RENDERED: MAY 7, 2021; 10:00 A.M.

NOT TO BE PUBLISHED

Commonwealth of Kentucky

Court of Appeals

NO. 2019-CA-1675-MR

KENNETH ALVIN O’NEIL AND 

KENTUCKY PLANNING PARTNERS 

APPELLANTS 

v. 

APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE ANN BAILEY SMITH, JUDGE

ACTION NO. 19-CI-000214 

DALE RAE HUTCHENS, 

PERSONALLY AND AS GUARDIAN 

FOR ADAM HAHN HUTCHENS; 

AND JOHN HANCOCK LIFE 

INSURANCE COMPANY (U.S.A.) 

APPELLEES 

AND

NO. 2019-CA-1683-MR

JOHN HANCOCK LIFE INSURANCE 

COMPANY (U.S.A.) 

APPELLANT 

v. 

APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE ANN BAILEY SMITH, JUDGE

ACTION NO. 19-CI-000214 
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DALE RAE HUTCHENS, 

PERSONALLY AND AS GUARDIAN 

FOR ADAM HAHN HUTCHENS

APPELLEES 

OPINION

AFFIRMING

**   **  **

BEFORE: CLAYTON, CHIEF JUDGE; ACREE AND TAYLOR, JUDGES.

TAYLOR, JUDGE: Kenneth Alvin O’Neil and Kentucky Planning Partners

(Planning Partners) bring Appeal No. 2019-CA-1675-MR and John Hancock Life 

Insurance Company (John Hancock) brings Appeal No. 2019-CA-1683-MR from 

an Opinion and Order of the Jefferson Circuit Court denying O’Neil’s, Planning 

Partners’, and John Hancock’s motions to dismiss and compel arbitration. We 

affirm Appeal Nos. 2019-CA-1675-MR and 2019-CA-1683-MR.

BACKGROUND

On October 18, 2017, James Hutchens applied for term life insurance 

in the amount of two million dollars and temporary life insurance in the amount of 

one million dollars with John Hancock. James executed several documents related 

to his application for life insurance with John Hancock, including a document 

entitled Account Holder Acknowledgement. The Account Holder 

Acknowledgment was signed by James and by O’Neil, who served as John 

Hancock’s agent throughout the application process. Importantly herein, the 
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Account Holder Acknowledgement included an arbitration provision. James also 

tendered two months of premium payments at the time.

On November 28, 2017, James suddenly passed away from a cardiovascular event. James had designated Dale Rae Hutchens and Adam Hahn 

Hutchens (collectively referred to as the Hutchens) as beneficiaries of the life 

insurance with John Hancock. Upon James’ death, the Hutchens filed a claim with 

John Hancock for the proceeds of the two-million-dollar term life insurance policy. 

John Hancock, however, only paid one million dollars to the Hutchens under the 

temporary life insurance issued to James. John Hancock maintained that it had 

neither approved the application for nor issued the term life insurance policy of 

two million dollars to James. Rather, at the time of James’ death, John Hancock 

asserted that James was only covered by the temporary life insurance in the amount 

of one million dollars.

As a result, the Hutchens filed a complaint in the Jefferson Circuit 

Court against John Hancock, O’Neil, and Kentucky Planning Partners.1 In the 

Complaint, the Hutchens alleged breach of contract, common law bad faith, unjust 

enrichment, negligence and violation of Kentucky Revised Statutes (KRS) 304.12-

230, KRS 304.12-235, and KRS 304.12-010. In particular, the Hutchens claimed:

 

1 Kentucky Planning Partners, LLC, is an insurance agency, and one of its two members is 

Kenneth Alvin O’Neil.
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Claims for Relief

A. John Hancock.

i. Breach of Contract.

35. Mr. Hutchens and John Hancock had an enforceable 

agreement for the payment of $2 million in life insurance 

benefits to Plaintiffs as his Beneficiaries.

36. Plaintiffs were the named, intended, and contractual 

third-party beneficiaries of the $2 million life insurance 

coverage.

