Court Opinion

ID: 8698031
Source: CourtListenerOpinion
Date Created: 2022-11-26 05:12:54.437306+00
Date Added: 2024-06-11T08:28:00.452824
License: Public Domain

MEMORANDUM OPINION

CHARLES R. SIMPSON III, District Judge.
This matter is before the court on cross motions for summary judgment between the plaintiff, Philadelphia Indemnity Insurance Company (“Philadelphia Indemnity”) and defendant Youth Alive, Inc. (‘Youth Alive”), (DNs 60, 62).1
The facts in this case are undisputed. This action arose out of a car crash which killed four children who participated in a youth event run by defendant, Youth Alive, Inc. (‘Youth Alive”). The children had been transported to the event in three vans owned by Youth Alive. Another event participant, 16-year-old Herbert Lee (“Lee”), also traveled to the youth event in a 1991 Honda. After the youth event concluded, Youth Alive was having trouble fitting all the participants into the three vans owned by Youth Alive for transport to their homes. One Youth Alive employee noticed that Lee was driving alone in the Honda and stopped him as he was leaving. She requested that Lee drive four other youth participants, Jemar Claybrooks, Demar Claybrooks, Marc Claybrooks, and Aaron Shields from the youth event to their homes, located nearby.
Unbeknownst to Youth Alive employees, the car which Lee was driving had actually been stolen from .an individual during a carjacking and Lee did not have a driver’s license. After Lee drove away with the four children, an officer from the Louisville Metro Police Department observed Lee driving erratically and ran the license plate for the Honda. The officer discovered that the car had been reported stolen dur*650ing a carjacking and tried to stop Lee. Lee attempted to evade the police and in doing so, lost control of the vehicle and hit a tree. The four children in the car with Lee were killed. Lee was subsequently-charged with and convicted of manslaughter, fleeing or evading the police, receiving stolen property, and operating a motor vehicle without an operator’s license. See Commonwealth of Kentucky, Jefferson Circuit Court, Criminal Division, Action No. 09CR1095-3, April 2009 (DN 62, Exhibit 18).
After the accident, the estates of the four children brought lawsuits against Youth Alive, alleging that Youth Alive was negligent in placing or allowing the youth event participants to be placed in a vehicle with Lee. (DN 60, Exhibits 9, 10). Youth Alive notified Philadelphia Indemnity of the claims and sought both a defense and indemnification under its commercial general liability policy (“CGL Policy”) and its commercial excess liability policy (“Excess Policy”) with Philadelphia Indemnity. Philadelphia Indemnity provided a defense to Youth Alive but issued a reservation of rights letter, denying coverage or indemnity under the commercial general liability policy, relying on “exclusion (g)” in the Policy. Philadelphia also issued a second reservation of rights letter asserting that coverage was also not available under the Excess Policy.
Philadelphia then filed this declaratory judgment action seeking a declaration that coverage does not exist under the CGL Policy and the Excess Policy for any claim arising from the accident involving Lee and the four other Youth Alive participants (DN 1). Youth Alive filed its Answer (DN 13), and then an Amended Answer and Counterclaim, asserting bad faith counterclaims against Philadelphia (DN 52). Philadelphia Indemnity filed a motion for summary judgment (DN 60) on its declaratory judgment claim. Youth Alive also filed a motion for summary judgment (DN 62), seeking a judgment that Philadelphia Indemnity must provide coverage under both policies.
A party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S.H. Kress & Co., 398 U.S. 144, 151-60, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Felix v. Young, 536 F.2d 1126, 1134 (6th Cir.1976). Not every factual dispute between the parties will prevent summary judgment. The disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The dispute must also be genuine. The facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505. The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties’ differing versions of the dispute at trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). The evidence must be construed in a light most favorable to the party opposing the motion. Id. at 587, 106 S.Ct. 1348; Smith v. Hudson, 600 F.2d 60, 63 (6th Cir.1979).
