Court Opinion

ID: 8374822
Source: CourtListenerOpinion
Date Created: 2022-10-20 15:05:27.933397+00
Date Added: 2024-06-11T16:46:24.156095
License: Public Domain

RENDERED: OCTOBER 20, 2022
                                                             TO BE PUBLISHED

                  Supreme Court of Kentucky
                                   2020-SC-0260-DG

ASHLAND HOSPITAL CORPORATION                                           APPELLANTS
D/B/A KING’S DAUGHTERS MEDICAL
CENTER; JOHN VAN DEREN, III, M.D.;
RICHARD E. PAULUS, M.D.; SRIHARSHA
VELURY, M.D.; AND KENTUCKY HEART
INSTITUTE, INC.

                       ON REVIEW FROM COURT OF APPEALS
                       NOS. 2016-CA-0372 AND 2016-CA-0396
                              BOYD CIRCUIT COURT
                                  NO. 15-CI-0070
V.

DARWIN SELECT INSURANCE CO. N/K/A                                       APPELLEES
ALLIED WORLD SURPLUS LINES
INSURANCE CO.; HOMELAND INSURANCE
COMPANY OF NEW YORK

                  OPINION OF THE COURT BY JUSTICE CONLEY

                           REVERSING AND REMANDING

      This case is before the Court on appeal from the Court of Appeals which

determined that Exclusion 15, the prior notice of events exclusion, contained in

the insurance policies applied to deny the coverage sought by the Appellants,

King’s Daughters Medical Center (KDMC),1 for claims made against it.

Consequently, the Court of Appeals also determined the insurance companies

were entitled to recoupment of expenses and remanded back to the trial court

      1   For ease of reference, we refer to all Appellants by KDMC.
for further proceedings. The Appellants moved for discretionary review which

we granted. After reviewing the record and hearing oral arguments, we reverse

the Court of Appeals on both issues. We remand back to the Court of Appeals

to consider the applicability of two other exclusions in the policies which it had

determined were superfluous to consider in light of its ruling as to Exclusion

15. The issue of recoupment was never properly before the Court of Appeals

thus it lacked, and continues to lack, jurisdiction to rule on that matter even

on remand.

                         I.     Facts and Procedural Posture
      There are three insurance policies between as many insurance

companies involved in this case. The first is the Directors and Officers policy

(D&O policy) issued by Darwin National Insurance Company (Darwin). The

second is the professional liability policy issued by Darwin Select (Allied), a

related entity to Darwin. Lastly is the excess liability policy issued by

Homeland Insurance Company of New York (Homeland). Although the timeline

of events spans three policy periods, KDMC sought professional liability and

excess liability coverage from Allied and Homeland only for the policy period of

2012-2013.

      In July 2011, KDMC was served a subpoena duces tecum by the United

States Department of Justice pursuant to the Health Insurance Portability and

Accountability Act of 1996. The subpoena sought a host of documents

generally pertaining to all medical records, files, and communications related to

cardiac patients, including prior review proceedings, revocations of hospital

                                         2
privileges, disciplinary proceedings, and medical malpractice complaints of any

kind, going back to 2006, in order to investigate potential federal health care

offenses. On December 30, 2011, KDMC notified Darwin of this subpoena and

sought coverage under its D&O policy. Darwin granted coverage.

      On May 14, 2013, KDMC’s insurance broker sent a letter notifying Allied

of the subpoena and the continuing federal investigation. On June 12, 2013,

KDMC received a litigation hold letter from counsel said to represent at least

500 potential claimants regarding cardiac procedures. On June 19, that letter

was forwarded to Allied. On July 2, 2013, Allied responded that neither the

May 14 nor June 19 letters constituted proper notice of circumstances that

might give rise to a claim. In making that assessment, Allied noted that in

order to properly constitute a notice of circumstances that could give rise to a

claim, said notice must contain

      the time, date and place of the Occurrence, Medical Professional
      Incident or Claim; a description of the Occurrence, Medical
      Incident or Claim; a description of the injury or damage which
      has allegedly resulted or may result from such Occurrence,
      Medical Professional Incident or Claim; how and when the
      Insured first became aware of such Occurrence, Medical
      Professional Incident or Claim; the names, addresses and ages of
      the injured parties; and the names and addresses of any
      witnesses.

Allied then stated the letters “do not refer to any of the specific circumstances

that require prompt notice of ‘any circumstances that could give rise to a

Claim[.]’” Allied did note, however, that the subpoena attached to KDMC’s May

14, 2013, letter was also submitted to Darwin in 2011 when KDMC sought

coverage under its D&O policy. Accordingly, Allied stated Exclusion 15 was

                                        3
implicated. This exclusion states that the Allied policy for 2012-13 would not

apply to a claim “based on, arising out of, directly or indirectly resulting from,

in consequence of, or in any way involving . . . any facts, matters, events, suits

or demands notified or reported to, or in accordance with, any policy of

insurance or policy or program of self-insurance in effect prior to October 16,

2012.” Thus, Allied’s position was that Exclusion 15 of the professional liability

policy in 2013 potentially applied to deny coverage because KDMC had invoked

its D&O policy with Darwin in 2011. As we shall see, Allied eventually

embraced this understanding of the policy explicitly.