37. John Hancock breached its contractual obligations. 

By way of example, and without limitation, John 

Hancock:

a. failed to timely issue payment of the life 

insurance coverage.

b. failed to issue full-payment of the life 

insurance coverage.

c. failed to pay the Acc. Benefit.

d. failed to comply with applicable 

Kentucky insurance laws and regulations 

incorporated as contractual terms.

38. As a direct and proximate result, Plaintiffs have been 

damaged by John Hancock’s breach, thereby entitling 

them to seek and to receive all available and appropriate 

relief.

. . . .

ii. Violation of KRS 304.12-230 (“UCSPA”).
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40. John Hancock is subject to Kentucky’s insurance 

laws and regulations, including KRS 304.12-230 –

Kentucky’s Unfair Claims Settlement Practices Act 

(“UCSPA”).

41. With respect to Mr. Hutchens’ Application and to 

Plaintiffs’ claim for insurance benefits, John Hancock 

failed to comply with the UCSPA. John Hancock’s 

violation has continued unabated. By way of example 

and without limitation, John Hancock:

a. misrepresented that the life insurance 

coverage had not been approved and issued.

b. misrepresented that only half of the life 

insurance coverage was payable.

c. misrepresented by omission the Acc. 

Benefits due and payable.

d. failed to acknowledge and act with 

reasonable promptness with respect to the 

Plaintiffs’ claims.

e. failed to conduct a reasonable 

investigation of Plaintiffs’ claims, including 

not investigating the Acc. Benefit.

f. failed to attempt in good faith to resolve 

Plaintiffs’ claims where liability was

reasonably clear – instead, refusing to 

release documents.

g. compelled Plaintiffs to file a lawsuit in 

order to recover the unpaid life insurance 

coverage and the Acc. Benefit coverage, 

including referring Plaintiffs’ claims to its 

in-house legal department and then to 

outside legal counsel.
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42. John Hancock’s actions were and continue to be 

without a reasonable basis and are indicative of a reckless 

disregard for Plaintiffs rights as Beneficiaries.

43. As a direct and proximate result, Plaintiffs have been 

damaged by John Hancock’s violations of KRS 304.12-

230, thereby entitling them to seek and to receive all 

appropriate relief.

. . . .

iii. Common Law Bad Faith.

45. As a party to the Application, including the life 

insurance coverage and Acc. Benefit, John Hancock 

owed a common law duty of good faith 

to Plaintiffs as the Beneficiaries.

46. John Hancock breached its duty of good faith. 

John Hancock’s breach has continued unabated. By way 

of example and without limitation, John Hancock:

a. misrepresented that the life insurance 

coverage had not been approved and 

issued.

b. misrepresented that only half of the 

life insurance coverage was payable.

c. misrepresented by omission the Acc. 

Benefits due and payable.

d. failed to acknowledge and act with 

reasonable promptness with respect to 

the Plaintiffs’ claims.

e. failed to conduct a reasonable 

investigation of Plaintiffs’ claims, 

including not investigating the Acc. 

Benefit.
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f. failed to attempt in good faith to 

resolve Plaintiffs’ claims where liability 

was reasonably clear – instead, refusing 

to release documents.

g. compelled Plaintiffs to file a lawsuit 

in order to recover the unpaid life 

insurance coverage and the Acc. Benefit 

coverage, including referring Plaintiffs’

claims to its in-house legal department 

and then to outside legal counsel.

47. John Hancock did not have a reasonable, legitimate, 

or arguable reason for its actions. John Hancock had 

actual knowledge that it lacked a legitimate or arguable 

reason for its actions.

48. John Hancock’s actions were willful and with 

reckless disregard to Plaintiffs’ rights as Beneficiaries 

and under applicable Kentucky insurance laws and 

regulations.

. . . .

iv. Violation of KRS 304.12-235.

51. Pursuant to KRS 304.12-235(1), John Hancock was 

obligated to remit the insurance proceeds within 30-days

of notice and proof of Plaintiffs’ claim.

52. Pursuant to KRS 304.12-235(2), for any claims paid 

after the 30-day deadline, the statute requires John 

Hancock to remit interest calculated at 12% per annum.

