                 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                            File Name: 14a0739n.06

                                      Nos. 13-6373/6445

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT
                                                                                     FILED
HARDY OIL COMPANY, INC.,                                )                      Sep 22, 2014
                                                        )                  DEBORAH S. HUNT, Clerk
       Plaintiff-Appellant/Cross-Appellee,              )
                                                        )
v.                                                      )
                                                        )
NATIONWIDE AGRIBUSINESS INSURANCE                       )      ON APPEAL FROM THE
CO.,                                                    )      UNITED STATES DISTRICT
                                                        )      COURT FOR THE EASTERN
       Defendant,                                       )      DISTRICT OF KENTUCKY
                                                        )
WELLS FARGO INSURANCE - INDIANA,                        )
                                                        )
      Defendant-Appellee/Cross-Appellant.               )


       Before: SUTTON and KETHLEDGE, Circuit Judges; ROSENTHAL, District Judge.*

       KETHLEDGE, Circuit Judge. Hardy Oil spent over $500,000 to clean up a diesel spill at

one of its facilities. Hardy later brought this suit on the theory that its insurance firm, Wells

Fargo, should have advised Hardy to obtain a policy that would have covered the spill’s costs.

The district court granted summary judgment to Wells Fargo. We affirm.

                                               I.

       Hardy is a family-owned business that distributes petroleum products. Over the course of

a few decades, Hardy sometimes purchased insurance through Roland Lehnus, an insurance

agent with Wells Fargo. In 2009, Hardy purchased from Lehnus policies that insured the




*
  The Honorable Lee H. Rosenthal, Judge for the Southern District of Texas, sitting by
designation.
Nos. 13-6373/6445
Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., et al.

company’s fuel-storage plant in Richmond, Kentucky. The policies were issued by Nationwide

Insurance.

       In 2010, Hardy learned that diesel fuel was leaking from an underground pipe at the

Richmond plant. As a result, Hardy incurred over $500,000 in expenses. Nationwide denied any

coverage for those costs. Hardy thereafter sued Nationwide for breach of contract and Wells

Fargo for negligence. Hardy settled its case against Nationwide. In the suit against Wells Fargo,

Hardy alleged that Wells Fargo’s agent, Lehnus, had a duty to advise Hardy to purchase a

pollution-liability insurance policy that would have covered its losses from the spill.

       After discovery, Wells Fargo moved for summary judgment, arguing among other things

that insurance for spills like this one was simply “not available in Kentucky.” R. 157-15 at 7. In

response, Hardy presented an expert report from Howard Tollin, who asserted that “more than

25 insurers could have provided pollution liability coverage which would have covered the loss.”

R. 169-2 at 4. In its reply brief, Wells Fargo alleged—for the first time—that Hardy could not

have obtained the relevant coverage for several reasons specific to the Richmond plant, including

the plant’s old age and equipment. R. 178 at 5. In support, Wells Fargo attached, again for the

first time, an affidavit from its own expert witness, Reynolds Renshaw. R. 178-2.

       The day after Wells Fargo filed its reply brief, the district court granted summary

judgment to Wells Fargo. The court held that, based on the Renshaw affidavit, Hardy could not

have obtained coverage for the spill even if it had tried. It is unclear whether the court also held

that Lehnus had a duty to advise Hardy to obtain pollution-liability coverage. Hardy appealed

and Wells Fargo cross-appealed.




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Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., et al.

                                                II.

       As an initial matter, Hardy argues that the district court should have given it an

opportunity to respond, prior to granting Wells Fargo’s motion, to the arguments and evidence

that Wells Fargo presented for the first time in its reply brief. We review the district court’s

decision not to give Hardy Oil that opportunity for an abuse of discretion. See Seay v. Tennessee

Valley Auth., 339 F.3d 456, 482 (6th Cir. 2003).        Before a district court grants summary

judgment, it must allow the nonmoving party an opportunity to respond to any new arguments or

evidence raised in the moving party’s reply brief. Seay, 339 F.3d at 481-82. “This is particularly

true when the district court relies on” the new arguments and evidence in granting summary

judgment. Id. at 482.

