Combs v. Intl Ins Co

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206 2 Combs v. Int’l Ins. Co. No. 01-6493
ELECTRONIC CITATION: 2004 FED App. 0002P (6th Cir.)
File Name: 04a0002p.06 Corsi, LANDMAN, CORSI, BALLAINE & FORD, New
York, New York, for Appellee. ON BRIEF: John H.
UNITED STATES COURT OF APPEALS Dwyer, Jr., Lawrence L. Pedley, PEDLEY, ZIELKE &
GORDINIER, Louisville, Kentucky, for Appellant. Louis G.
FOR THE SIXTH CIRCUIT Corsi, Eileen H. de Callies, LANDMAN, CORSI,
_________________ BALLAINE & FORD, New York, New York, David R.
Monohan, WOODWARD, HOBSON & FULTON,
BROWNELL COMBS , II, X Louisville, Kentucky, for Appellee.
Administrator C.T.A. of the -
- CLAY, J., delivered the opinion of the court, in which
Estate of LESLIE COMBS , II, KEITH, J., joined. BATCHELDER, J., concurred in Part IV
- No. 01-6493
Deceased, - only.
Plaintiff-Appellant, >
, _________________
-
v. - OPINION
- _________________
INTERNATIONAL INSURANCE -
COMPANY , - CLAY, Circuit Judge. Plaintiff, Brownell Combs, II,
Defendant-Appellee. -
Administrator C.T.A. of the Estate of Leslie Combs, II,
- deceased, appeals an order granting Defendant, International
N Insurance Company, summary judgment against Plaintiff’s
Appeal from the United States District Court action in diversity, brought pursuant to 28 U.S.C. § 1332,
for the Eastern District of Kentucky at Lexington. alleging breach of a directors and officers liability insurance
No. 00-00217—Karl S. Forester, Chief District Judge. contract, breach of the implied contractual duty of good faith
and fair dealing, and bad faith denial of Defendant’s duty to
Argued: June 11, 2003 defend under the insurance policy. For the reasons set forth
below, we AFFIRM the district court.
Decided and Filed: January 6, 2004 FACTS
Before: KEITH, BATCHELDER, and CLAY, Circuit Decedent founded Spendthrift Farm (“Spendthrift”) in 1937
Judges. with 120 acres of land near Lexington, Kentucky. By the
early 1980s, the farm encompassed 1800 acres and housed
_________________ forty-three stallions, including the last two Triple Crown
COUNSEL
ARGUED: John H. Dwyer, Jr., PEDLEY, ZIELKE &
GORDINIER, Louisville, Kentucky, for Appellant. Louis G.

1
No. 01-6493 Combs v. Int’l Ins. Co. 3 4 Combs v. Int’l Ins. Co. No. 01-6493

winners. Decedent developed the principal method of stallion private placement” to “protect Spendthrift against claims that
management used today.1 might arise out of the placement.” (J.A. at 748.)
By 1981, Decedent was over eighty years old and became Through the PPM, the farm sold blocks of stock to certain
interested in planning his estate so that Spendthrift would investors already involved in the thoroughbred industry,
continue after his death. During the early 1980s, Decedent thereby creating a pool of shareholders who could create a
tried several different methods to broaden Spendthrift’s board of directors and lead Spendthrift after Decedent’s death.
ownership. Initial efforts to take the company public failed Decedent completed the stock sale in 1983. Decedent
when the farm could not locate a suitable investment bank. personally received $17.5 million from the transaction and
A 1982 effort to distribute forty percent of the ownership Plaintiff received another $17.5 million.
interest in Spendthrift failed because of disputes between
Plaintiff2 and potential investors. The thoroughbred industry, including Spendthrift,
prospered during the early 1980s. Later in the decade,
Eventually, the farm developed and implemented a private however, the industry suffered a downturn from which it did
stock placement plan described in a Private Placement not fully recover until the mid-1990s. Spendthrift’s problems
Memorandum (“PPM”). The PPM made clear that Decedent in the mid-to-late-eighties upset many of the investors in the
and Plaintiff, not Spendthrift, retained exclusive control over private placement.
the private placement:
In January of 1984, Defendant issued excess policy no.