      On September 30, 2013, the first medical malpractice claims against

KDMC generally alleging unnecessary cardiac operations and lack of informed

consent, among other allegations, were filed in Boyd Circuit Court. The same

day, KDMC forwarded the complaints to Allied and Homeland. On November

20, 2013, Allied agreed to defend the Cardiac Litigation under a reservation of

rights; specifically, that the 2011 invocation of the D&O policy constituted

notice to a prior insurer of facts, matters or events giving rise to a claim. Allied

invoked Exclusion 15, as well as two other exclusions, numbers 10 (intentional

acts exclusion) and 16 (government-related claims exclusion).

      At this juncture it is important to note the nature of these policies. They

were annually renewed and renegotiated in order for applicable coverage and

premiums to be adjusted. None of the insurers were bound to continue

coverage beyond the time allotted in any one policy. Yet and still, both Allied

and Homeland agreed to insure KDMC for the third policy period covering

                                         4
October 16, 2012, to October 1, 2013. Both insurers concede that they had

knowledge of the 2011 subpoena during the negotiation period for that policy

period. This notice was sent by KDMC’s insurance broker on August 28, 2012,

to the insurers’ application department for the specific purpose of “full

disclosure” in negotiating the new policies. With this notice, Homeland even

agreed to increase its excess liability policy from $10 million to $20 million for

the 2012-13 period.

      In May 2014, the DOJ investigation concluded with KDMC agreeing to

pay approximately $40 million in fines, but KDMC conceded no liability or

wrongdoing. Although this was a settlement in a sense, it was not a judicial

settlement of any civil claims.2 No judge signed in approval of the settlement

and the language of the settlement itself only indicates that the United States

has a basis for civil claims, but the settlement was meant to prevent litigation.

In 2015, the Appellants filed a declaratory action in Boyd Circuit Court to

determine their rights and coverage under the 2012-13 policies of Allied and

Homeland for the Cardiac Litigation that first began in September 2013. In

November 2015, the circuit court granted summary judgment to the hospital

finding none of the three exclusions asserted by the insurers applied.

      As to Exclusion 15, the circuit court ruled “the insurers are attempting

to label the letter and the subpoena as something that they are not. There is

      2  The Court of Appeals apparently believed otherwise by stating the United
States had asserted civil claims against KDMC. This statement misconstrues the
record. No party has provided a copy of a complaint filed in a federal District Court
alleging civil claims against KDMC by the United States, nor has any party provided a
case number citation if one ever existed.
                                          5
nothing contained therein that describes any supposed wrongful conduct, let

alone any allegation of performing unnecessary cardiac procedures.” The

summary judgment was silent as to the issue of recoupment and for an

obvious reason—the issue had not even been briefed. It was never before the

trial court.

      The insurers appealed. In a unanimous opinion, the Court of Appeals

concluded that Exclusion 15 did apply because

      KDMC had previously secured coverage under its D&O policy with
      National [Darwin] regarding the DOJ investigation. KDMC’s D&O
      policy qualified as ‘any policy of insurance in effect prior to the
      Inception Date’ of KDMC’s Umbrella Policies with Darwin [Allied].
      And, judging from the allegations set forth above in the various
      complaints filed in In re: Cardiac Litigation, the claims asserted in
      that mass of litigation unavoidably fell within the remaining ambit
      of this exclusion.

In other words, according to the Court of Appeals, the 2011 subpoena had

identified who the DOJ was investigating and why it was investigating.

However, it was years later, by virtue of the May 2014 settlement and the

September 2013 civil complaint, that the what, where, and when were

supplied. Or, using the contractual language, the facts, matters, and events

were revealed which the hundreds of litigants in Boyd Circuit Court all

asserted were the “common nexus” linking not only their complaints with one

another but linking the entire Cardiac Litigation with the DOJ investigation.

      The Court of Appeals also addressed and disposed of the three

arguments of KDMC against the application of Exclusion 15. First, KDMC had

argued that the words “any policy of insurance” should be read to only apply to

other professional liability policies. The court rejected that as effectively
                                          6
rewriting the contract. Second, KDMC argued that Allied determined the 2011

subpoena did not constitute notification of circumstances that might give rise

to a claim. The court rejected that on the basis that nothing in the policy

explicitly required notification to be contained in a single communication

therefore, what was eventually revealed in May 2014 about the DOJ’s three-

year investigation is what effectively gave notice. Finally, the court rejected the

arguments of KDMC that the insurers’ position denied the reasonable

expectations of the insured and rendered insurance coverage illusory. The

court noted that the doctrine of reasonable expectations only applies to

ambiguous language in the policy, which KDMC had never argued was an

issue. As to illusory coverage, the court ruled “[c]overage is ‘illusory’ when the

insured cannot foresee any circumstances under which he or she would collect

under a particular policy provision.” In effect, the insurers used Exclusion 15

to “hedge their bets” around what risk they were willing and unwilling to

assume— with any possible litigation stemming from the same facts, matters,

and events of the DOJ investigation being excluded. Indeed, Homeland

specifically argued at oral argument that this was the case when it had agreed

to the 2012-13 policy and increased its limits to $20 million. Notably, however,

nowhere was this specific understanding conveyed to KDMC and Homeland

conceded at oral argument that it was only a “fair inference.”

