NO BAD FAITH UNDER KENTUCKY LAW.
The case of Springstone, Inc. v. Hiscox Ins. Co., ___ F. App'x. ___, No. 20-6014, 2021 WL 4240779 (6th Circ. September 17, 2021) may not have made the official reporters but it has many issues of note.
Too many issues to mention them all here. Two that deserve especial mention at this time are the disposition both by the trial court and by the appellate court of a coverage issue and of a bad faith issue.
The appellate panel affirmed the trial judge's determination of the requirement of the policy at bar that a "Claim first [be] made ... during the Policy Period[.]" Both the trial court and the appellate court determined that this policy requirement was not satisfied here. In this coverage case, an underlying qui tam lawsuit was filed before the policy period but was unsealed during the policy period.
That did not satisfy the policy requirement in the eyes of the trial judge nor in the eyes of any of the three judges on the Sixth Circuit panel in this case. "A lawsuit is first produced or created when it is filed not when it was unsealed." Springstone, 2021 WL 4240779, in second full paragraph of Section III of the Sixth Circuit's opinion (pinpoint page numbers not available at the time that this blog article is written).
On the bad faith issue, the Sixth Circuit panel affirmed the trial court's determination that under Kentucky law, there is no bad faith cause of action where there is no insurance coverage. The panel cited to a "Ky. App. 2005" officially unreported decision. Springstone, 2021 WL 4240779, in penultimate paragraph of Section III of the Sixth Circuit's opinion (pinpoint page numbers not available at the time that this blog article is written). This is the view held by most courts in most jurisdictions in the United States.
Although there is not room enough here to address all of the issues surfaced in the Sixth Circuit's brief opinion, it is an opinion well worth reading and I will reproduce here the opening paragraph because it is so succinct and covers the crux of the case:
Responding to lawsuits and investigations is expensive (even when they are without merit). That reality played out when Plaintiff Springstone, Inc. incurred substantial legal fees responding to a government subpoena based on a sealed qui tam lawsuit. Springstone thought, however, it was in luck. After all, it had purchased insurance from Defendant Hiscox Insurance Company, Inc. to cover it from certain legal claims. But its coverage does not extend so far. Springstone’s policy does not cover qui tam actions filed before the coverage period, nor does it cover subpoena responses. Accordingly, the district court’s judgment is AFFIRMED.
Please read the disclaimer. ©2021 Dennis J. Wall. All rights reserved.