Under Kentucky law, an insurance contract must be “liberally construed and all doubts resolved in favor of the insureds.” Kentucky Farm Bureau Mut. Ins. Co. v. McKinney, 831 S.W.2d 164, 166 *651(Ky.1992). The terms used in the insurance policies should be interpreted as they would be by the “average man.” James Graham Brown Foundation, Inc. v. St. Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279 (Ky.1991). Exclusions must be interpreted narrowly, with any questions resolved in favor of finding coverage, because exclusions are “contrary to the fundamental protective purpose of insurance.” Kemper Nat’l Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 873-74 (Ky.2002); Eyler v. Nationwide Mut. Fire Ins. Co., 824 S.W.2d 855, 859 (Ky.1992). Kentucky courts have adopted the “doctrine of ambiguity,” which mandates that if an insurance contract is ambiguous, any doubts as to its construction must be resolved in favor of the insured. Woodson v. Manhattan Life Ins. Co. of N.Y., 743 S.W.2d 835, 838 (Ky.1987).
The exclusion which Philadelphia Indemnity relies on in seeking to deny coverage is “exclusion (g) Aircraft, Auto or Watercraft” in the CGL Policy. Exclusion (g) provides that “bodily injury ... that arises out of the ownership, maintenance, use or entrustment to others of any ... auto ... owned or operated by or rented or loaned to any insured” is excluded from coverage. (DN 60, Exhibit 11) (emphasis added). Philadelphia Indemnity further relies on language from the CGL Policy which states that this exception applies
even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the occurrence which caused the bodily injury ... involved the ownership, maintenance, use or entrustment to others of any ... auto ... that is owned or operated by or rented or loaned to any insured.
Id. It is undisputed that Youth Alive did not own, rent, or loan the Honda at issue. Therefore, for this exclusion to be applicable, Lee must be considered an “insured” under the definitions set out in the CGL Policy. Philadelphia Indemnity argues that Lee is an “insured” either under the CGL Policy’s definition of a “volunteer worker” or because Lee should be considered to have the status of a “member” under an endorsement to the CGL Policy.
The CGL Policy defines who is an “insured” by providing:
Section II — Who Is An Insured
1. If you are designated in the Declarations as:
d. An organization other than a partnership, joint venture or limited liability company, you are an insured. Your “executive officers” and directors are insureds, but only with respect to their duties as your officers or directors. Your stockholders are also insureds, but only with respect to their liability as stockholders.
2. Each of the following is also an insured:
a. Your “volunteer workers” only while performing duties related to the conduct of your business, or your “employees,” other than either your “executive officers” (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.
Id. The CGL Policy then defines a “volunteer worker” as:
*652a person who is not your “employee,” and who donates his or her work and acts at the direction of and within the scope of duties determined by you, and is not paid a fee, salary or other compensation by you or anyone else for their work performed by you.

Id.

Reviewing all the pleadings and evidence, we do not find that Lee is a “volunteer worker” as defined in the CGL Policy, and therefore cannot be considered “an insured” for purposes of the automobile exclusion. We consider how an “average man” would interpret the term “volunteer worker” in “light of the prevailing rule that uncertainties and ambiguities must be resolved in favor of the insured.” See James Graham Brown Found., Inc., 814 S.W.2d at 279.
Lee did not volunteer or offer to “donate his time” to work for Youth Alive. Lee’s mother submitted applications for Lee to be a child participant in the program, so that he could benefit from Youth Alive’s services to the community. Lee was spontaneously asked to drive four other kids home, along with himself, as they lived very near to that particular youth event. Lee’s compliance with the request does not transform him into a “volunteer worker” under the Policy. Lee was not given a “scope of duties” as contemplated by the CGL Policy. Further, Youth Alive required volunteer workers to file applications and be of a certain minimum age, and have experience and abilities. Youth Alive required its volunteer workers to go through training, because its volunteers worked with troubled youths and would be taking care of children in the community. We do not find that an average person considering the circumstances of the organization would conclude that one of Youth Alive’s own child participants could constitute a “volunteer worker” under the definition of the CGL Policy and common understanding.