      Finally, the Court of Appeals ruled that the insurers were entitled to

recoupment of their expenses thus far in defending the Cardiac Litigation

despite acknowledging “[t]he issue of whether Darwin [Allied] and Homeland

                                         7
can seek reimbursement after offering policy limits under a reservation of

rights is not an issue before this Court[.]”

      We granted discretionary review to consider whether Exclusion 15

applies to bar professional liability and excess coverage for the Cardiac

Litigation and whether the Court of Appeals improperly ruled on the issue of

recoupment. We now address the merits of the appeal.

              II.     Standard of Review and Principles of Controlling Law
      This case comes to us from a summary judgment. Summary judgment

should only be granted when “there is no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law.” CR3

56.03. “[T]he proper function of summary judgment is to terminate litigation

when, as a matter of law, it appears that it would be impossible for the

respondent to produce evidence at the trial warranting a judgment in his

favor.” Steelvest, Inc. v. Scansteel Serv. Ctr, Inc., 807 S.W.2d 476, 480 (Ky.

1991). “Because summary judgment does not require findings of fact but only

an examination of the record to determine whether material issues of fact exist,

we generally review the grant of summary judgment without deference to either

the trial court's assessment of the record or its legal conclusions.” Hammons v.

Hammons, 327 S.W.3d 444, 448 (Ky. 2010). Our review therefore is de novo. Id.

      “De novo review extends to the trial court's interpretation of

the insurance contract as a matter of law.” Thomas v. State Farm Fire & Cas.

Co., 626 S.W.3d 504, 506 (Ky. 2021). “Additionally, we adhere to our long-held

      3   Kentucky Rules of Civil Procedure.

                                               8
standard that when we interpret insurance contracts, perceived ambiguities

and uncertainties in the policy terms are generally resolved in favor of the

insured.” Id. at 506-07. This rule of construction favoring coverage, however,

“does not mean that every doubt must be resolved against it and does not

interfere with the rule that the policy must 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). Nonetheless, “[a]s

long as coverage is available under a reasonable interpretation of an

ambiguous clause, the insurer should not escape liability, and the exclusionary

provision addressed herein may be subject to more than one good faith

interpretation.” Id. at 227. An ambiguity may exist either on the face of the

contract, i.e., from the nature of the language itself, or “when a provision is

applied to a particular claim.” Id. The latter is a latent ambiguity that arises

when the contractual terms “are brought in contact with the collateral facts.”

Carroll v. Cave Hill Cemetery Co., 189 S.W. 186, 190 (Ky. 1916). “When

analyzing challenged terms for clarity we note that the terms

of insurance contracts have no technical legal meanings and must be

reasonably interpreted as they would be understood by a lay reader.” Thomas,

626 S.W.3d at 507. Nevertheless, “an insurance company should not be

allowed to collect premiums by stimulating a reasonable expectation of risk

protection in the mind of the consumer, and then hide behind a technical

definition to snatch away the protection which induced the premium payment.”

                                         9
Aetna Cas. & Sur. Co. v. Commonwealth, 179 S.W.3d 830, 837 (Ky. 2005)

(quoting Moore v. Commonwealth Life Ins. Co., 759 S.W.2d 598, 599 (Ky. App.

1988)).

      Moreover, this Court has always “strongly adhered to a policy of

protecting the reasonable expectations of policyholders.” Lewis ex rel. Lewis v.

West American Ins. Co., 927 S.W.2d 829, 833-34 (Ky. 1996). “Although

‘insurance carriers have the right to impose reasonable’ limitations on their

coverage, ‘the question then becomes the reasonableness of the condition as a

limitation on public policy as opposed to one of strict contract considerations

between private parties where no public interest is involved.’” Id. at 834

(quoting Jones v. Bituminous Cas. Corp., 821 S.W.2d 798, 802 (Ky. 1991).

                         III.   Exclusion 15 Does Not Bar Coverage
      Foremost in our consideration is the fact that no one disagrees that by

the May 2014 DOJ settlement, the DOJ had clearly been investigating the

same facts, matters and events from which the Cardiac Litigation also sprang.

That fact, however, was not clear in May 2011 when the subpoena was first

issued nor was it clear in July 2013 when Allied declared that the May 2011

subpoena and accompanying letters did not constitute adequate notice of

circumstances giving rise to a claim. Curiously, the insurers now adopt the

opposite reading of the subpoena and argue it did constitute adequate notice.