53. Pursuant to KRS 304.12-235(3), John Hancock is 

further obligated to reimburse Plaintiffs for their 

attorneys’ fees incurred in collecting the unpaid interest 

and insurance proceeds.
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54. John Hancock was on notice and in receipt of proof 

of Plaintiffs’ claim, for the life insurance coverage and 

Acc. Benefit, no later than November 2017 – making the 

proceeds due and payable within 30 days thereafter.

55. John Hancock did not comply with the statutory 

requirement to timely remit the insurance proceeds. By 

way of example, and without limitation, John Hancock:

a. delayed payment of 1⁄2 the insurance 

proceeds – $1 million – until the following 

June 2018 but failed to remit the statutory 

12% interest.

b. failed to remit the balance of the 

insurance proceeds – $1 million, with the 

corresponding statutory 12% continuing 

to accrue.

c. caused Plaintiffs to incur attorneys’

fees and expenses to recover the unpaid 

insurance proceeds and the unpaid 

interest.

. . . .

v. Unjust Enrichment.

57. Mr. Hutchens conferred a benefit on John 

Hancock when he remitted premiums, and that 

John Hancock accepted, for the $2 million in life 

insurance coverage.

58. Upon Mr. Hutchens’ death, John Hancock 

failed to remit the full $2 million, remitting only 

half of the coverage while retaining the full 

premium paid by Mr. Hutchens.

59. The $1 million in unpaid coverage is a benefit 

that was conferred on John Hancock at Mr. 
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Hutchens’, and by extension the Plaintiffs as his 

named Beneficiaries, expense.

60. John Hancock’s retention of the $1 million in 

promised life insurance coverage is inequitable as 

it deprives the Plaintiffs of the benefit conferred by 

John Hancock’s acceptance and retention of the 

insurance premiums.

. . . .

vi. Negligence.

62. As the insurance company involved in Mr. 

Hutchens’ application for insurance coverage, John 

Hancock owed Mr. Hutchens a duty to ensure its agents: 

(i) complied with Kentucky’s insurance laws and 

regulations; and (ii) did not make any misrepresentations.

63. John Hancock breached its duties. The breach 

continues unabated. By way of example, without 

limitations, John Hancock:

a. failed to ensure its agents – specifically 

KPP – were licensed and appointed in

Kentucky to act on its behalf.

b. allowed its agents to represent to Mr. 

Hutchens that the $2 million in life 

insurance had been approved and issued.

64. As a direct and proximate result, Plaintiffs have been 

damaged by John Hancock’s negligence, thereby 

entitling them to seek and to receive all appropriate 

relief.

. . . .
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vii. Punitive.

66. John Hancock’s actions were committed with the 

requisite mind set so as to entitle Plaintiffs to an award of 

punitive damages under Kentucky statutory and common 

law.

B. O’Neil and KPP.

i. Negligence.

67. O’Neil and [Kentucky Planning Partners (KPP)]

owed Mr. Hutchens a statutory and common law duty in 

the solicitation and sale of the $2 million life insurance 

coverage with John Hancock.

68. O’Neil and KPP breached their respective duty to 

Mr. Hutchens, and by extension the Plaintiffs as his 

named Beneficiaries. The breach has continued unabated. 

By way of example, and without limitation, O’Neil and 

KPP:

a. failed to timely deliver the life insurance 

policy to Mr. Hutchens.

b. failed to timely process the Application 

and corresponding forms.

c. failed to accurately advise Mr. Hutchens 

concerning the status of the Application.

69. As a direct and proximate result, Plaintiffs have been 

damaged by O’Neil’s and KPP’s negligence, thereby 

entitling them to seek and to receive all appropriate 

relief.

. . . .

ii. Misrepresentation.
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71. O’Neil and KPP made material representations to 

Mr. Hutchens concerning the status of his Application 

that, based on John Hancock’s subsequent refusal to pay 

the Plaintiffs’ claims, were false.

72. O’Neil and KPP recklessly informed Mr. Hutchens 

the insurance coverage had been approved and issued as 

applied.

73. O’Neil’s and KPP’s representations were made with 

the intent of obtaining Mr. Hutchens’ reliance.