We also find that Lee is not a “club member” under the endorsement that was issued with Youth Alive’s CGL Policy.2 The endorsement provides that “who is an insured (Section II) is amended to include as an insured any of your members, but only with respect to their liability for your activities or activities they perform on your behalf.” (DN 60, Exhibit 15, p. 37). Neither the CGL Policy nor the relevant endorsement defines the term “member” or explains the other phrases in the endorsement. However, The CGL Policy is a standard-form insurance policy and was developed by a separate company, the Insurance Services Office, Inc. (“ISO”). ISO develops standard policy forms that are used across the country and most CGL insurance written in the United States is written on these forms. Hartford Fire *653Ins. Co. v. Cal., 509 U.S. 764, 772, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993). ISO provides a classification table to aid insurers in properly using its standard-form insurance policies. The club member endorsement was included with the CGL Policy because Philadelphia Indemnity classified Youth Alive under a specific ISO commercial general liability class known as “Club-Civic-Bldg 41668.” (DN 67, Exhibit 5). According to the ISO classification table, classification Club-Civic-Bldg 41668 applies only “to clubs which charge a membership fee to join, may assess fees to cover expenses and/or liabilities, and provide that members oversee activities or elect directors, officers or management.” (DN 67, Exhibit 3).
Lee does not constitute a “member” under this classification. Youth Alive did not charge membership fees to the children. (DN 62, Exhibit 7, Affidavit of Kenny Boyd, Youth Alive Founder ¶ 15). Youth Alive also did not permit children to “oversee activities or elect directors, officers, or management,” as described in the classification table. See (DN 67, Exhibit 4, Affidavit of Woody Northup, Youth Alive board member, ¶ 26-32) (the “officers of Youth Alive were responsible for overseeing the activities of the program, and the Board of Directors of Youth Alive were responsible for electing directors, officers or management of Youth Alive. Herbert Lee and the other children in the program did not have these responsibilities”); (DN 62, Exhibit 4, Youth Alive’s bylaws). Lee was merely a youth participant in a nonprofit organization. Thus, Lee is not a “club member” as contemplated by the endorsement classification.
Even disregarding the ISO classification table, an average person would not interpret a “club member” to include a participant in a non-profit organization which provides “educational support and delinquency prevention/intervention services to at-risk youth of economically disadvantaged neighborhoods.” See (DN 60, Exhibit 2, Youth Alive’s Mission Statement). Youth Alive is a service organization and not a “club” with members. Under Kentucky law, non-profit corporations are either membership organizations or non-membership organizations. KRS § 273.187(1). Youth Alive’s Articles of Incorporation expressly provide that Youth Alive “shall have no members except as may be provided by the bylaws hereafter duly adopted by the directors.” (DN 62, Exhibit 3, Youth Alive’s Articles of Incorporation). Youth Alive’s bylaws also did not provide for members. (DN 62, Exhibit 4, Youth Alive’s bylaws). Therefore, Lee would not be considered a “club member” of Youth Alive, but rather a child participant in the non-profit organization.
At best, the inclusion of the club member endorsement makes the Policy exclusion ambiguous as applied to the circumstances of Youth Alive. See Motorists Mutual Ins. Co. v. RSJ, Inc., 926 S.W.2d 679, 680 (Ky.App.1996) (“[bjecause there is nothing inherently ambiguous in the language employed, any ambiguity necessarily arises in the application of the provision to the specifics of a particular claim”) (citing St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226-27 (Ky.1994)). Any doubts must be resolved in favor of the insured, and any ambiguous terms must be construed to favor coverage rather than exclusions, which are “contrary to the fundamental protective purpose of insurance.” Kemper Nat’l Ins. Cos., 82 S.W.3d at 873-74.
Therefore, we find that exclusion (g) of the CGL Policy does not exclude coverage for the accident involving Lee in this case. Lee was not “an insured” as provided in the CGL Policy or the club member endorsement. Thus, Lee’s actions on the *654night of the accident are not, on those bases, excluded from coverage under the CGL Policy. Youth Alive’s motion for summary judgment will be granted in part.
Philadelphia Indemnity also seeks a declaratory judgment that coverage does not exist under Youth Alive’s Excess Policy. It is undisputed that the Excess Policy was in effect at the time of the accident. Philadelphia Indemnity argues that coverage is excluded under a similar automobile exclusion contained in the Excess Policy.