All sales are subject to the discretion of the Sellers 524-029517-1, which provided directors’ and officers’
including the right to accept each unit as purchased or liability coverage to Spendthrift for claims made against the
none until the entire offering is purchased. Sellers farm from November 17, 1983 through November 17, 1986.
reserve the right, in their absolute discretion, to accept or The policy provided coverage as follows:
reject any offer to purchase, and/or to withdraw the
offering either partially or in its entirety. 1. INSURING CLAUSE

(J.A. at 842.) Furthermore, the lawyers involved in both the If during the policy period any claim or claims are
private placement (Charles Hembree, Decedent’s long-time made against the Insured (as herinafter defined) or
personal counsel), and the contemplated initial public offering any of them for a Wrongful Act (as hereinafter
(“IPO”) (Frank Wheat of Gibson, Dunn & Crutcher), defined) while acting in their individual or
distinguished between the Combs family and Spendthrift collective capacities as Directors or Officers, the
Farm. Wheat took steps “to keep Spendthrift out of this Insurer will pay on behalf of the Insureds or any
of them, their Executors, Administrators, Assigns
95% of all Loss (as hereinafter defined), which the
Insureds or any of them shall become legally
1
obligated to pay in excess of the retentions stated
The parties never define “stallion management,” but evidently prices in Item IV (a) and (b) of the Declarations, not
at Spendthrift Farm are as high as $1 million per visit. exceeding the limit of liability stated in Item III of
2 the Declarations.
Plaintiff is Decedent’s son and administrator of Decedent’s estate.
No. 01-6493 Combs v. Int’l Ins. Co. 5 6 Combs v. Int’l Ins. Co. No. 01-6493

(J.A. at 34-35.) The policy defined “Wrongful Act” as “any In a letter dated November 14, 1986, Paul Renne, Plaintiff’s
actual or alleged error or misstatement or breach of duty by counsel in San Francisco, California, notified Defendant that
the Insureds while acting in their individual or collective the plaintiffs filed eight complaints against Defendant.
capacities, or any matter not excluded by the terms and Renne’s letter sought reimbursement under the policy and
conditions of this Policy claimed against them solely by Renne requested that Defendant communicate with him about
reason of their being Directors and Officers of the Company.” Decedent’s coverage demand.
Id.
In Defendant’s response, Defendant’s New York counsel
In 1986, while the policy was in effect, Fred L. Fredricks explained, inter alia, that the wrongful conduct alleged
sued Decedent, Plaintiff, and other co-defendants “in their against Decedent did not involve acts solely in his capacity as
individual capacity and as agents and employees of defendant a director or officer of Spendthrift, but rather conduct in his
Spendthrift Farm, Inc.” (J.A. at 1049.) The Northern District individual capacity as a shareholder selling his shares in
of California consolidated the Fredericks case with seven Spendthrift for his personal gain (and Plaintiff’s personal
other cases involving substantially similar claims (hereinafter gain) of $35 million:
the consolidated “California Litigation”). Approximately half
of the California Litigation plaintiffs sued Spendthrift Farm The wrongful conduct alleged against the [Plaintiff and
itself for the alleged misrepresentations of its officers, Decedent] in the [California Litigation] arises from the
directors and agents with respect to the private placement. sale of their Spendthrift stock. International has
The other half sued only the individual agents of the farm observed from a review of the Private Placement
involved in the private placement. Memorandum dated April 1, 1982 (“PPM”), which was
distributed along with a supplement thereto dated July
Regardless, the substance of all the claims focused 27, 1983 (“PPM Supplement”), in connection with a
primarily on representations made in the PPM regarding the “private placement” distribution of shares of Spendthrift
farm’s financial condition and the value of its assets. by the [Plaintiff and Decedent] that the [Plaintiff and
Specifically, the plaintiffs in the California Litigation made Decedent] offered shares in Spendthrift, in units of
two allegations: (1) that the PPM relied upon financial twenty at $1.75 million per unit, for a total offering of
statements prepared on a current value basis rather than a cost $35 million. All of the proceeds of the offering went to
basis; and (2) that the current value presentation misled the the [Plaintiff and Decedent], and none of the proceeds
plaintiffs because it failed to include any provision for income went to Spendthrift. The PPM states that [Decedent] is
taxes, thereby overstating the value of Spendthrift’s assets by selling the portion of stock for the purpose of estate
the amount of tax liability that would result from attempting planning, and that [Plaintiff] is selling his portion of
to realize the assets’ full value. According to the plaintiffs, stock for estate planning and to diversify his interests. . . .