Putting on the Janus4 mask, the insurers embraced one reading of the

      4   Janus was a god of ancient Rome, always depicted with two faces.

                                              10
subpoena then, the opposite reading now, whichever is convenient to justify

the denial of coverage.

      The critical facts to this Court are first, that prior to the institution of

legal action in September 2013, the insurers had adopted the position that the

2011 subpoena did not constitute notice of circumstances that might give rise

to a claim. The Court of Appeals surmounted this fact by holding that notice of

circumstances did not have to occur in a single communication from the

insured to insurer but could be developed over time from a multitude of

sources. This ruling, however, is belied by the very denial at issue in this case.

Allied took the position that the subpoena and the letters it was attached to did

not constitute adequate notice because they lacked several critical facts

stipulated by the policy in Section IV(D)(2) (see supra, Allied’s July 2, 2013

letter). The terms of the policy unambiguously required notice “shall include”

the “time, date and place” of the occurrence, incident, or claim; a description of

it; “a description of the injury or damage which has allegedly resulted or may

result from” it; how and when KDMC first became aware of it; and the

identifying information of injured parties and witnesses. We do not doubt that

in general, errors or omissions in notification may require supplementation

and, in that respect, we would agree that notice does not require a single

communication unless the policy specifically disallowed supplementation. But

the Court of Appeals has erred in concluding that notice can be gathered over a

matter of years—that is not a reasonable interpretation of the notice provision

as would be understood by a lay reader. Thomas, 626 S.W.3d at 507.

                                         11
      The policy, by requiring time, date and place of an occurrence, incident,

or claim, required a deal of specificity wholly lacking in a subpoena that sought

a plethora of records between 2006 to 2011. The total responsive

documentation amounted to approximately seven million documents.5

Moreover, nowhere does the subpoena cite a specific incident by reference to a

time, date, or place; nowhere does it give a description of injuries or damages,

much less allege that any injuries or damages had occurred; and it does not in

any way name any injured parties or witnesses.

      Proverbially, hindsight is 20/20. And looking at this case from the

perspective of 2022, the DOJ inarguably was investigating facts, matters, and

circumstances shared by the Cardiac Litigation. But in this instance, hindsight

is obscuring the reasonable interpretation of the language by a lay reader

which sensibly supports the interpretation that the policy contemplates a great

deal of specificity to constitute notice of circumstances giving rise to a claim

that is absent from the subpoena. Because the subpoena did not constitute

adequate notice of circumstances giving rise to a claim in 2011, it cannot be

covered by Exclusion 15 in the professional liability policy and excess policy of

2012-13.

      5  It is worth noting that the subpoena received by KDMC in this case was issued
pursuant to 18 U.S.C. § 3486, and the Supreme Court of the United States has
declared such administrative subpoenas are “analogous to the Grand Jury, which
does not depend on a case or controversy for power to get evidence but can investigate
merely on suspicion that the law is being violated, or even just because it wants
assurance that it is not.” United States v. Morton Salt Co., 338 U.S. 632, 642-43
(1950). It is “a power of inquisition[.]” Id. at 642. As such, wrongful conduct is not a
prerequisite for a subpoena to issue.
                                          12
      This distinction is crucial since the insurers argued at oral argument

that KDMC should have sought professional liability coverage under the 2010-

11 policy. But because all the policies had mirrored language regarding what

information was required to constitute notice of circumstances giving rise to a

claim, we fail to see how KDMC could have reasonably expected to get

professional liability coverage under the 2010-11 policy based on the subpoena

alone. No claim had been made against them in 2011, and the DOJ

investigation would not be concluded until 2014. This also defeats the insurers’

argument in their briefing that they would provide professional liability and

excess coverage for the 2011-12 policy period. No material fact had changed in

that policy period—only the subpoena existed. No one disputes that it did not

state a claim, and it was insufficient under the policy language to be a notice of

circumstances giving rise to a claim by the insurers’ own admission. KDMC

therefore legitimately sought coverage under the 2012-13 policy because that

was the policy in effect when the first claims were made against it in Boyd

Circuit Court.

      Arguably, however, such a conclusion ignores KDMC invoked and

received coverage for the DOJ investigation under its D&O policy. That brings

us to the second dispositive fact in our analysis, which is that both Allied and

Homeland were aware of the subpoena and investigation prior to issuing the

2012-13 insurance policies. Both insurers argue that they issued the policies

only because they believed Exclusion 15’s terms would prohibit coverage for

any claims related to the investigation. But they have failed to point to any

                                       13
documentary evidence that this was in fact their understanding of Exclusion

15 when they issued the policy in October 2012, nor that such an

understanding was communicated to KDMC. At oral argument, Homeland

specifically conceded that this was only a “fair inference.” But KDMC can

respond with its own fair inference in kind, that by informing the insurers of

the subpoena and investigation they expected the policy to cover any potential

claims related to the DOJ investigation and assumed that risk would be

factored into the premium payments.

      True, we do not consider “the policyholder's subjective thought process

regarding his policy[,]” Sparks v. Trustguard Ins. Co., 389 S.W.3d 121, 128 (Ky.