The Excess Policy excludes from coverage liability for claims that arise out of an automobile accident by providing:
Automobile Liability Exclusion
This insurance does not apply to any liability arising out of the ownership, operation, maintenance, use, loading or unloading or entrustment to others of any “auto” as defined in the Commercial General Liability policy listed in the Schedule of Underlying Insurance.
(DN 60, Exhibit 18). The “Commercial General Liability policy listed in the Schedule of Underlying Insurance” refers to the CGL Policy. The CGL Policy defines an “auto” as “[a] land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment.” (DN 60, Exhibit 15).
It appears the automobile liability exclusion in the Excess Policy is broader than the CGL Policy’s exclusion (g). Exclusion (g) only excluded bodily injury from autos that were “owned or operated by or rented or loaned to any insured.” (DN 60, Exhibit 11). The Excess Policy automobile exclusion is not so restricted. It applies to liability arising out of any “auto” as defined in the CGL Policy, which is a broad definition that encompasses all land motor vehicles. Therefore, the liability in this case, stemming from Lee’s operation of an automobile, is excluded from coverage under the Excess Policy’s more expansive automobile exclusion. Philadelphia Indemnity is not obligated to provide coverage to Youth Alive under its Excess Policy and its motion for summary judgment will be granted in part.
An order consistent with this opinion will be entered this date.

MEMORANDUM OPINION

This matter is before the court on motion of the defendant, Youth Alive, Inc. (‘Youth Alive”) (DN 90) to alter the judgment of this court issued February 13, 2012 (DN 86). Also before the court is a motion of the plaintiff, Philadelphia Indemnity Insurance Company, (“Philadelphia Indemnity”) to dismiss the counterclaim of Youth Alive against it for bad faith. (DN 88). For the reasons set forth below, Youth Alive’s motion to amend will be denied and Philadelphia Indemnity’s motion to dismiss will be granted.
I. BACKGROUND
As set forth in the court’s memorandum opinion entered February 13, 2012 (DN 86), this action arose out of a car crash which killed four children who participated in a youth event run by Youth Alive. The children had been transported to the event in three vans owned by Youth Alive. Another event participant, 16-year-old Herbert Lee (“Lee”), also traveled to the youth event in a 1991 Honda. After the youth event concluded, Youth Alive was having trouble fitting all the participants into the three vans owned by Youth Alive for transport to their homes. One Youth Alive employee noticed that Lee was driving alone in the Honda and stopped him as he was leaving. She requested that Lee drive four other youth participants, Jemar Claybrooks, Demar Claybrooks, Marc Claybrooks, and Aaron Shields from the *655youth event to their homes, located nearby.
Unbeknownst to Youth Alive employees, the car which Lee was driving had actually been stolen from an individual during a carjacking and Lee did not have a driver’s license. After Lee drove away with the four children, an officer from the Louisville Metro Police Department observed Lee driving erratically and ran the license plate for the Honda. The officer discovered that the car had been reported stolen during a carjacking and tried to stop Lee. Lee attempted to evade the police and in doing so, lost control of the vehicle and hit a tree. The four children in the car with Lee were killed. Lee was subsequently charged with and convicted of manslaughter, fleeing or evading the police, receiving stolen property, and operating a motor vehicle without an operator’s license. See Commonwealth of Kentucky, Jefferson Circuit Court, Criminal Division, Action No. 09CR1095-3, April 2009 (DN 62, Exhibit 18).
After the accident, the estates of the four children brought lawsuits against Youth Alive, alleging that Youth Alive was negligent in placing or allowing the youth event participants to be placed in a vehicle with Lee. (DN 60, Exhibits 9, 10). Youth Alive notified Philadelphia Indemnity of the claims and sought both a defense and indemnification under its commercial general liability policy (“CGL Policy”) and its commercial excess liability policy (“Excess Policy”) with Philadelphia Indemnity. Philadelphia Indemnity provided a defense to Youth Alive but issued a reservation of rights letter, denying coverage or indemnity under the commercial general liability policy, relying on “exclusion (g)” in the Policy. Philadelphia also issued a second reservation of rights letter to Youth Alive, asserting that coverage was also not available under the Excess Policy.