the asset valuations were “substantially inflated and based on
unrealistic assumptions about the quality, confirmation and As indicated above, the directors and officers of
other characteristics of the horses.” Id. The plaintiffs sought Spendthrift are insured only for loss incurred by them
rescission pursuant to Section 12 of the Securities Act of solely in their respective capacities as directors and
1933, 15 U.S.C. § 77, along with damages for the allegedly officers. The wrongful conduct alleged against the
fraudulent misrepresentations. [Plaintiff and Decedent] in the [California Litigation]
does not involve them solely in their capacity as directors
No. 01-6493 Combs v. Int’l Ins. Co. 7 8 Combs v. Int’l Ins. Co. No. 01-6493

or officers but rather in their capacity as individuals who (J.A. at 379-80.) The evidence Decedent submitted to the
are selling their shares in Spendthrift for their own district court in the California Litigation included a due
personal gain. Accordingly, International declines to diligence memorandum prepared by counsel following a July
afford coverage for any loss incurred by the [Plaintiff and 26, 1983 meeting with Decedent and Plaintiff. This
Decedent] in connection with the [California Litigation]. memorandum distinguishes between the conduct of Decedent
and Plaintiff as sellers, and their conduct as officers or
(J.A. at 108-09.) Defendant addressed this letter to Renne, in directors for Spendthrift:
California, as well as to certain defense counsel (located in
California, Ohio, and Kentucky) who had an interest in the On Tuesday morning, July 26, we met with [Plaintiff] to
Policy because they represented other defendants. discuss with him the timing of the private placement.
[Plaintiff] informed us in rather blunt terms that he had
Decedent settled some of the claims against him for $2 no intention of delaying the private placement. He
million in a court-approved settlement. The trial court informed us that he was willing to accept the risks of lack
dismissed numerous other claims. A few issues reached a of full disclosure and non-compliance with state
jury, which returned a verdict in favor of the defendants. In securities laws. I advised [Plaintiff] that the risks of lack
a comprehensive opinion explaining the California Litigation of going forward could be rather significant as it was my
in detail, the Ninth Circuit affirmed. See McGonigle v. view that prudence called for a delay of the private
Combs, 968 F.2d 810 (9th Cir. 1992). When the California placement of at least two weeks. [Plaintiff] informed the
Litigation concluded in 1992, Decedent had spent $770,000 group that he knew each of the investors personally and
in attorney’s fees in addition to the $2 million he paid to settle had conducted a significant amount of business with
certain claims. them in the past. He informed us that he would give
back any monies if the investors complained about the
With respect to the court-approved settlement, Decedent adequacy of the disclosure or non-compliance with Blue
submitted an extensive evidentiary record to persuade the Sky laws.
district court that he had only a personal role in the disputed
transactions: (J.A. at 716-20.) Decedent’s factual submission to the district
court in the California Litigation also established that
(1) there is no evidence that [Decedent] wrote any part of Decedent “was only interested in [the private placement]
the offering memos or that he was even consulted as to being done and having his check delivered to him and
their text; (2) there is no evidence that [Decedent] [Plaintiff] was supposed to take care of everything.” (J.A. at
consciously did anything wrong, or that he is guilty of 395.) Decedent quoted Plaintiff as stating that “his father had
any moral turpitude in this action; and (3) there is no reached the point in his life where he would not have an
evidence that [Decedent] personally misled anyone or attention span sufficient to go through complex legal
sought to mislead anyone. [Decedent] is in these cases documents or, for that matter, a conversation that lasted more
for one reason only: he was a seller, and there is a claim than five minutes.” (J.A. at 413.) Plaintiff did not dispute
for recission to which he must respond although there is any part of the factual record submitted to the district court in
no evidence of scienter on his part. support of the settlement in the California Litigation.
No. 01-6493 Combs v. Int’l Ins. Co. 9 10 Combs v. Int’l Ins. Co. No. 01-6493

PROCEDURAL HISTORY of limitations issue to the Kentucky Supreme Court. After
further briefing, the district court denied Plaintiff’s motion on
Decedent died in April of 1990, before the California November 16, 2001. On November 29, 2001, Plaintiff timely
Litigation concluded. Decedent had not yet brought an action noticed his appeal.
against Defendant for his defense fees or the settlement
payments, and Plaintiff still had not done so on Decedent’s DISCUSSION
behalf when the California Litigation terminated in 1992.
Decedent’s estate was closed four years later, on June 21, We conduct a de novo review of summary judgment.