74. Mr. Hutchens relied on O’Neil’s and KPP’s 

representations, and as a result was damaged by John 

Hancock’s subsequent refusal to pay Plaintiffs the entire 

$2 million in life insurance coverage.

. . . .

C. John Hancock, O’Neil and KPP.

i. Violation of KRS 304.12-010.

77. Kentucky’s insurance code prohibits unfair and 

deceptive insurance practices based on the following 

statutory language.

No person shall engage in this state in 

any practice which is prohibited in this 

subtitle, or which is defined therein as, or 

determined pursuant thereto to be, an unfair 

method of competition or any unfair or 

deceptive act or practice in the business of 

insurance.

KRS 304.12-010.

78. John Hancock’s, O’Neil’s, and KPP’s

(“Defendants”) individual and collective actions in the 

solicitation and issuance of the life insurance coverage 
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were unfair and deceptive. By way of example, 

Defendants:

a. misrepresented that the Application 

would be processed timely and with an

intended effective date of October 12, 

2017.

b. misrepresented that the insurance 

coverage had been approved and issued 

as applied.

79. As a direct and proximate result, Plaintiffs have been 

damaged by Defendants’ individual and collective 

actions, thereby entitling them to seek and to receive all 

appropriate relief.

Complaint at 6-14.

John Hancock, O’Neil, and Planning Partners filed answers and 

motions to dismiss and compel arbitration. In the motions, it was argued that the 

Hutchens’ claims were subject to arbitration under the arbitration provision 

contained in the Account Holder Acknowledgement executed by James. In their 

response, the Hutchens maintain that KRS 417.050(2) prohibited such a mandatory 

arbitration provision as to insurance contracts. The Hutchens pointed out that this 

statutory prohibition (KRS 417.050(2)) against arbitration was not preempted by 

the Federal Arbitration Act (FAA) by operation of the McCarran-Ferguson Act.

In an October 8, 2019, opinion and order, the circuit court denied the 

motions to dismiss and compel arbitration. The circuit court reasoned:
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This is an action on an application for an insurance 

policy on the life of James Hutchens which [Hutchens] 

claims ripened into an insurance contract that the 

Defendant John Hancock breached by failing to pay the 

face amount plus an accelerated benefit rider after Mr. 

Hutchens died. All defendants have filed motions to 

dismiss pursuant to CR [Kentucky Rules of Civil 

Procedure] 12.02(f), claiming that an arbitration 

agreement James Hutchens signed at the time of 

application requires that the dispute by submitted to 

binding arbitration pursuant to The Federal Arbitration 

Act (“FAA”), 9 [United States Code (U.S.C.)] § 1 et seq. 

The parties have filed briefs, the Court has carefully 

considered the facts and law contained therein and 

resolved the instant motion by applying Kentucky’s wellknown standard for motions to dismiss. Being 

sufficiently advised, the Court DENIES the defendants’

motion to compel arbitration, finding, first, that 

construing the allegations in the complaint in a light most 

favorable to the plaintiff, the alleged arbitration 

agreement is unenforceable pursuant to KRS 417.050(2) 

because the agreement pertains to an insurance contract. 

Second, the Court finds that a factual issue exists 

concerning whether the form upon which the purported 

agreement is contained was ever filed with and approved 

by the insurance commissioner. If the commissioner did 

not approve the form, the agreement is void.

October 8, 2019, opinion and order at 1-2 (citations and footnotes omitted). These 

interlocutory appeals follow.2

 

2 An interlocutory appeal is permitted from an order denying a motion to compel arbitration. 

Kentucky Revised Statutes (KRS) 417.220(1)(a); JP Morgan Chase Bank, N.A. v. Bluegrass 

Powerboats, 424 S.W.3d 902, 908 (Ky. 2014).
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ISSUES PRESENTED

In both appeals (Appeal Nos. 2019-CA-1683-MR and 2019-CA-1675-

MR), John Hancock, O’Neil and Planning Partners (collectively referred to as 

appellants) contend that the circuit court erred by determining that arbitration was 

barred by operation of KRS 417.050(2). In particular, appellants argue that the 

arbitration provision in the Account Holder Acknowledgement is enforceable 

under the FAA and not barred by KRS 417.050(2). In support thereof, appellants 

maintain that KRS 417.050(2) only bars an arbitration provision in an insurance 

contract and that no insurance contract existed between John Hancock and James. 