Philadelphia then filed a declaratory judgment action seeking a declaration that coverage does not exist under the CGL Policy and the Excess Policy for any claim arising from the accident involving Lee and the four other Youth Alive participants (DN 1). Youth Alive filed its Answer (DN 13), and then an Amended Answer and Counterclaim, asserting bad faith counterclaims against Philadelphia (DN 52). Philadelphia Indemnity filed a motion for summary judgment (DN 60) on its declaratory judgment claim. Youth Alive also filed a motion for summary judgment (DN 62), seeking a judgment that Philadelphia Indemnity must provide coverage under both policies.
Pursuant to the ruling entered February 13, 2012, we held that Philadelphia was obligated to provide defense and indemnity under the CGL Policy it issued to Youth Alive, but that coverage did not exist under the Excess Policy because the automobile exclusion applied. (DNs 84, 85). Youth Alive has now filed a motion to alter or amend that judgment, arguing that our ruling on the coverage issue under the Excess Policy was based on grounds not raised by the parties. (DN 90). Philadelphia has also filed a motion to dismiss the counterclaims of Youth Alive asserting bad faith, violations of the Kentucky Unfair Claims Settlement Practice Act, and seeking attorneys fees. (DN 88).
II. YOUTH ALIVE’S MOTION TO ALTER OR AMEND JUDGMENT
First, we consider Youth Alive’s motion to alter or amend the judgment entered by this court on February 13, 2012. (DN 90). Motions to alter or amend a judgment pursuant to Fed.R.Civ.P. 59(e) are “extraordinary” in nature and should be “sparingly granted.” Buckner v. Kentucky, 2011 WL 1304747 at *1, 2011 U.S. *656Dist. LEXIS 36956 (E.D.Ky. April 5, 2011) (citing Marshall v. Johnson, 2007 WL 1175046 (W.D.Ky. Apr. 19, 2007)). The court may grant a Rule 59(e) motion only in limited circumstances: if there is (1) a clear error of law; (2) newly-discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice. Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir.2005) (citing GenCorp, Inc. v. Am. Int'l Underwriters, 178 F.3d 804, 834 (6th Cir.1999)). “Rule 59(e) does not provide parties a forum to present new arguments or theories that, with proper diligence, could have been asserted prior to the judgment being issued.” Buckner, 2011 WL 1304747 at *1 (citing Howard v. United States, 533 F.3d 472, 475 (6th Cir.2008); GenCorp, 178 F.3d at 834).
Youth Alive argues that pursuant to Fed.R.Civ.P. 56(f), it is entitled to present further arguments or evidence because this court’s previous ruling was based upon grounds not raised by either party. (DN 90-1). Fed.R.Civ.P. 56(f) provides that “[ajfter giving notice and a reasonable time to respond, the court may (1) grant summary judgment for a nonmovant; (2) grant the motion on grounds not raised by a party; or (3) consider summary judgment on its own after identifying for the parties material facts that may not be genuinely in dispute.” Rule 56(f) is thus grounded in notions of fairness by allowing the adversely affected party an opportunity to respond when a court determines that a motion should be granted on grounds not raised by the parties. See Richeson v. Select Comfort Retail Corp., 2011 WL 5434019, 2011 U.S. Dist. LEXIS 129361 (N.D.Ohio Nov. 8, 2011) (providing parties with notice and a reasonable time to respond when addressing a ground not raised by either party).
Youth Alive argues that Philadelphia Indemnity did not argue that the Excess Policy’s automobile exclusion was broader than the CGL Policy’s automobile exclusion. Youth Alive asserts that therefore, the court’s ruling, which noted that “[i]t appears the automobile liability exclusion in the Excess Policy is broader than the CGL Policy’s exclusion (g),” rested on grounds not argued by either party and Youth Alive should have been provided an opportunity to respond.