1996. Neither the administrator of the estate at the time, P. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S.
Keith Nally, nor the estate’s attorney, Charles Hembree, 451, 466 n.10 (1992); Buckeye Cmty. Hope Found. v. City of
considered commencing a claim against Defendant on Cuyhaoga Falls, 263 F.3d 627, 633 (6th Cir. 2001); Johnson
Decedent’s behalf. v. Econ. Dev. Corp., 241 F.3d 501, 509 (6th Cir. 2001).
Summary judgment is appropriate when there is no genuine
In the Spring of 2000, four years after Decedent’s estate issue of material fact such that the moving party is entitled to
closed, Plaintiff reopened the estate and arranged to become a judgment as a matter of law. Kocsis v. Multi-Care Mgmt.,
the administrator. On June 6, 2000, in the United States Inc., 97 F.3d 876, 882 (6th Cir. 1996). In Anderson v. Liberty
District Court for the Eastern District of Kentucky, Plaintiff Lobby, Inc., 477 U.S. 242 (1986), the Supreme Court
commenced the action that is the subject of this appeal. Count explained that
I of the complaint asserted a breach of contract claim; Count
II alleged a breach of the duty of good faith and fair dealing; [t]he mere existence of a scintilla of evidence in support
and Count III asserted a bad faith claim. of the plaintiff's position will be insufficient; there must
be evidence on which the jury could reasonably find for
Following discovery, Defendant moved for summary the plaintiff. The judge's inquiry, therefore, unavoidably
judgment on July 2, 2001. Defendant argued (1) that New asks whether reasonable jurors could find by a
York’s statute of limitations applied and barred Plaintiff’s preponderance of evidence that the plaintiff is entitled to
claims; (2) equitable estoppel barred Plaintiff’s claims; and a verdict.
(3) the policy did not cover the Decedent’s role in the private
placement. On September 10, 2001, the district court granted Id. at 322. The “mere possibility” of a factual dispute does
Defendant’s motion on the basis that the applicable statute of not suffice to create a triable case. Gregg v. Allen-Bradley
limitations barred Plaintiff’s claims. See Combs v. Int’l Ins. Co., 801 F.2d 859, 863 (6th Cir. 1986). To defeat summary
Co., 163 F. Supp.2d 686 (E.D. Ky. 2001). The district court judgment, the plaintiff "must come forward with more
also suggested that the good faith and fair dealing claim and persuasive evidence to support [his or her] claim than would
the bad faith claim lacked merit.3 Id. at 695-96. otherwise be necessary." Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). If the
On September 20, 2001, Plaintiff filed a motion under Fed. defendant successfully demonstrates, after a reasonable period
R. Civ. P. 59(e) to amend the judgment to certify the statute of discovery, that the plaintiff cannot produce sufficient
evidence beyond the bare allegations of the complaint to
support an essential element of his or her case, summary
3 judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S.
Plaintiff evidently d oes not contest this co nclusion on appe al.
No. 01-6493 Combs v. Int’l Ins. Co. 11 12 Combs v. Int’l Ins. Co. No. 01-6493

317, 325 (1986). When determining whether to reach this Cir. 1988)). If the relevant state judiciary has not spoken to
conclusion, we view the evidence and draw all reasonable the issue, courts sitting in diversity should consider “all
inferences in the light most favorable to the non-moving relevant data,” Kinglsey Associates, Inc. v. Moll Plastic
party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 Crafters, Inc., 65 F.3d 498, 507 (6th Cir. 2000), including
(1970); Williams v. Int’l Paper Co., 227 F.3d 706, 710 (6th jurisprudence from other jurisdictions, Lexington Insurance
Cir. 2000); Smith v. Thornburg, 136 F.3d 1070, 1074 (6th Cir. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir.
1998). 1999).
