                NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 16a0538n.06

                                           No. 15-6443

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT                                   FILED
                                                                                 Sep 16, 2016
                                                                             DEBORAH S. HUNT, Clerk
DAN HALE et al.,                                 )
                                                 )
        Plaintiffs-Appellants,                   )         ON APPEAL FROM THE
                                                 )         UNITED STATES DISTRICT
v.                                               )         COURT FOR THE MIDDLE
                                                 )         DISTRICT OF TENNESSEE
TRAVELERS CASUALTY AND SURETY                    )
COMPANY OF AMERICA,                              )
                                                 )                  OPINION
        Defendant-Appellee.                      )
                                                 )


Before: COLE, Chief Judge; DAUGHTREY and MOORE, Circuit Judges.

       KAREN NELSON MOORE, Circuit Judge. Plaintiffs-Appellants Dan Hale, Don

Hale, and HRC Medical Centers, Inc. seek to compel Defendant-Appellee Travelers Casualty

and Surety Company of America to defend them in a lawsuit brought by the Attorney General of

the State of Tennessee. Travelers refuses to defend plaintiffs in that lawsuit, arguing that

plaintiffs’ coverage application included material misrepresentations and that, according to the

definitions in the policy, the lawsuit involves a claim that was made prior to the policy period.

On these grounds, the district court held that plaintiffs had no right to coverage for the Attorney

General’s lawsuit and entered summary judgment for Travelers. Plaintiffs appealed. For the

reasons discussed below, we AFFIRM the district court’s judgment.
No. 15-6443
Hale et al. v. Travelers Casualty and Surety Co. of Am.


                                       I. BACKGROUND

       Dan Hale and Don Hale were the principals and directors of HRC Medical Centers, Inc.

(“HRC”), which provided bio-identical hormone replacement therapy in Tennessee and other

states. Plaintiffs do not dispute that prior to February 2012, at least seven complaints against

HRC were filed with the Tennessee Division of Consumer Affairs; at least sixty-four complaints

against HRC were filed with the Better Business Bureau of Middle Tennessee (BBB);

Nashville’s News Channel 5 investigated customer complaints against HRC; and an individual

named Laquita Amos filed a lawsuit against HRC alleging breach of contract, negligent

misrepresentation, intentional misrepresentation, and violations of the Tennessee Consumer

Protection Act. R. 40 (Pls.’ Resp. to Def.’s Facts at ¶¶ 20–23) (Page ID #3802–03).1 Plaintiffs

were aware of the complaints, lawsuit, and investigation prior to February 2012. See R. 27

(Consumer Affairs Complaints) (Page ID #1376–1700) (including responses from HRC); R. 29

(BBB Complaints) (Page ID #2976–3439) (including responses from HRC); R. 28-2 (Don Hale

Dep. at 43–47) (Page ID #1857–61) (acknowledging that a lawsuit alleging negligent

misrepresentation, intentional misrepresentation, and violations of the Tennessee Consumer

Protection Act was served on HRC and was set for a court hearing in December 2011); R. 28-1

(Dan Hale Dep. at 38–40) (Page ID #1743–45) (explaining that Channel 5 News spoke with Dan

as part of their investigation into HRC).

       1
        Plaintiffs vigorously dispute the validity of each of these criticisms, but that was not the
issue before the district court and is not the issue before this court. This case is not about
whether plaintiffs’ business practices were sound or whether they provided safe or effective
treatment. Like the district court, we do not weigh in on those questions.

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No. 15-6443
Hale et al. v. Travelers Casualty and Surety Co. of Am.


       In February 2012, HRC submitted a coverage application to Travelers. The coverage

application asked the following questions:

       1. Has there been during the past five years, or are there now pending, any
          securities claims, criminal actions, administrative or regulatory proceedings,
          charges, hearings, demands or lawsuits including shareholder, creditor,
          antitrust, fair trade law, copyright or patent litigation, against any Applicant,
          or any person proposed for this insurance, whether or not such claim or action
          would be covered under the Health Care Organization Directors, Officers and
          Trustees Liability Coverage?

       ...

       3. Does the Applicant, or any person proposed for this insurance have any
          knowledge or information of any fact, circumstance or situation related to the
          Health Care Organization Directors, Officers and Trustees Liability Coverage
          that could reasonably give rise to a claim against them?

R. 28-3 (Coverage Application at 6) (Page ID #2318). Despite the complaints to the Consumer

Affairs Division and BBB, Amos’s lawsuit, and Channel 5’s investigation, HRC’s application

answered “No” to both questions. Id. Based on this application, HRC secured insurance for a

policy period of February 1, 2012 through February 1, 2013. R. 1-1 (Insurance Policy at 1)

(Page ID #16).