App. 2012), when resolving the reasonable expectations of policy coverage. But

a latent ambiguity has arisen from the application of Exclusion 15 to the facts

of this case, which entail that a) a DOJ subpoena was received in 2011; b)

coverage was provided under a D&O policy for that investigation; c) the

insurers were aware of the subpoena and did not understand it to be adequate

notice of circumstances giving rise to a claim; and d) they nevertheless issued

the liability and excess coverage for 2012-13. The latent ambiguity arises from

the disputed effect notice of the subpoena and investigation had on the

applicability of Exclusion 15 as understood by a lay reader to specifically

prohibit coverage of the Cardiac Litigation.

      Under our rules, not only is the insured’s subjective understanding of

the policy not considered, neither is the insurer’s. What matters is “[a]s long as

coverage is available under a reasonable interpretation of an ambiguous

                                        14
clause, the insurer should not escape liability . . . and [if] it is susceptible to

two interpretations, one favorable to the insured and the other favorable to the

insurer, the former will be adopted.” St. Paul, 870 S.W.2d at 227. Moreover,

“[a]ny limitation on coverage or an exclusion in a policy must be clearly stated

in order to apprise the insured of such limitations.” Id. “[A]n insurance

company should not be allowed to collect premiums by stimulating a

reasonable expectation of risk protection in the mind of the consumer, and

then hide behind a technical definition to snatch away the protection which

induced the premium payment.” Aetna, 179 S.W.3d at 837 (internal quotation

omitted). In this case, the insurers stimulated the expectation of risk protection

by failing to inform KDMC prior to the 2012-13 policies taking effect that they

believed Exclusion 15 specifically applied to any potential claims related to the

DOJ investigation. But having notice, it was incumbent on the insurers to

clearly state in the policy that they would not insure any potential claims

related to the DOJ investigation. Now the insurers wish to hide behind a

sweepingly broad exclusion to elude coverage. A lay reader, knowing these

facts, would reasonably understand the notice to essentially have defeated the

generality of Exclusion 15.

      This also demonstrates the error of the Court of Appeals when it

reasoned “that known liabilities generally are not insurable.” The lower court

quoted LaValley v. Virginia Sur. Co., Inc., 85 F.Supp.2d 740, 744 (N.D. Ohio

2000) (citing Russ and Segalla, Couch on Insurance § 102:7, at p. 102-17 (3rd

ed. 1997)). That is indeed generally true and “where one applies for insurance

                                          15
knowing that a loss has already occurred, conceals this fact, and procures a

policy to be antedated so as to cover the period when the loss occurred, the

policy is void because of such fraud or concealment . . .” § 102:7; see generally,

7 Couch on Ins. § 102:7. But an insurer, “having knowledge of an existing or

potential claim prior to issuing the policy of insurance[,]” may still be held to

provide coverage if, with this knowledge, indicated “the insured will be covered

for such claim in order to obtain the insured's business.” Id. As cited above,

that is precisely the law in Kentucky. Aetna, 179 S.W.3d at 837.

      Looking to our facts, KDMC never tried to conceal the fact of the DOJ

investigation from its insurers. Darwin was notified in December 2011, and

Allied and Homeland were informed in August 2012, during the negotiations

for renewed coverage for October 2012-13. Thus, the general rule that known

liabilities are not insurable is not operable here since first, the 2011 subpoena

does not constitute notice of circumstances giving rise to a claim and therefore

is a known liability only in an abstract sense of the term; and second, the

insurers here, by having knowledge of the investigation but without specifically

informing KDMC that they did not intend to provide coverage for any potential

claims per Exclusion 15, lured KDMC into believing it had obtained coverage

for any potential claim should one be made in the course of the 2012-13 policy

timeframe.

      Therefore, we reverse the Court of Appeals and reinstate the trial court’s

summary judgment as to the inapplicability of Exclusion 15 to bar coverage.

                                        16
       IV.    Court of Appeals Lacked Jurisdiction to Rule on Recoupment
      Finally, we address the issue of recoupment which was not identified as

an issue on appeal before the Court of Appeals nor was it briefed by the parties

before that court. Most importantly, the trial court had not made any final

judgment or order as to recoupment. Yet and still the Court of Appeals issued

its own judgment upon this question even though it acknowledged the issue

was not before it. Where there is no final order on a particular question from

the trial court, an appellate court lacks subject-matter jurisdiction over that

issue. Ky. Const. § 111(2); Erie Ins. Exchange v. Johnson, 647 S.W.3d 198, 204

(Ky. 2022).

      Subject-matter jurisdiction goes to whether a court has “‘power to do

anything at all.’” Commonwealth Health Corp. v. Croslin, 920 S.W.2d 46, 48 (Ky.