We must decide whether the district court properly ruled The Seventh Circuit observed that federal courts “must
that under Ky. Rev. Stat. § 413.320, the Kentucky “borrowing proceed with caution” when making pronouncements about
statute,” the New York statute of limitations bars Plaintiff’s state law. Lexington, 165 F.3d at 1092. Sitting in diversity,
action. This is a highly uncertain area of state law, forcing us we are “not commissioned to take a position regarding the
to make an educated “Erie guess.” Plaintiff contends, advisability or fairness of the state rule to be applied, but
alternatively, (1) that the Kentucky judiciary would interpret [must] determine the issue as would the highest court of the
Kentucky’s borrowing statute so as to apply the statute of state.” Kurczi v. Eli Lilly & Co., 113 F.3d 1426, 1429 (6th
limitations of the jurisdiction that, considering all the facts, Cir. 1997). This Court’s proper reluctance to speculate on
has the most significant connection with the disputed any trends of state law applies with special force to a plaintiff
transaction, and (2) even if the locus of accrual is the only in a diversity case, like this one, who has chosen to litigate his
relevant consideration, this cause of action accrued in state law claim in federal court. Torres v. Goodyear Tire &
Kentucky, making Kentucky’s statute of limitations Rubber, Inc., 867 F.2d 1234, 1238 (9th Cir. 1989); Shaw v.
applicable. Republic Drill Corp., 810 F.2d 149, 150 (7th Cir. 1987).
Furthermore, “[w]hen given a choice between an
New York’s statute of limitations for breach of a written interpretation of [state] law which reasonably restricts
contract is six years. N.Y. CIV . PRAC. LAW & RULES § 213. liability, and one which greatly expands liability, we should
Kentucky has a fifteen-year statute of limitations for the choose the narrower and more reasonable path.” Todd v.
breach of a written contract. KY . REV . STAT . § 413.090(2). Societe Bic, S.A., 21 F.3d 1402, 1412 (7th Cir. 1994) (en
Defendant notified Plaintiff that it would deny coverage on banc); see also City of Phila. v. Beretta, U.S.A., Corp., 126 F.
November 14, 1986, and Plaintiff brought suit on June 6, Supp.2d 882, 906 (E.D. Pa. 2000) (declining to broaden state
2000. Thus, if New York’s statute of limitations applies, as law nuisance doctrine in a diversity case).
opposed to Kentucky’s, Plaintiff’s claim is barred.
As the First Circuit explained, federal courts sitting in a
In accordance with Erie Railroad Co. v. Tompkins, 304 diversity case are in “a particularly poor position . . . to
U.S. 64 (1938), when evaluating an undecided question of endorse [a] fundamental policy innovation . . . . Absent some
Kentucky law, a federal court sitting in diversity must make authoritative signal from the legislature of the courts of [the
the “‘the best prediction, even in the absence of direct state state], we see no basis for even considering the pros and cons
precedent, of what the Kentucky Supreme Court would do if of innovative theories . . . .” Dayton v. Peck, Stow & Wilcox
it were confronted with [the] question.’” Managed Healthcare Co. (Pexto), 739 F.2d 690, 694 (1st Cir. 1984). Federal
Assocs., Inc. v. Kethan, 209 F.3d 923, 927 (6th Cir. 2000) courts hearing diversity matters should be extremely cautious
(quoting Welsh v. United States, 844 F.2d 1239, 1245 (6th about adopting “substantive innovation” in state law. Rhynes
No. 01-6493 Combs v. Int’l Ins. Co. 13 14 Combs v. Int’l Ins. Co. No. 01-6493

v. Branick Mfg. Corp., 629 F.2d 409, 410 (5th Cir. Unit A Mae Endreson, Wisconsin’s Borrowing Statute: Did We
1980). Thus, we must handle this issue charily. Shortchange Ourselves?, 70 MARQ . L. REV . 120, 122-27
(1986).
I.
Historically, local statutes of limitations governed. At
As noted, Plaintiff contends that the Kentucky Supreme common law, statutes of limitation were procedural, not
Court would interpret Kentucky’s borrowing statute so that substantive, a fact which the Second Circuit rightly termed
whenever substantive Kentucky law governs a claim “an accident of history.” Bournias v. Atl. Mar. Co., 220 F.2d
involving multiple jurisdictions, Kentucky will apply the 152, 154 (2d Cir. 1955). In most civil law countries, the
statute of limitations of the forum with the most significant statute of limitations applicable to an action would come from
relationship to the dispute. the jurisdiction whose substantive law formed the action’s
basis. ERNST RABEL, THE CONFLICT OF LAWS: A
A borrowing statute is a legislative exception from the COMPARATIVE STUDY 511-16 (1964); Edgar H. Ailes,
general rule that the forum always applies its statute of Limitations of Actions and the Conflict of Laws, 31 MICH. L.
limitation. Miller v. Stauffer Chem. Co., 581 P.2d 345, 348 REV . 474, 478 (1933). Early English courts first confronted
(Idaho 1978) (“Borrowing statutes change the common law with conflict-of-law problems acted to protect English law
rule governing choice of the applicable statute of limitation.”) from continental influence and thus took the opposite route.
