
as U.S.

- based fiduciaries of the retirement funds, provided Internal Revenue
Service (“ IRS ”) forms and power of attorney forms to the payment agent in Europe. SKAT then approve d the refu nd request and pa id the dividend tax refunds
into the retirement accounts.

1 Andrea Tew, Vincent Tew, and Stephanie Tew Campbell, children of the Tews, moved to intervene in this suit as fiduciaries of three separate retirement accounts. While there are some separate issues as to their potential coverage, we will simply refer to all appellants as the Tews.- 3

- However, in 2015, SKAT discovered that the tax refund requests it processed and paid to numerous U.S. retirement funds exceeded the amount of

tax es that had actually been withheld

. SKAT contends that it transferred billions
of Danish K roner (Danish currency) to accounts that were not entitled to receive
them. The Tews claim that the retirement fund accounts were being manipulated fraudulently by insiders at ED&F.

Regardless of whether the Tews had knowledge of th o se actions, they were sued along with others in 15 complaints filed by the Kingdom of Denmark

. Those actions were heard in the U nited States District Court for the Eastern District of Kentucky. In short, the suits alleged that the Tews had negligently misrepresented facts and provided inaccurate information and misrepresentations to SKAT to process a tax refund claim, which SKAT relied upon, and ma de corresponding payments into the Tews’ retirement accounts/entities. 2

The Tews initially sought bankruptcy protection as a result of th e SKAT litigation and reached a confidential agreement with SKAT a s part of the bankruptcy proceedings. Thereafter, the Tews filed this action in Woodford Circuit Court, seeking a declaratory judgment that Acuity, a Mutual Insurance Company (“ ACUITY ”) and Kentucky Farm Bureau (“ KFB ”) had a duty to defend

2 Although there were also allegations of fraud, here, the parties agree that there would be no coverage under any policy for those claims.- 4

-

the Tews against SKAT’s allegations and that one or both of them were liable for the damages that were being sought against the Tews. This leads us to a discussion
of the policies alleged to be in effect at the time of th o se allegati ons. I . The A cuity P olicy
A CUITY issued a commercial general liability policy to Bluegrass , which was in effect from January of 2013 until January of 2014 (“Acuity Policy”)

. The parties agree that Bernard and Andrea Tew w ere the named members and only

em ployees of the named insured, Bluegrass . That policy provide d that

1. If you are designated in the Declarations as:

. . . .

c. A limited liability company, you are an insured. Your members are also insureds, but only with respect to the conduct of your business. Your managers are insureds, but only with respect to their duties as your managers.

. . . . The parties agree that the policy and/or its endorsement s clearly
define t he scope of “ property damage ” and “ occurrence, ” as follows:

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of

. . . property damage to which this insurance applies. We will have the righ t and duty to defend the insured against any suit- 5

- seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for

. . . property damage to which this insurance does not apply.

. . . b. This insurance applies t o bodily injury and property damage only if: (1) The bodily injury or property damage is caused by an occurrence that takes place in the coverage territory; (2) The bodily injury or property damage occurs during the policy period,

. . . . (Emphasis added.)

The Acuity Policy defined the following terms:
17. “Property Damage” means:

. . . 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 caus ed it. . . .
18. “Suit” means a civil proceeding in which damage because of

. . . [property damage] to which this insurance applied is alleged.

. . . (Emphasis added.)

Further, it defined “occurrence” in the base policy using an Amendatory Endorsement Form No IL

– 7092(2

- 11), which provided, in pertinent part:- 6

- Occurrence means an accident, including continuous or repeated exposure to the same general harmful conditions. Occurrence includes:

. . . B. Property damage to property other than your work that arises out of your work.

. . . ROA 2240

- 2265.
The Tews contend that A CUITY had a duty to defend them in relation
to the c omplaints filed by SKAT in the United States District Court for the Eastern District of Kentucky. They assert that the foregoing definition of “occurrence” provides coverage for accidental conduct and that there is at least one allegation in the SKAT comp laints that the Tews did something accidentally, resulting in property damage. A CUITY contends the conduct of the Tews was not covered under the terms of the policy a nd does not constitute an “occurrence” as defined in the Acuity Policy. ACUITY further c ontends that the loss of use of money asserted in the SKAT complaints does not constitute “ property damage ” caused by

an o cc urrence. II. The Kentucky Farm Bureau Policies

The trial court initially found that the only possibl e effective policy
that KFB had issued to the Tews at the time of the loss was a farm policy on property owned in Lyon C ounty , Kentucky. The o rder specifically state d that at
the time of the losses claimed by SKAT, the Tews resided in Woodford County- 7