1996) (quoting Duncan v. O'Nan, 451 S.W.2d 626, 631 (Ky. 1970)). Thus, a

judgment absent subject-matter jurisdiction is void ab initio. Upper Pond Creek

Volunteer Fire Dept. v. Kinser, 617 S.W.3d 328, 333 (Ky. 2020). We remind the

lower court that

      On every writ of error or appeal, the first and fundamental
      question is that of jurisdiction, first, of this court, and then of the
      court from which the record comes. This question the court is
      bound to ask and answer for itself, even when not otherwise
      suggested, and without respect to the relation of the parties to it.

Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 453 (1900). This

duty stems from the “nature and limits of the judicial power. . . .” Id. “Every

exercise of jurisdiction is original, where the complaint is heard by that

tribunal in the first instance, before any other tribunal is resorted to.” Smith v.

                                         17
Carr, 3 Ky. 305, 3 (Ky. 1809). And since the Kentucky Constitution grants to

the Court of Appeals only an appellate jurisdiction (with an exception not

pertinent here), its ruling upon recoupment absent any final judgment from the

trial court below flouted this constitutional stricture. Id. at 4. The Court of

Appeals is reversed.

                                    V.    Conclusion
      Per unambiguous policy language, the 2011 subpoena did not constitute

notice of circumstances giving rise to a claim. Considering the information

specifically required by the policy to be included in a notice of an occurrence,

incident, or claim, the subpoena simply fails to convey key facts with the

requisite specificity a lay reader would understand to be required, and wholly

omits other facts such as injured persons and witnesses. Moreover, we do not

believe a reasonable interpretation of the policy supports the proposition that

notice could be gathered over multiple years. Instead, a lay reader would

understand that notice is required to be given in a single communication with

some supplementation allowed within a reasonable amount of time in case of

errors or omissions, a circumstance not at issue here.

      Secondly, the insurers, by failing to inform KDMC prior to issuing the

2012-13 policy that they understood Exclusion 15 to specifically bar coverage

for any potential claims related to the DOJ investigation (which at the time had

still not yet been resolved with any specificity), they stimulated the expectation

of risk protection. Because this argument centered upon the effect the notice of

the 2011 subpoena had upon the general language of Exclusion 15 as the

                                         18
parties understood it, constitutes a latent ambiguity. Well-settled rules require

resolution in favor of coverage. Therefore, we hold Exclusion 15 does not bar

coverage and we reverse the Court of Appeals.

       Finally, the Court of Appeals lacked jurisdiction to consider the issue of

recoupment for expenses, and continues to do so upon remand, and we reverse

that ruling as well. We remand back to the Court of Appeals to consider the

applicability of Exclusions 10 and 16 also invoked by the insurers and denied

by the trial court but not considered by the appellate court due to its

adjudication on Exclusion 15.

       Minton, C.J., and Hughes, Keller, VanMeter, Nickell and Conley, JJ.,

sitting. Hughes, Keller, VanMeter, and Nickell, JJ., concurring. Minton, C.J.,

concurring in part and dissenting in part by separate opinion. Lambert, J., not

sitting.

       MINTON, C.J., CONCURS IN PART AND DISSENTS IN PART: I

respectfully dissent. I concur in the majority’s conclusion that the Court of

Appeals lacked jurisdiction to rule on recoupment of legal fees. But I disagree

with the majority’s conclusion that the Prior Notice of Events Exclusion—

Exclusion 15—did not preclude insurance coverage on this record.

       Exclusion 15 to the Darwin professional-liability insurance policy

precludes insurance coverage because Exclusion 15 is unambiguous both

facially and as applied to the claims submitted by King’s Daughters Medical

Center (“KDMC”). Applying the plain text of Exclusion 15 to the record here,

the information contained in the subpoena duces tecum from the Department of

                                        19
Justice (the “DOJ subpoena”) provided ample notice of circumstances that

could give rise to a claim under the liability policies.6 In July 2011, the DOJ

subpoena put KDMC on notice of potential liability under the professional-

liability policies. But, while KDMC sought coverage under its director’s and

officer’s (“D&O”) policy after receiving the DOJ subpoena, it failed to provide

notice of potential claims under the liability policies until 2013. KDMC’s

failure to provide notice of potential claims under the professional-liability

policies falls squarely within the textual limitations of Exclusion 15. As a

result, the portion of the Court of Appeals’ decision finding that Exclusion 15

barred coverage under the liability policies should be affirmed.

      I share the majority’s concern with Allied’s inconsistent positions

regarding whether KDMC’s May 14, 2013, or June 19, 2013, letters constituted

proper notice of circumstances that may give rise to claims. And, as the

majority notes, Allied and Homeland concede that they had

knowledge of the 2011 subpoena during the negotiation period for the 2012–

2013 policy period. But the insurers argue that KDMC engaged in the exact

behavior that Exclusion 15 is designed to prevent. KDMC was fully aware in

2011 of potential professional-liability claims arising from the DOJ’s

investigation of specific doctors during a specific period. The insurers argue

that KDMC metaphorically obtained fire insurance for a building that was

       6 There are two insurance policies at issue in this matter. The first is the

Darwin Select (Allied) professional-liability policy. The second is an excess policy
issued by Homeland Insurance Company of New York. I refer to the plural policies for
ease of reference.
                                         20
already aflame. As the insurers see it, KDMC knew in 2011 that the DOJ had

initiated an investigation into KDMC for performing and billing for allegedly

unnecessary cardiac procedures. But instead of notifying the insurers of this

potential claim, the insurers contend that KDMC intentionally failed to provide

notice of potential claims and increased its insurance coverage for the 2012–13

policy period. Of course, KDMC denies the insurers’ characterization of events.