(citation omitted). Borrowing statutes vary somewhat, but all Ernest H. Lorezen, The Statute of Limitations and the Conflict
provide that the forum state will apply the statute of of Laws, 28 YALE L.J. 492, 496 (1919). Carrying the
limitations from the foreign jurisdiction in which the cause of English tradition to America, in M’Elmoyle v. Cohen, 38 U.S.
action accrued. Kentucky’s borrowing statute provides: (13 Pet.) 312 (1939), the Supreme Court held that a state may
treat statutes of limitations as procedural and thus may apply
When a cause of action has arisen in another state or its own limitations law even when it must apply another
country, and by the laws of this state or country where jurisdiction’s substantive law. Id. at 328; see also Sun Oil
the cause of action accrued the time for commencement Co. v. Wortman, 486 U.S. 717, 722 (1988); Wells v. Simonds
of an action thereon is limited to a shorter period of time Abrasive Co., 345 U.S. 514, 516-18 (1953); Townsend v.
than the period of limitation prescribed by the laws of Jemison, 50 U.S. (9 How.) 407, 413-20 (1850).
this state for a like cause of action, then said action shall
be barred in this state at the expiration of said shorter Before borrowing statutes, when a claim arose outside the
period. forum, courts handled the limitations problem in one of two
ways. First, if the forum’s rules barred the claim, the forum’s
KY . REV . STAT . § 413.320. Thus, if a cause of action arises courts would not hear the claim regardless of its status
in a foreign jurisdiction which has a shorter statute of elsewhere. See, e.g., Panhandle E. Pipe Line Co. v. Parish,
limitations than Kentucky for the same cause of action, 168 F.2d 238, 241 (10th Cir. 1948); Corrigan v. Clairol, Inc.,
Kentucky courts must “borrow” the foreign jurisdiction’s 126 F. Supp. 791, 792 (D. Conn. 1954). Second, the forum
statute of limitations. Almost three-fourths of states have would hear the claim as long as the local limitations period
statutes that resemble Kentucky’s. See Ibrahim J. Wani, had not expired, even if the limitations period applicable
Borrowing Statutes, Statutes of Limitations and Modern where the claim arose had run. See, e.g., Filson v. Fountain,
Choice of Law, 57 UMKC L. REV . 681, 690 (1989); Donna 197 F.2d 383, 384 (D.C. Cir. 1952) (per curiam); Goodwin v.
No. 01-6493 Combs v. Int’l Ins. Co. 15 16 Combs v. Int’l Ins. Co. No. 01-6493

Townsend, 197 F.2d 970 (3d Cir. 1952); Jackson v. Cont’l S. Restatement of the Conflict of Laws (1934), which reflected
Lines, Inc., 172 F. Supp. 809, 812 (W.D. Ark. 1959). In the vested rights approach. Section 384 of the Restatement
essence, lex fori governed the determination of procedural provides, for instance: “(1) [i]f a cause of action in tort is
issues, including those associated with statutes of limitation. created at the place of the wrong, a cause of action will be
recognized in other states[;] (2) [i]f no cause of action is
Lex fori governs procedural rights, but under lex loci (the created at the place of wrong, no recovery in tort can be had
law of the place), substantive rights are determined according in any other state.” Kentucky adopted its borrowing statute
to the law of the place where the cause of action accrued. Lex in 1942, during the heyday of the vested rights approach.
loci involves a concept of accrual similar to the idea of
vesting, which forms the basis for the vested-rights approach After most states adopted borrowing statutes, problems in
to choice of law. Replacing nineteenth-century comity theory the application of borrowing rules and a torrent of scholarly
but preceding contemporary choice of law paradigms, the criticism caused some state high courts to consider
vested rights approach dominated the period from 1900 to interpreting their state’s borrowing statutes so the forum
1950. EUGENE F. SCOLES, ET AL., CONFLICT OF LAWS § 2.7, would “borrow” another state’s limitation rule only when the
at 20 (3d ed. 2000). According to Professor Joseph H. Beale, local forum lacked a significant connection to the dispute.
the main proponent of vested rights analysis, “[a] right having Critics of borrowing statutes note that this would be
been created by the appropriate law, that recognition of its consistent with the Restatement (Second) on Conflict of
existence should follow anywhere.” JOSEPH H. BEALE , 3 Laws, which seeks to apply the law of the forum with the
CASES ON THE CONFLICT OF LAWS 517 (1901). As Justice most significant relationship with the parties and the dispute.