-

and had separate liability coverage on th at residence with a different carrier. T he trial court held there was no coverage owed nor any duty to defend under th at f arm policy.
The Tews ’ briefs , however, make no reference to the farm policy and
instead a ddress only purpor ted claims under a KFB homeowner ’s policy , first
issued to the Tews in October 2018 to cover t he ir Woodford County home (“KFB Homeowner’s Policy”)

. We are “without authority to review issues not raised in or
decided by the trial court .” Util. Mgmt. Grp., LLC v. Pike Cnty. Fiscal Ct. , 531 S.W.3d 3, 13 n.8 (Ky. 2017) (citing Ten Broeck DuPont, Inc. v. Brooks , 283
S.W.3d 705, 734 (Ky. 2009))

. While the trial court did find that there was no duty to defend nor any coverage owed under any policy issued by KFB, we will review only the applicability of the KFB Homeowner ’s P olicy as that is the only argument
the Tews raise here

.

T he KFB Homeowner ’ s P olicy defines the following terms: A n “o ccurrence” means a n accident, includ ing continuous or repeated exposure to substantially the same gen e ral harmful conditions, which results, during the policy period, in:

. . . 6. “ Property damag e ” m eans physical injury to, destruction of, or loss of use of tangible property

. ( E mphasis added

. )- 8

- Section II of the KFB Homeowner’s Policy provided l iability
coverage , and Coverage E provided personal liability coverage. The insuring agreement provides:

SECTION 11

– LIABILITY COVERAGES COVERAGE E

– Personal Liability If a claim is made or a suit is brought against an

“ insure d” for damages because of “ bodily injury ” or
“ property damage ” caused by an “ occurrence ” to which this coverage applies, w e will: 1. Pay up to our limits of liability for damages for which the “ insured ” is legally liable. Damages include pre

judgment interest awarded against the “ insured ” ; and
2. Provide a defense at our expense by counsel of our choice, even if the suit is groun dless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the “ occurrences ” equals our limit of liability.
T he Tews mai ntain that they were i nsured s, as named individuals residing in the residence , a long with their son, who still lives in the residence. They also assert that one of their daughter s resided there during the period that the
transactions at issue were ongoing and could also qualify under the definitions. They assert ed that the KFB Homeowner’s P olicy language does not limit coverage in terms of the date the suit was filed or when the accidental occurrence happened.
It was further their position that th e KFB Homeowner’s P olicy definition of- 9

-

“occurrence” does not require the “accident” to occur during the policy period , but requires only the “ property damage ” caused by the accident to result during the policy period.

As they claimed in regard to ACUITY, the Tews argue that the allegations of five of the SKAT complaints , i.e. , of negligent misrepresentation resulting in a loss of use of tangible property , are sufficient to require KFB to
defend them. KFB maintains that the KFB H omeowner’s P olicy d efines a n

“ occurrence ” as an accident that results during the policy period in property damage that must occur during the policy period

. KFB further maintains that the
transactions at issue took place years before the policy was effective . Finally, KFB asserts that none of the allegations involve an “occurrence” or “accident” as those
terms are defined. The parties agree that the “occurrence ,” “accident , ” or “property damage , ” if app licable at all, was the loss of Danish K roner alleged by SKAT, which took place in 2013 to 2 01 4 and was discovered by the Danish tax authority in 2015. KFB also asserts that even if there were any coverage afforded under any of the policies, it is specifi cally excluded by multiple exclusions within each of the policies.
STANDARD OF REVIEW

When a trial court grants summary judgment in a declaratory judgment action with no bench trial, as it did here, “ we use the appellate standard- 10

-

of review for summary judgments .” Foreman v. Auto Club Prop.

- Cas. Ins. Co. , 617 S.W.3d 345, 349 (Ky. 2021) (citation omitted). “ Because summary judgment involves only legal questions and the existence of any disputed material issues of
fact , an appellate court nee d not defer to the trial court’s decision and will review
the issue de novo .” Lewis v. B&R Corp

. , 56 S.W.3d 432 , 436 (Ky. App. 2001) (citation omitted)

.

For insurance claims , specifically, the Kentucky Supreme Court has recently held:

Foremost in interpreting an insurance contract we are bound by the specific language of the contract before us. We apply certain rules of construction to insurance contracts, including a rule that when the terms of an insurance contract are unambiguous an d not unreasonable, they will be enforced as written. Unambiguously defined terms are “interpreted in the light of usage and understanding of the average person.” Ambiguous terms and the language of exclusions are strictly construed against the insurer s o as not to defeat the policyholder’s reasonable expectation of coverage. But “this rule of strict construction certainly does not mean that every doubt must be resolved against the insurer and does not interfere with the rule that the policy must receive a reasonable interpretation consistent with the plain meaning in the contract

. ”
Foreman , 617 S.W.3d at 349

- 50 ( citations omitted).- 11

- LEGAL ANALYSIS Here, we must (1) determine whether the insurance providers were obligated to provide coverage, and therefore had a duty to defend the Tews; and (2) interpret the terms of the policies

. We begin with the duty to defend.