       In October 2012, the State of Tennessee, through Attorney General Robert Cooper, filed

a lawsuit against HRC, Dan Hale, and Don Hale seeking to have the court dissolve HRC and

revoke Dan Hale’s medical license, among other relief. R. 28-3 (AG Lawsuit Compl. at 1, 157–

59) (Page ID #2000, 2156–58). The allegations in the Attorney General’s lawsuit mirror the

allegations in the Consumer Affairs Division complaints, BBB complaints, and Amos’s lawsuit.

See R. 27 (Consumer Affairs Complaints) (Page ID #1376–1700); R. 29 (BBB Complaints)


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Hale et al. v. Travelers Casualty and Surety Co. of Am.


(Page ID #2976–3439); R. 28-3 (Summons in Laquita Amos v. HRC Med. Ctrs. at 1–2) (Page ID

#2311–12); R. 28-4 (Affs. Submitted in AG’s Lawsuit) (Page ID #2893–2972); R. 28-3 (AG

Lawsuit Compl. at 38–149) (Page ID #2037–2148). The Director of the Tennessee Consumer

Affairs Division requested that the Attorney General file the lawsuit. R. 28-3 (AG Lawsuit

Compl. at 2) (Page ID #2001). The affidavits that support the Attorney General’s lawsuit are

anonymous, but at least one person who provided an affidavit to the Attorney General attests that

she also submitted complaints to the BBB and Consumer Affairs Division. R. 30-2 (Barbara

Bradshaw Aff. at ¶¶ 7–11) (Page ID #3451).

       Travelers denied HRC coverage for the Attorney General’s lawsuit, determining that the

Attorney General’s lawsuit was related to a claim made prior to the policy period and that

plaintiffs’ coverage application included material misrepresentations.       R. 1-1 (12/18/2012

Travelers Letter to Dixie Hale at 5, 7) (Page ID #68, 70). In September 2014, plaintiffs filed this

lawsuit in state court seeking a declaratory judgment requiring Travelers to defend them in the

Attorney General’s lawsuit. R. 1-1 (Petition) (Page ID #9). Travelers removed the case to

federal court. The district court held that plaintiffs had no right to coverage for the Attorney

General’s lawsuit and entered summary judgment for Travelers.

                                       II. DISCUSSION

       We review a district court order granting summary judgment de novo. Pennington v.

State Farm Mut. Auto. Ins. Co., 553 F.3d 447, 450 (6th Cir. 2009). “The court shall grant




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No. 15-6443
Hale et al. v. Travelers Casualty and Surety Co. of Am.


summary judgment if the movant shows that there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a).

A. Material Misrepresentations on the Coverage Application

       We agree with the district court that plaintiffs made material misrepresentations on their

coverage application. The policy application asks, in question 1, whether there were “any . . .

demands or lawsuits” made in the last five years or currently pending. R. 28-3 (Coverage

Application at 6) (Page ID #2318). When plaintiffs submitted the application, they were aware

that within the last five years a number of customers had demanded refunds and one had filed a

lawsuit against them. At the very least, a lawsuit constitutes “any . . . lawsuits.” Yet plaintiffs

answered “No” to question 1. The policy application also asks, in question 3, whether the

“Applicant, or any person proposed for this insurance [has] any knowledge or information of any

fact, circumstance or situation . . . that could reasonably give rise to a claim against them.” R.

28-3 (Coverage Application at 6) (Page ID #2318). Plaintiffs were aware that a number of

customers filed complaints with the Consumer Affairs Division and with the BBB, that one

customer filed a lawsuit against them, and that a television station investigated them. At least in

combination, these events constitute “any fact, circumstance or situation . . . that could

reasonably give rise to a claim.” Yet plaintiffs answered “No” to question 3.

       Plaintiffs’ failure to disclose these circumstances is a material misrepresentation that

justifies denying coverage. See, e.g., Bass v. Equitable Life Assurance Soc’y of U.S., 72 F.

App’x 401, 403–04 (6th Cir. 2003); Snead v. Nationwide Prop. & Cas. Ins. Co., 653 F. Supp. 2d



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No. 15-6443
Hale et al. v. Travelers Casualty and Surety Co. of Am.


823, 827–28 (W.D. Tenn. 2009); Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Fed. Deposit Ins.

Corp., No. 03A01-9405-CH-00179, 1995 WL 48462, at *3–4 (Tenn. Ct. App. Feb. 8, 1995).

The district court correctly ruled that as a consequence of plaintiffs’ material misrepresentations,

Travelers has no obligation to defend plaintiffs in the Attorney General’s lawsuit.

B. Other Reasons for Refusing Coverage

       Because we affirm the district court on the ground that plaintiffs made material

misrepresentations on the coverage application, we do not reach the district court’s holding that

the Attorney General’s lawsuit was not covered under plaintiffs’ policy or Travelers’s other

arguments.

                                            III. CONCLUSION

       For the foregoing reasons, we AFFIRM the district court’s judgment.




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