None of the parties appear to come to this Court with clean hands.

          So how do we resolve situations where none of the parties come to our

Court with clean hands? We dispassionately apply the law. It is well-

established that, under Kentucky law, “an insurance policy is a contract, and

insofar as it does not contravene the law any recovery against the insurance

company is governed solely by its terms.”7 True, when interpreting insurance

policies, “exclusions are to be narrowly interpreted and all questions resolved

in favor of the insured.”8 And “[e]xceptions and exclusions are to be strictly

construed so as to render the insurance effective.”9

      But these canons are only applicable “when the language of the

insurance contract is ambiguous or self-contradictory.”10 “Otherwise, the

      7   State Farm Mut. Ins. Co. v. Fireman's Fund Am. Ins. Co., 550 S.W.2d 554, 557
(Ky. 1977); see also Masler v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 633, 635–36
(Ky. 1995); Woods v. Standard Fire Ins. Co., 411 F. Supp. 3d 397, 401 (E.D. Ky. 2019);
Associated Indus. of Ky., Inc. v. United States Liab. Ins. Grp., 531 F.3d 462, 465 (6th
Cir. 2008).
        8 Eyler v. Nationwide Mut. Fire Ins. Co., 824 S.W.2d 855, 859–60 (Ky. 1992)

(citations omitted).
        9 Id.
        10 Peoples Bank & Trust Co. v. Aetna Cas. & Surety Co., 113 F.3d 629, 636 (6th

Cir. 1997) (applying Kentucky law).
                                          21
contract is to be read according to its plain meaning, its true character and

purpose, and the intent of the policies.”11 In the context of interpreting

insurance policies

      [t]he rule of strict construction against an insurance company
      certainly does not mean that every doubt must be resolved against
      it and does not interfere with the rule that the policy must receive
      a reasonable interpretation consistent with the parties' object and
      intent or narrowly expressed in the plain meaning and/or language
      of the contract. Neither should a nonexistent ambiguity be utilized
      to resolve a policy against the company. We consider that courts
      should not rewrite an insurance contract to enlarge the risk to the
      insurer.12

We enforce the unambiguous language of insurance policies to effectuate the

intent of the parties for good reason. The insurance policies at issue here were

negotiated by and between highly sophisticated parties. As such, we must

apply the plain language of the insurance policy to effectuate the intent of the

parties.

      But here, the majority does not conclude that the text of Exclusion 15 is

ambiguous or self-contradictory. Instead, the majority concludes that

Exclusion 15 is inapplicable for two reasons. First, the majority contends that

the information contained in the DOJ subpoena did not constitute notice of

circumstances giving rise to a claim under the liability policies. Second, the

majority contends that “the insurers here, by having knowledge of the

investigation but without specifically informing KDMC that they did not intend

      11 Id.; see also Kentucky Ass'n of Counties All Lines Fund Trust v. McClendon,
157 S.W.3d 626, 630 (Ky. 2005) (“When the terms of an insurance contract are
unambiguous and not unreasonable, they will be enforced.”).
      12 St. Paul Fire & Marine Ins. Co. v. Powell–Walton–Milward, Inc., 870 S.W.2d

223, 226–27 (Ky. 1994) (citation omitted).
                                          22
to provide coverage for any potential claims per Exclusion 15, lured KDMC into

believing it had obtained coverage for any potential claim should one have been

made in the course of the 2012–13 policy timeframe.” But this conclusion is a

misapplication of the undisputed facts to the unambiguous policy language.

      First, we look at the relevant policy language. The Darwin policy defines

“Claim” as “a written demand seeking monetary damages.” And “Related

Claims”—"Claims based on or arising out of or in any way involving the same

or related facts, circumstances, situations, transactions or events or the same

or related series of facts”—are treated as one Claim.

      In its entirety, the exclusion contained in part III, section D, number 15

(“Exclusion 15”) of the policy states:

      The Policy shall not apply to any Claim based on, arising out of,
      directly or indirectly resulting from, or in any way involving . . .
      any facts, matters, events, suits or demands notified or reported
      to, or in accordance with, any policy of insurance or policy or
      program of self-insurance in effect prior to the Inception Date
      stated in Item 2(a) of the Declarations.

The plain and unambiguous text of Exclusion 15 expressly precludes

insurance coverage for any Claims involving facts, matters, events, suits or

demands occurring before the 2012–13 policy inception date.

      Next, we apply the unambiguous language of Exclusion 15 to the facts of

this case. The DOJ subpoena included ample, detailed information that

provided KDMC notice of a claim under the liability policies. In fact, even

under Allied’s assessment of circumstances that would give rise to prior notice,

which are extraneous to the unambiguous policy language, the subpoena

                                         23
provided sufficient information regarding circumstances that could give rise to

a claim under the liability policies.