The Kentucky Supreme Court outlined the basic duties of an insurance company to defend its insured in James Graham Brown Fou nd ation , Inc. , v. St. Paul Marine & Fire Ins urance Co mpany , 814 S.W.2d 273 (Ky. 1991). There, the Kentucky Supreme Court held that an “ insurer ha s a duty to defend i f
there i s any allegation which ” could come within the coverage of the policy. Id. at
279 (citing O’Bannon v. Aetna Ca s. & Sur. Co

. , 678 S.W.2d 390 (Ky. 1984) )

. Under those circumstances , where the policy appears to provide coverage, the appropriate course of action for the insured is to com mence a declaration of rights
action. See, e.g. , Thompson v. W

. A m. Ins . Co. , 839 S.W.2d 579 (Ky. App. 1992).
In this case , the Tews commenced multiple actions to declare rights under various policies, but coverage must be found before there is a corresp onding duty to defend any insured.
T he Tews maintain that only a single allegation need s to fall within the scope of coverage for the duty to defend to kick in ; therefore, they focus on t he negligent misrepresentation allegations . T hey assert that such allegations involve
the paperwork the Tews submitted , which result ed in the loss of use of a set- 12

-

amount of Danish K roner. Further , they claim that loss of use of money constituted loss of use of tangible property as defined by the KFB Homeowner’s
P ol icy. According to the Tews, t he same allegations constitute an “ occurrence resulting in property damage ” under the A cuity P olicy. Thus, they maintain that both carriers had a duty to defend under Brown Foundation

.

However, the allegations in the complai nt are not by themselves sufficient to create a duty if the terms of the policy do not potentially provide
coverage. Brown Found

. , 814 S.W.2d at 279

. An insurer does not always have to

“ defend against a claim it believes falls outside the policy it issued. ” Cincinnati
Ins. Co

. v. Motorists Mut. Ins. Co. , 306 S.W.3d 69 , 79. (Ky. 2010)

. It is well established that terms of a policy must be given their plain meaning and enforced as drafted with a reasonable interpretation. See St. Paul Fire & Marine Ins. Co.
Powell

- Walton

- Milward, Inc ., 870 S.W.2d 223 , 226 (Ky. 1994)

.

Thus, we must interpret the words and terms of the policies at issue

. As delineated in the provisions of both polic ies , the coverage is generally available only if there is “ property damage ” caused by an “occurrence” to which coverage applies. In that instance alone , the insurers would have a duty to defend

. This
Court simply cannot agree that the SKAT complaints allege any cause of action that would constitute an “occurrence” under either of the policies.- 13

- First, the SKAT complaints allege that the Tews had a duty to provide accurate and complete information and that they materially misrepresented or
misstated a

pplications that they knew or should have known were inaccurate. The Tews argue that these are allegations of “ accidental ” conduct, not intentional
conduct. However, Kentucky courts have taken a narrow approach when defining “accidents

. ” In Stone v K ent ucky Farm Bureau Mut ual Ins urance Co mpany , 34 S.W.3d 809 , 812 (Ky. App. 2000) , th is Court stated that an accident is not something that results “ from a plan, design, or an intent on the part of the
insured. ” There must be some reasonable limitation and in terpretation as to what
constitutes an accident or occurrence. See Cincinnati , 306 S.W.3d 69. An
“accident” is generally seen as a fortuitous event. See i d

. at 73

- 74. Because

“ accident ” has not been given a technical meaning in the many cases interpreting insurance policies, the courts have given “accident” its plain meaning. Id

. at 74 (citing Fryman for Fryman v. Pilot Life In s. Co. , 704 S.W.2d 205 (Ky. 1986) )

.

Regardless of the deg ree to which the information provided or documents filed were scrutinized or assessed by the Tews in its preparation, there
was no evidence suggesting it was an accident that it was provided and filed. What the Tews did in the early stages should be distinguished from what may have later come to light. In their brief, the Tews reference some information as what “[t]he- 14

-

Tews learned, long after this litigation began.” Specifically, the Tews maintain
tha t they only learned afterward that large blocks of shares were being purchased by insiders at ED&F , who then fraudulently cycled those shares between multiple fund accounts on the dividend date and manipulated the accounts to hide this activity. Even if t he Tews did not intend to participate in the fraudulent activity, they intended to execute the documents. The Tews may have later learned that the
water in the SKAT pool , so to speak, was contaminated ; however, it was no accident that they chose to dive i nto that pool in the beginning

.