However, we disagree and do not find Fed.R.Civ.P. 56(f) applicable here, as the previous ruling by this court was decided on grounds raised by the parties. Youth Alive and Philadelphia Indemnity both moved this court for summary judgment, requesting that the court interpret the exclusionary language from both the CGL Policy and the Excess Policy. Philadelphia Indemnity treated the CGL Policy and the Excess Policy separately in its motion papers and raised the precise grounds on which the court’s holding rested, namely that the automobile exclusion within the Excess Policy applied because the underlying claim arose from an automobile accident. Philadelphia Indemnity provided the Excess Policy language on which this court’s opinion relied and specifically argued that “because the bodily injury at issue in the underlying tort actions brought by the estates of the Claybrooks brothers and Shields arises from Lee’s use and operation of an ‘auto,’ there is no coverage available to Youth Alive or Lee under the Excess Policy.” (DN 60-1, p. 12-13). Philadelphia Indemnity did not explicitly argue that one exclusion was broader than the other and also alternatively argued that Lee being an “insured” prevented coverage under the Excess Policy. However, the court’s holding rested on the fact that the underlying claim arose from an automobile accident, which was *657specifically raised by Philadelphia Indemnity.
It is well-settled under Kentucky law that the proper interpretation, construction, and legal effect of an insurance contract are matters of law to be decided by a court. Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 69, 73 (Ky.2010); Bituminous Casualty Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky.2007); Hugenberg v. West Am. Ins. Co., 249 S.W.3d 174, 185 (Ky.Ct.App.2006). In the absence of ambiguity, “a written instrument will be enforced strictly according to its terms, and a court will interpret the contract’s terms by assigning language its ordinary meaning and without resort to extrinsic evidence.” Hazard, Coal Corp. v. Knight, 325 S.W.3d 290, 298 (Ky.2010) (quoting Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99, 106 (Ky.2003)).
In the memorandum opinion entered February 13, 2012, we quoted the “Automobile Liability Exclusion” from the Excess Policy, which stated:
This insurance does not apply to any liability arising out of the ownership, operation, maintenance, use, loading or unloading or entrustment to others of any “auto” as defined in the Commercial General Liability policy listed in the Schedule of Underlying Insurance.
(DN 86). We then recognized the broad definition of an “auto” provided in the CGL Policy and noted that “the automobile liability exclusion in the Excess Policy is broader than the CGL’s Policy exclusion (g). Exclusion (g) only excluded bodily injury from autos that were ‘owned or operated or rented or loaned to any insured.’ ” Id. (quoting the CGL Policy language). We then held that “the liability in this case, stemming from Lee’s operation of an automobile, is excluded from coverage under the Excess Policy’s more expansive automobile exclusion.” Id. Thus, our holding rested on the automobile exclusion of the Excess Policy and the fact that the underlying claim stemmed from the operation of an automobile. This is identical to the argument made by Philadelphia Indemnity in its motion for summary judgment when it argued that because the underlying claim “arises from Lee’s use and operation of an ‘auto,’ there is no coverage available to Youth Alive under the Excess Policy.” (DN 60-1, p. 12-13).
Therefore, we hold that Youth Alive is not entitled to relief pursuant to Fed. R.Civ.P. 59(e) and Fed.R.Civ.P. 56(f) is not applicable, because the court’s ruling rested on grounds raised by Philadelphia Indemnity. A Rule 59(e) motion “is not an opportunity to re-argue a case” nor an avenue to raise arguments that “could have, but [were] not” raised before. See Sault Ste. Marie Tribe of Chippewa Indians v. Engler, 146 F.3d 367, 374 (6th Cir.1998). Youth Alive’s motion to amend or alter the judgment will thus be denied.
III. PHILADELPHIA INDEMNITY’S MOTION TO DISMISS BAD FAITH CLAIMS
Before the court is also Philadelphia Indemnity’s motion to dismiss the bad faith counterclaims of Youth Alive. (DN 87). When a motion to dismiss is made, the court accepts the well-pleaded facts of the complaint as true and construes the complaint in the light most favorable to the plaintiff, drawing all reasonable inferences in favor of the plaintiff. Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007); Morgan v. Church’s Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). The complaint may be dismissed “if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.” Morgan, 829 F.2d at 12.