Holmes explained: See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6
(1969). The “most significant relationship” test that guides
[W]hen . . . a liability is enforced in a jurisdiction foreign the Second Restatement has at least arguable policy
to the place of the wrongful act, obviously that does not advantages over lex fori because the state with the most
mean that the act in any degree is subject to the lex fori, significant relationship with the parties and the dispute is
with regard to either its quality or its consequences. On probably the state with the greatest interest in the action’s
the other hand, it equally little means that the law of the outcome.4 In fact, one state, Minnesota, repealed its
place of the act is operative outside its own territory. borrowing statute in 1977. See MINN. STAT . § 541.14 (1976),
The theory of the foreign suit is that, although the act repealed by 1977 MINN. LAWS ch. 187 § 1.
complained of was subject to no law having force in the
forum, it gave rise to an obligation, an obligatio, which, Plaintiff cites a number of law review articles arguing that
like other obligations, follows the person, and may be borrowing statutes should be repealed entirely or interpreted
enforced wherever the person may be found. But as the to incorporate a “most significant relationship” test. See, e.g.,
only source of this obligation is the law of the place of Ibrahim J. Wani, Borrowing Statutes, Statutes of Limitations,
the act, it follows that that law determines not merely the
existence of the obligation, but equally determines its
extent. 4
“Lex fori,” in this sentence, also refers to the place whe re the cause
Slater v. Mexican Nat’l R.R. Co., 194 U.S. 120, 126 (1904) of action accrued (lex loci), because borrowing statutes effectively merge
(citations omitted). Beale served as the reporter for the the two concepts. Borrowing statutes are substantive laws that determine
which state’s statute o f limitations (a procedural rule) will app ly.
No. 01-6493 Combs v. Int’l Ins. Co. 17 18 Combs v. Int’l Ins. Co. No. 01-6493

and Modern Choice of Law; 57 UMKC L. REV . 681 (1989); recalculate royalty payments. Id. Wyoming’s borrowing
Donna Mae Endreson, Wisconsin’s Borrowing Statute: Did statute states that “[i]f by the laws of the state or country
We Shortchange Ourselves?, 70 MARQ . L. REV . 120 (1986); where the cause of action arose the action is barred, it is also
Samuel J. Morley, Applying the Significant Relationships Test barred in this state.” WYO . STAT . ANN . § 1-3-117. Colorado
to Florida’s Borrowing Statute, 59 FLA . BAR. J. 17 (1985); had a shorter statute of limitations that would have barred
Donald R. Rigone, The Impact of Significant Contacts on the BHP’s action; BHP thus argued that Wyoming’s longer
Pennsylvania Borrowing Statute, 72 DICK. L. REV . 598 limitations period should apply. 1. P.3d at 1256. The
(1968); David H. Vernon, Statutes of Limitation in the Wyoming court, applying the borrowing statute, found that
Conflict of Laws: Borrowing Statutes, 32 ROCKY MTN . L. “the breach occurred in Colorado where BHP received the
REV . 287 (1960). However, none of these law review articles letter.” Id. at 1258.
are binding on this Court. For that reason, we will conduct
our own inquiry. We note several points about BHP. First, the BHP court
provides scant detail on the nature of the breach. Not only
II. does the court appear skeptical that any breach occurred, the
court never defines the dispute with precision. From the
Plaintiff highlights five states whose judiciaries have, facts, it appears the case involved BHP’s attempt to modify
according to Plaintiff, interpreted borrowing statutes to the terms of an existing transaction—something different than
incorporate a most significant relationship test despite Plaintiff’s request that Defendant remit (or pledge to remit)
statutory language essentially indistinguishable from certain monies allegedly in accordance with the terms of a
Kentucky’s borrowing statute. Directors and Officers (hereinafter “D & O”) insurance
contract.
A.