John Hancock points out that it had not issued the term life insurance of two 

million dollars at the time of James’ death. In fact, John Hancock states that it was 

still in the process of reviewing James’ application for the term life insurance when 

James died. Thus, according to appellants, no insurance contract or policy existed, 

thus rendering KRS 417.050(2) inapplicable. Alternatively, appellants argue that 

the arbitration provision is governed by the FAA, and the FAA preempts state law 

to the contrary, including KRS 417.050(2).3

STANDARD OF REVIEW

It is well-established that a person seeking to compel arbitration must 

demonstrate that a valid arbitration agreement exists between the parties. Ping v. 

 

3 The Federal Arbitration Act is codified in 9 U.S.C. § 1, et seq.
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Beverly Enters., Inc., 376 S.W.3d 581, 590 (Ky. 2012); Golden Gate Nat’l Senior 

Care, LLC. v. Rucker, 588 S.W.3d 868, 871 (Ky. App. 2019). The existence of an 

agreement looks to state law rules for contract formation. Ping, 376 S.W.3d at 

590. And, as an appellate court, the review of a trial court’s interpretation and 

construction of a contract is a matter of law, and we thus apply a de novo standard 

of review. Lynch v. Claims Mgmt. Corp., 306 S.W.3d 93, 96 (Ky. App. 2010). 

Finally, we review the circuit court’s findings of fact, if any, under the clearly 

erroneous standard. N. Fork Collieries, LLC v. Hall, 322 S.W.3d 98, 102 (Ky. 

2010); CR 52.01.

ANALYSIS

In this case, the arbitration provision found in the Account Holder 

Acknowledgement provides:

ARBITRATION AGREEMENT: With respect to any 

disputes that might arise out of this transaction, LPL 

Insurance Associates, Inc. and its affiliates, its appointed 

insurance agents, and the individual whose signature 

appears below are giving up the right to sue each other in 

court, including the right to a trial by jury, except as 

provided by the rules of arbitration forum in which a 

claim is filed; such rules being incorporated herein by 

reference.

Account Holder Acknowledgement at 1. To determine whether the above 

arbitration provision is valid and enforceable, we must initially determine whether 
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KRS 417.050(2) is applicable, and if so, whether the FAA preempts its application

herein. Our analysis shall proceed accordingly.

KRS 417.050 reads, in relevant part:

A written agreement to submit any existing controversy 

to arbitration or a provision in written contract to submit 

to arbitration any controversy thereafter arising between 

the parties is valid, enforceable, and irrevocable, save 

upon such grounds as exist at law for the revocation of 

any contract. This chapter does not apply to:

. . . . 

(2) Insurance contracts. Nothing in this subsection shall 

be deemed to invalidate or render unenforceable 

contractual arbitration provisions between two (2) or 

more insurers, including reinsurers[.]

Under KRS 417.050(2), an arbitration agreement or arbitration provision in an 

insurance contract is invalid and unenforceable unless such arbitration provision 

is between insurers. Scott v. Louisville Bedding Co., 404 S.W.3d 870, 877-78 (Ky. 

App. 2013). And, the term “insurance” is defined as a “contract whereby one 

undertakes to pay or indemnify another as to loss 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.” 

KRS 304.1-030. Herein, we are concerned with the term “insurance contracts” as 

used in KRS 417.050(2) and whether an application for insurance comes within its 

ambit.
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Appellants advance a narrow interpretation of the term “insurance 

contracts” and believe it encompasses only issued insurance policies. Hence, 

appellants argue that KRS 417.050(2) does not apply to an application for 

insurance. We reject such overly narrow and technical interpretation. 