*658Youth Alive asserts a common law claim for bad faith, a claim under Kentucky’s Unfair Claims Settlement Practices Act, KRS § 304.12-230, and the applicable regulations, and a claim under KRS § 304.12-235(3) for attorney’s fees. (DN 81, 88-105). Under Kentucky law, to support a claim for bad faith, an insured must allege that: (1) the insurer is “obligated to pay the claim under the terms of the policy;” (2) the insurer lacks a “reasonable basis in law or fact for denying the claim;” and (3) the insurer either “knew there was no reasonable basis for denying the claim or acted with reckless disregard for whether such a basis existed.” Wittmer v. Jones, 864 S.W.2d 885, 890 (Ky.1993). This standard is identical for claims under both common law and Kentucky Unfair Claims Settlement Practices Act. Rawe v. Liberty Mut. Fire Ins. Co., 462 F.3d 521, 527 (6th Cir.2006).
Philadelphia Indemnity first argues that Youth Alive’s claim for bad faith and a violation of Kentucky’s Unfair Claims Settlement Practices Act with regard to Philadelphia Indemnity’s disputing coverage under the Excess Policy fails because Youth Alive cannot prove the first element of a claim for bad faith. We agree that because the court has already ruled that no coverage exists under the Excess Policy (DNs 86, 87), Youth Alive cannot establish that the insurer is “obligated to pay the claim under the terms of the policy,” as required by Wittmer, 864 S.W.2d at 890. Therefore, we will grant Philadelphia Indemnity’s motion to dismiss with regard to Youth Alive’s bad faith claim based on the Excess Policy.
Philadelphia Indemnity also seeks to dismiss Youth Alive’s bad faith claim with regard to the CGL Policy. Philadelphia Indemnity concedes that Youth Alive can establish that Philadelphia Indemnity is obligated to pay under the terms of the policy, given this court’s previous ruling that such coverage exists, but disputes whether Youth Alive has made sufficient allegations to support its bad faith claim under the second two Wittmer elements. 864 S.W.2d at 890. Philadelphia Indemnity argues that it did not in fact “deny” Youth Alive’s claim and that it did not lack a “reasonable basis in law or fact” for contesting coverage. Id.
First, Philadelphia Indemnity argues that the claim should be dismissed because it did not “deny” Youth Alive’s claim. Philadelphia Indemnity asserts that it provided a defense to Youth Alive and settled the claims against Youth Alive. The Counterclaim states that Philadelphia Indemnity undertook Youth Alive’s defense in the underlying action against it, negotiated a settlement, and secured a dismissal of all claims against Youth Alive. (DN 81, First Amended Counterclaim, at 17, 79-81). However, Youth Alive argues that Philadelphia Indemnity’s conduct does in fact amount to a denial because of Philadelphia Indemnity’s delay in negotiating the settlement. (DN 81 at ¶¶ 78, 80, 82, 84-85).
The Kentucky Supreme Court has held that absent a denial, there can be no damage and thus no actionable claim for bad faith. See e.g., Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 454 (Ky.1997). As set forth in Wittmer, a “denial” of a claim is a key prerequisite to establishing a prima facie cause of action for bad faith. 864 S.W.2d at 890. The Kentucky Supreme Court has held that a “mere delay in payment does not amount to outrageous conduct absent some affirmative act of harassment or deception.” Glass, 996 S.W.2d at 452.
Youth Alive admits that Philadelphia Indemnity undertook the defense of Youth Alive in the underlying tort actions against it, immediately investigated the claims, *659participated in settlement negotiations, and did settle the claims by making payments in order to obtain a dismissal of all claims against Youth Alive. Philadelphia Indemnity did issue reservation of rights letters while defending Youth Alive and also filed this action to have the coverage issues determined by the court. However, Philadelphia Indemnity paid and settled the claims against Youth Alive before this court determined that coverage existed under the CGL Policy. Even taking all of the allegations of the Amended Counterclaim as true, we hold that because Kentucky law requires a “denial” of a claim to support a bad faith cause of action, Youth Alive’s bad faith claim must fail here, as it cannot prove that Philadelphia Indemnity “denied” its claim. See Wittmer, 864 S.W.2d at 890.
