Travelers Indem. Co. v. Bernard Tew ( 2022 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 22a0357n.06
No. 21-6129
FILED
UNITED STATES COURT OF APPEALS Aug 26, 2022
FOR THE SIXTH CIRCUIT DEBORAH S. HUNT, Clerk
)
TRAVELERS INDEMNITY COMPANY OF
)
AMERICA; TRAVELERS INDEMNITY
)
COMPANY,
) ON APPEAL FROM THE
Plaintiffs-Appellees, ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
v. ) DISTRICT OF KENTUCKY
)
BERNARD TEW; ANDREA TEW; VINCENT )
TEW; STEPHANIE TEW; TEW, LP, ) OPINION
Defendants-Appellants. )
)
Before: NORRIS, SUHRHEINRICH, and CLAY, Circuit Judges.
ALAN E. NORRIS, Circuit Judge. Travelers Indemnity Company and Travelers
Indemnity Company of America (“Travelers”) filed suit to resolve coverage issues under farm
liability policies issued in the name of Bernard Tew, Andrea Tew, and Tew LP, a limited
partnership that operates the Tew family farm. Stephanie Tew and Vincent Tew also sought
coverage under the policies as members of Tew LP (all together, “the Tews”). Through family
retirement plans, the Tews sought to exploit what they called a “dividend arbitrage investment
opportunity.” Skatteforvaltningen (“SKAT”), the Customs and Tax Administration of the
Kingdom of Denmark, called it tax fraud.
The scheme involved the Tews acquiring on paper a large number of shares in Danish
companies, but only for the short period when the eligibility to receive dividends was determined.
The Tew entities were not seeking dividends, but instead sought tax refunds of tax withheld
No. 21-6129, Travelers Indem. Co. of Am., et al. v. Tew, et al.
because of the dividends. Danish companies are required by law to withhold a 27% tax on
dividends, but under a tax treaty between Denmark and the United States, the tax is reimbursable
to certain non-Danish shareholders, including the retirement entities operated by the Tews. The
Tews sought tax refunds, but according to SKAT, the applications were fraudulent because the
Tews did not own the shares that they claimed to own, they did not earn the dividends they claimed
to have earned, and they were not entitled to the tax refunds they claimed.
SKAT filed fifteen lawsuits against members of the Tew family and Tew LP seeking
recovery of the improper tax refunds. The Tews filed claims with Travelers seeking defense and
indemnification for the claims. The policies issued by Travelers to the Tews covered, among other
things, damages arising from the loss of use of tangible property. Under the Tews’ theory, SKAT’s
payment of the improper tax refunds meant that SKAT lost the use of that money, and money
constitutes tangible property.
The Tews no longer seek indemnification under the policies. Instead, they seek
reimbursement of costs incurred defending five of the SKAT complaints and damages they
incurred because of Travelers’ failure to assist them with their defense. They argue that, at the
time that those five claims were filed by SKAT, the allegations might have been covered under the
relevant farm liability policy, and Travelers therefore had a duty to defend the Tews against those
five claims.
In its thorough and careful analysis, the district court reasoned that:
[M]oney is not tangible property. Instead, money is intangible property, as it does
nothing more than represent value while having no intrinsic value of its own. This
is exemplified by the fact that money can be deposited and transferred
electronically, which unquestionably makes money intangible. That money may
also come in a physical form, such as a United States Dollar, or in this case, a
Danish Kroner, is inconsequential regarding whether money is tangible property
because the tangible embodiment of money can be converted to an inarguably
intangible medium without losing its value, meaning the Danish Kroner itself is not
2
No. 21-6129, Travelers Indem. Co. of Am., et al. v. Tew, et al.
what has value. Since money is not tangible property, there was no loss of tangible
property triggering Travelers’ duty to defend and, thus, no breach of that duty
entitling [the Tews] to either defense costs or damages.
Travelers Indem. Co. of Am. v. Tew, No. 5:20-CV-292-JMH, 2021 WL 5380944, at *5 (E.D. Ky.
Nov. 17, 2021).
We have carefully reviewed the record, the law, and the arguments on appeal. The district
court’s well-reasoned opinion correctly concluded that the damages alleged by SKAT in the five
relevant claims did not constitute a loss of tangible property. For that reason alone, the farm
liability policies did not cover the tax fraud claims, nor require Travelers to defend the Tews
against those claims. The issuance of a full written opinion by this court would serve no useful
purpose.
Accordingly, for the reasons stated in the district court’s opinion, we AFFIRM.
3