When interpreting a statute, the Court is primarily guided by 

legislative intent or purpose of such statute. See Livingood v. Transfreight, LLC, 

467 S.W.3d 249, 256 (Ky. 2015). A legislative purpose of KRS 417.050(2) has 

been recognized as regulating the business of insurance. Scott, 404 S.W.3d at 880. 

This legislative purpose would be undoubtedly frustrated by appellants’ proposed 

narrow interpretation of KRS 417.050(2), as an insurance company would be free 

to impose strict arbitration as to any issue related to the insurance application. 

Also, we think an application for insurance can be viewed as being akin to an offer 

under contract law; thus, such an application is inextricably interwoven with every

insurance contract. For these reasons, applications for insurance certainly come 

within the purview of the term “insurance contracts” as utilized in KRS 

417.050(2). Accordingly, we interpret KRS 417.050(2) as being equally 

applicable to insurance applications as it is to issued insurance policies or 

insurance contracts. 

In this case, the arbitration provision was contained in the Account 

Holder Acknowledgement. The Account Holder Acknowledgement was executed 
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with other insurance application forms and specifically stated that it applied to 

“any disputes that might arise out of this transaction.” As the arbitration provision 

was contained in an insurance application form, we are of the opinion that the 

arbitration provision comes within the scope of KRS 417.050(2) and is rendered 

unenforceable thereby. And, although the term life insurance policy may not have 

been issued to James at the time of his death, it is uncontroverted that James was 

covered by temporary life insurance issued by John Hancock and in full force at 

the time of James’ death.

As to the purported preemption of KRS 417.050(2) by the FAA, our 

Court has specifically held that the McCarran-Ferguson Act precludes the FAA 

from preempting KRS 417.050(2).4 Scott, 404 S.W.3d at 877-80. Thus, the FAA 

does not preempt KRS 417.050(2). 

Our decision that KRS 417.050(2) renders the arbitration provision 

contained in the Account Holder Acknowledgement unenforceable is one of law

and based upon undisputed facts. Consequently, any alleged error committed by 

the circuit court upon reviewing this matter under CR 12.02(f) is merely harmless. 

We view any remaining contentions of error to be without error or 

moot.

 

4

15 U.S.C. § 1012(a) and (b).
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To summarize, we conclude that the arbitration provision found in the 

Account Holder Acknowledgement is invalid and unenforceable per KRS 

417.050(2); hence, the circuit court properly denied appellants’ motions to compel 

arbitration.

For the foregoing reasons, the Opinion and Order of the Jefferson 

Circuit Court is affirmed.

ALL CONCUR.
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BRIEFS FOR APPELLANTS 

KENNETH ALVIN O’NEIL AND 

KENTUCKY PLANNING 

PARTNERS:

Andrew J. Dorman

Cleveland, Ohio

Danielle J. Lewis

Andrew Pettijohn

Louisville, Kentucky

BRIEFS FOR APPELLANTS JOHN 

HANCOCK LIFE INSURANCE 

COMPANY (U.S.A.):

Steven P. DelMauro

Colleen M. Duffy

Tinton Falls, New Jersey

Jill F. Endicott

Jeremy S. Rogers

Louisville, Kentucky

ORAL ARGUMENT FOR 

APPELLANTS KENNETH ALVIN 

O’NEIL AND KENTUCKY 

PLANNING PARTNERS:

Danielle J. Lewis

Louisville, Kentucky

ORAL ARGUMENT FOR 

APPELLANTS JOHN HANCOCK 

LIFE INSURANCE COMPANY 

(U.S.A.):

Colleen M. Duffy

Tinton Falls, New Jersey

BRIEFS FOR APPELLEE DALE 

RAE HUTCHENS, PERSONALLY 

AND AS GUARDIAN FOR ADAM 

HAHN HUTCHENS:

Michael D. Grabhorn

Andrew M. Grabhorn

Louisville, Kentucky

ORAL ARGUMENT FOR 

APPELLEE DALE RAE 

HUTCHENS, PERSONALLY AND 

AS GUARDIAN FOR ADAM HAHN 

HUTCHENS:

Michael D. Grabhorn

Louisville, Kentucky
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Jill F. Endicott

Jeremy S. Rogers

Louisville, Kentucky