Philadelphia also argues that Youth Alive’s claim for bad faith should be dismissed because it had a “reasonable basis in law or fact” for contesting coverage under the CGL Policy. Wittmer, 864 S.W.2d at 890. Under Kentucky law, “an insured’s claim of bad faith must fail where the claim is ‘fairly debatable’ on the law or the facts.” Cowan v. Paul Revere Life Ins. Co., 30 Fed.Appx. 384 (6th Cir.2002). If a claim is “fairly debatable,” an “insurer is entitled to debate [a] claim regardless of whether the debate concerns a matter of fact or one of law.” Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886, 889-90 (Ky.App.1994). It is established under Kentucky law that an insurer is entitled “to challenge a claim and litigate it if the claim is debatable on the law or the facts.” Wittmer, 864 S.W.2d at 890; see also Stine v. State Farm, 2009 WL 4704889, *1, 2009 U.S. Dist. LEXIS 114689 (W.D.Ky. Dec. 9, 2009) (holding that the “well-established law of Kentucky” entitles the insurer to litigate the issue where there is a fairly debatable issue of coverage).
In Empire Fire, the Kentucky Court of Appeals discussed a case where coverage was disputed and the plaintiffs claim was denied by the insurer. 880 S.W.2d 886. The coverage issue was litigated and after the court declared coverage existed, the insurer paid the claim. Id. at 887. The case then proceeded to trial on the plaintiffs bad faith claims and on appeal, the Kentucky Court of Appeals held that the claim should not have been submitted to the jury. Id. at 888-90. The Court stated that “[i]f a genuine dispute does exist as to the status of the law governing the coverage question, the insured’s claim is fairly debatable and the tort claim for bad faith based upon the insurer’s refusal to pay the claim may not be maintained.” Id. The Court further explained that often coverage questions are debatable and “where there is a legitimate first-impression coverage question for purposes of Kentucky law and recognized authorities support the insurer’s position in denying coverage, the insured’s claim is fairly debatable as a matter of law and will not support a claim for bad faith.”
Although we ultimately disagreed with the position Philadelphia Indemnity took in finding that Lee was a “volunteer worker” or “club member” under the policy, we find that this issue was “fairly debatable under the law.” See Id. at 889-90. The issue of whether a participant in a youth group who is asked to perform a task benefitting other youth participants was a “volunteer worker” under an insurance policy was not previously addressed under Kentucky law. In its motion papers, Philadelphia Indemnity cited to several authorities from other circuits, attempting to persuade this court that Lee was a “volunteer worker” or “club member” under the policy. We find that the *660law was “fairly debatable” and a bad faith claim cannot be maintained against Philadelphia Indemnity for this reason also. The fact that Philadelphia Indemnity did not ultimately prevail is neither determinative of whether it acted with bad faith nor whether its contention raised a fairly debatable issue.
An order consistent with this opinion will be entered this date.

. We do not rule on the motion of the plaintiff, Philadelphia Indemnity to dismiss bad faith counterclaims by Youth Alive (DN 53). The Court has permitted Youth Alive to amend its Answer asserting counterclaims, thus rendering the motion to dismiss and briefing based on the original counterclaims moot.

. There does appear to be a dispute as to whether the "club member” endorsement to the CGL Policy was validly issued. Youth Alive asserts that Youth Alive did not request the endorsement and that it was Philadelphia Indemnity's practice that the insured was responsible for the inclusion of the endorsement. (DN 67, p. 13) (citing DN 67, Exhibit 3, Affidavit of John Lavelle, insurance agent; DN 67, Exhibit 5, Philadelphia's Discovery Responses). Youth Alive further argues that it did not meet the requirements for a "club” under this endorsement and that it should not have been issued and is invalid. Id. at 14. On the other hand, Philadelphia Indemnity asserts that Youth Alive’s own insurance agent, John Lavelle, provided the 41668 "club” classification for Youth Alive on its May 2004 application. (DN 71, p. 7) (citing DN 71, Exhibit 1, Affidavit of Margie Calder-one). Philadelphia Indemnity maintains that the club members endorsement was validly issued. Id. We do not decide here whether the club endorsement issue was validly issued, because we find coverage exists even with the club members endorsement amendment applied to exclusion (g).