Secondly, the complaints by SKAT allege d loss of use of money due
to this fraudulent tax scheme. In a creative discussion of fiat money and how
Danish K roner is not backed by gold or any commodity, the Tews assert that th e monetary damages SKAT sought in its filings constitute d loss of use of “ tangible property ,” as defined by each of the policies.

This raises an interesting discussion as to whether money is tangible property

. Several courts in other states have largely held that it is not

. 3 We have not found, nor ha s any party referred us to , any Kentucky case law which directly
address es whether money constitutes tangible property. However, the federal

3 See, e.g. , Mack v. Nationwide Mut. Fire Ins. Co. , 517 S. E .2d 839 (Ga. Ct. App. 1999); Travelers Indem

. Co. of Am

. v. Jim Coleman Auto

. of Columbia, LLC , 236 F. Supp. 2d 513 (D. Md. 2002); Snug Harbor, Ltd. v. Zurich Ins

. , 968 F.2d 538 (5th Cir. 1992) ; Johnson v. Amica Mu t. Ins. Co. , 733 A.2d 977 (Me. 1999); Walker v. St ate Farm Fire and Cas. Co ., 569 N.W.2d 542 (Minn. Ct. App. 1997).- 15

-

district court for the Eastern District of Kentucky, called to determine coverage and/or any duty to defend the Tews on a separate claim against a different
insurance carrier , did a thorough analysis of this very argument

. Travelers Indem. Co. of Am. v. Tew , No. 5:20

- c v - 292

- JMH, 2021 WL 5380944 , at *5 (E.D. Ky. Nov. 17, 2021)

.

Having reviewed these policies and briefs before us , we do not believe we could state our view any better than what was stated therein:

[M]oney is not tangible property. 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 transferred electronically, which unquestionably makes money intangible. That money may also come in a physical form, such as a United States Dollar, or in this case, a Danish Kroner, is inconsequential regarding whether money is tangible property 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 tangible property, there was no loss of tangible property triggering [the insurance company’s] d uty to defend and, thus, no breach of that duty entitling [the Tews] to either defense costs or damages. Travelers Indem. Co. of Am. v . Tew , No. 21

- 6129 , 2022 WL 3696676 , at *1

- 2 (6 th
Cir. Aug. 26, 2022) ( quoting Travelers Indem. Co. of Am. v. Tew , 2021 WL
5380944 , at * 5 ).- 16

- We agree and conclude that the damages alleged by SKAT did not implicate either of the policies , as there simply was no loss of tangible property. The alleged conversion of refunds in this case resulted in an intangible economic
l oss, rather than a loss of use of tangible property.

The insurers both make further arguments pertaining to the various exclusions from coverage under the respective policies. The Kentucky Supreme
Court has held that if an event does not fall within the terms of the coverage, then
there is no need to determi ne whether the exclusions apply because coverage is already denied. Cincinnati , 306 S.W.3d at 78 n.35 (Ky. 2010) (citation omitted) (“[A] court need not consider the applicability of an exclusion if there is no initial grant of coverage under the policy.” ).

The Tews make further arguments pertaining to the “occurrence” period of the KFB Homeowner’s P olicy and whether there would be any coverage owed if there was property damage that occurred during the policy period ( even though that policy was not in e ffect until three years after the alleged acts )

. Having already concluded that the loss of money alleged by SKAT was not a loss of tangible property, so as to invoke property damage coverage, we need not address
th at a rgument either

. As a matter of law, the policies did not cover the SKAT litigation and the insurance companies had no duty to defend o r indemnify the
Tews.- 17

- The trial court found the same
. Specifically, the court found no cause
of action that would constitute an “occurrence” under either po licy and found no

“ property damage ” occurred, as defined in the A cuity P olicy

. A s to th e KFB
Homeowner’s P olicy, the loss of use of money would not constitute “ damage to tangible property .” W e hereby affirm the rulings of the Woodford Circuit Court, finding there was no disputed material issue of fact. The Woodford Circuit Court properly granted summary judgment, finding the insurance companies’ policies did

not cover any portion of t he SKAT litigation

.

ALL CONCUR.

BRIEF S FOR APPELLANT S : Justin S. Peterson Kellie M. Collins Taylor M. Shepherd Lexington , Kentucky BRIEF FOR APPELLEE ACUITY , A MUTUAL INSURANCE COMPANY : Jason S. Morgan Betsy R. Catron Lexington , Kentucky

BRIEF FOR APPELLEE KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY : R. Craig Reinhardt Lexington, Kentucky