      For instance, the DOJ subpoena provided information about when the

alleged unnecessary procedures occurred. The subpoena referred to

“documents that were created, received[,] or dated at any time during the

period of August 1, 2006[,] to the present.”13

      The subpoena also made clear what specific procedures were being

investigated by DOJ. The subpoena sought “[a]ll medical records and files,

digital images[,] and/or films of catheter procedures, intracoronary stent

placements, billing records, and schedules reflecting cath lab usage pertaining

to all patients treated in the hospital by physicians associated with

Cumberland Cardiology and the Kentucky Heart Institute[.]” The subpoena

further clarified that “[t]he requested documents include but are not limited to:

(a) angiograms; (b) records of stress tests; (c) nuclear/echo image EKG; (d)

intravascular ultrasound; (e) fluoroscopic film and (f) fractional flow reserve

records.” Finally, the subpoena sought “[n]ames and records of any and all

patients who died and/or suffered complications as a result of or within one

month of an angioplasty from August 1, 2006, to present.”

      The subpoena clearly identified who were the targets of the DOJ’s

investigation. The subpoena sought records and files for “Richard E. Paulus,

Zane Darnell, Sriharsha Velury, Matthew Shotwell; Christopher Epling, Ahmed

Elsber, Richard Ansinelli, Michelle Friday, and Arshad Ali.”

      13   The DOJ subpoena was dated July 25, 2011.
                                         24
      Taken together, the information contained in the DOJ subpoena provided

ample notice to KDMC of potential claims under its professional-liability

policies. It is of no moment that the DOJ subpoena did not exhaustively

explain each fact and circumstance of the investigation. Nor is Allied’s

inconsistency concerning the required specificity of proper notice of a prior

claim dispositive. The crucial fact is that, on the face of the subpoena, any

reasonable person, especially a reasonable healthcare professional or attorney,

would be aware that the DOJ was investigating potential impropriety by

specified doctors performing cardiac procedures at KDMC. KDCM knew that

alleged impropriety by doctors performing cardiac procedures could lead to

claims under its professional-liability policies. The insurers argue convincingly

that an immediate 70-percent reduction post-subpoena in the number of

cardiac procedures performed strongly indicates KDMC’s total awareness of its

level of potential claims exposure. And KDMC was best positioned to

determine which procedures the DOJ was investigating that may eventually

lead to claims under the professional-liability policies. At bottom, if a

subpoena duces tecum from the Department of Justice requesting records

pertaining to specific cardiac procedures, over a specified period, and involving

several named doctors, does not provide notice of a potential professional-

liability insurance claim, it is difficult to imagine circumstances that would put

an insured on notice of a potential professional-liability claim.

      In fact, in response to the DOJ subpoena, KDMC sought coverage to

protect its directors and officers under its D&O policy. This fact demonstrates

                                        25
that the DOJ subpoena put KDMC on notice of potential liability for its

directors and officers arising from the information contained in the subpoena,

even though none of KDMC’s directors or officers were named in the subpoena.

The same facts and circumstances that led to potential liability for KDMC’s

directors and officers provided a factual basis for potential professional-liability

claims.

      Ultimately, the DOJ subpoena clearly provided the who, what, when, and

where regarding the investigation into cardiac procedures performed at KDMC.

This put KDMC on notice of potential claims under its professional-liability

policies. So, I would affirm the holding of the Court of Appeals, in part, as to

Exclusion 15’s preclusion of insurance coverage; but I would join the majority

in reversing the Court of Appeals’ holding as to recoupment.

                                        26
COUNSEL FOR APPELLANTS:

Kimberly S. McCann
W. Mitchell Hall, Jr.
VanAntwerp Attorneys, LLP

Perry M. Bentley
Todd S. Page
Stoll Keenon Ogden PLLC

COUNSEL FOR APPELLEES:

Jamie Wilhite Dittert
Strugill, Turner, Barker & Moloney PLLC

Jonathan D. Hacker
O’Melveny & Myers LLP

Jeffrey Michael Cohen
Carlton Fields Jorden Burt PA

Ronald G. Sheffer
Sheffer & Monhollen, PLLC

Charles E. Spevacek
William M. Hart
Meagher + Geer, P.L.L.P.

COUNSEL FOR AMICUS CURIAE,
KENTUCKY HOSPITAL ASSOCIATION:

Wesley R. Butler
Kimberly G. DeSimone
Barnett Benvenuti & Butler PLLC

COUNSEL FOR AMICUS CURIAE,
KENTUCKY JUSTICE ASSOCIATION:

Kevin C. Burke
Jamie K. Neal
Burke Neal PLLC

                                    27
COUNSEL FOR AMICUS CURIAE,
UNITED POLICYHOLDERS:

Kyle R. Salyer
Tyler J. Wicker
Morgan, Collins, Yeast & Salyer

                                  28