       Here, Wells Fargo argued in its reply brief, for the first time, that Hardy Oil could not

have obtained pollution-liability coverage for the Richmond plant. Hardy Oil had no chance to

respond to that argument, because the district court granted summary judgment the day after

Wells Fargo filed its reply brief.        Wells Fargo says that the new argument merely

“supplement[ed]” its earlier argument that pollution-liability insurance for aboveground storage

tanks “is not available in Kentucky.” But the two arguments are different: the first is that

nobody sells this kind of policy in Kentucky; the second is that the Richmond plant in particular

was uninsurable.

       In addition, Wells Fargo attached new evidence to its reply brief, namely the Renshaw

affidavit. Wells Fargo contends that the Renshaw affidavit was not “new evidence,” because

during discovery it had sent Hardy expert disclosures with the affidavit attached. But that does

not mean that Hardy knew that Wells Fargo would use the affidavit as a basis for summary

judgment. And when the district court granted the motion, it relied exclusively on Renshaw’s


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contention that the Richmond plant would not have qualified for coverage. The district court

therefore should have given Hardy “an adequate opportunity to respond to” the new arguments

and evidence before entering judgment in favor of Wells Fargo. See Seay, 339 F.3d at 482.

       That mistake was harmless, however, if Lehnus had no duty to recommend pollution-

liability coverage in the first place. Wells Fargo argues that Lehnus did not, which if true would

be an alternative ground for the district court’s grant of summary judgment. We review the grant

de novo. Montell v. Diversified Clinical Servs., 757 F.3d 497, 503 (6th Cir. 2014).

       Under Kentucky law, whether an insurance agent has a duty to advise his client (as

opposed to merely a duty to execute the client’s orders) is a question of law. Mullins v.

Commonwealth Life Ins. Co., 839 S.W.2d 245, 248 (Ky. 1992). As a general matter, “no

affirmative duty to advise is assumed by the mere creation of an agency relationship.” Id.

(quoting Hardt v. Brink, 192 F. Supp. 879, 880 (W.D. Wash. 1961)). The duty arises under only

three circumstances: first, where the client pays consideration beyond a premium; second, where

there is “a course of dealing over an extended period of time which would put an objectively

reasonable insurance agent on notice that his advice is being sought and relied on”; or third,

where the client “clearly makes a request for advice.” Id.

       Hardy does not argue that the first circumstance—payment of additional consideration—

was present here. Hardy does argue that the second circumstance was, citing Hardy’s long-term

relationship with Lehnus and Lehnus’s knowledge of the petroleum business. But Hardy itself

was aware of the risks presented by its own business; and more to the point, the record shows

that Hardy’s relationship with Lehnus was not based on any reliance upon his advice, but on

price. Indeed, over the years Hardy switched from Lehnus to other agents several times, in each

instance because of price. R. 169-1 at 5. Price, not advice, was the basis of their sometimes-


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Hardy Oil Co., Inc. v. Nationwide Agribusiness Ins. Co., et al.

relationship—a point illustrated by the testimony of Butch Hardy (the company’s founder) that,

despite this litigation and the omission that gave rise to it, he would use Lehnus again “[i]f the

price is right.” R. 157-4 at 9.

       Nor was the third circumstance—a clear request for advice—present here. Hardy argues

that it was, because Butch asked Lehnus if “there [was] anything that I needed to add to our

policy to protect me.” R. 157-4 at 6. But the Kentucky courts have held that this sort of open-

ended inquiry is not a clear request for advice. See Mullins, 839 S.W.2d at 249. Thus, in

summary, Wells Fargo had no duty to advise Hardy to purchase pollution-liability insurance.

       The district court’s judgment is affirmed.




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