Second, BHP urged the court to adopt the Wyoming
Beginning with Wyoming, Plaintiff claims that BHP limitations period because, according to BHP, the court
Petroleum v. Texaco Exploration Production, 1 P.3d 1253 should “focus[] upon the location of the subject matter of the
(Wyo. 2000), “addresses precisely the question before the contract.” Id. at 1256. Thus, the plaintiff in BHP argued in
Court in this case.” (Pl.’s Br. at 32) (Plaintiff’s emphasis). In favor of the limitation period associated with the forum of the
BHP, the Wyoming Supreme Court considered a dispute subject matter (the Wyoming resources), while the defendant
between two oil companies, each with offices located in both argued for the limitation period associated with the forum of
Texas and Colorado. Id. at 1255. BHP and Texaco had an the breach. BHP evidently did not disagree that if the breach
ongoing relationship in which they shared royalties from was the only relevant consideration, the breach occurred in
minerals extracted in Wyoming. Id. Colorado, as opposed to Texas, where Texaco posted the
letter. The latter scenario, however, is much more akin to the
BHP allegedly made an offer to Texaco to change the issue we presently face. Plaintiff’s counsel sent a letter from
formula by which the companies calculated royalties. Id. California to Defendant’s New York office, and the New
BHP sent that letter from Texas to Colorado. Id. Texaco York office replied with a letter sent to lawyers in three
allegedly accepted in a response sent from Colorado back to states—California, Kentucky and Ohio. Thus, as the origin
BHP’s office in Texas. Id. Later, Texaco sent another letter of the letter that allegedly constituted the breach, New York
from Texas to Colorado that disclaimed any intention to is the analogue of Texas in BHP, not Colorado. No one
No. 01-6493 Combs v. Int’l Ins. Co. 19 20 Combs v. Int’l Ins. Co. No. 01-6493

argues in the instant case that the California statute of Delaware against a corporate defendant also located in
limitations might apply. Delaware but with its principal place of business in
Pennsylvania. Id. at 484-85. Statutes of limitations in both
Finally, BHP never adopted the “substantial relationship” Delaware and Pennsylvania barred the action, but the suit
test. According to the BHP decision: could proceed under New York’s longer limitations period.
Id. at 484. New York has a borrowing statute similar to
The thread of the argument presented by BHP is tenuous. Kentucky’s. See id.
The essential premise is that in Stanbury v. Larsen, 803
P.2d 349, 355 (Wyo. 1990), this Court adopted The court concluded that the breach occurred in Delaware
Restatement (Second) Conflict of Laws § 188 (1971). because, under New York’s borrowing statute, “a cause of
BHP then contends that since that provision utilizes the action accrues at the time and in the place of injury,” and
“most significant relationship” test, the cause of action “[w]hen an alleged injury is purely economic, the place of
arose in Wyoming because the subject matter of the injury is usually where the plaintiff resides and sustains the
contract is Wyoming minerals. The elements articulated economic impact of the loss.” Id. at 485 (citations omitted).
in the “most significant relationship” test include “(a) the The Global Financial court did not adopt a “most substantial
place of contracting, (b) the place of negotiation of the relationship” analysis of New York’s borrowing statute. In
contract, (c) the place of performance, (d) the location of fact, the court rejected the more holistic “center of gravity”
the subject matter of the contract, and (e) the domicil, test, writing that the goals of New York’s borrowing statute
residence, nationality, place of incorporation and place of are “better served by a rule requiring the single determination
business of the parties.” RESTATEMENT (SECOND) of a plaintiff’s residence than by a rule dependent on a litany
CONFLICT OF LAWS § 188 at 575. of events relevant to the ‘center of gravity’ of a contract
dispute.”5 Id. at 486.
BHP, 1 P.3d at 1256. After considering its Stanbury decision,
the court concluded that “[w]e do not understand that this
Court adopted [in Stanbury] the ‘most significant 5
If Decedent’s residence were the only relevant consideration under
relationship’ test of Restatement (Second) Conflict of Laws Kentucky law, then the Kentucky statute of limitations would apply and
§ 188. . . . [W]e invoked the Restatement provision only as Plaintiff’s action could proceed. Although we must weigh Global
containing examples of factors to be considered in making the Financial when making our Erie guess, the case represents only one
determination as to where the cause of action arose.” Id. at source amo ng ma ny. As already observed, we consider “all relevant
data,” Kinglsey Associates, 65 F.3d at 507, when attempting to asce rtain
1257. Thus, BHP does not indicate that the Kentucky what a state court might do in a particular situation. M oreo ver, the
Supreme Court would adopt the most substantial relationship authority of Global F inan cial is somewhat limited because, although the
test. court does support “a rule requiring the single determination of a
plaintiff’s residence,” 715 N.E.2d at 486 , the court also says that “[w]hen
B. an alleged injury is purely economic, the place of injury is usually where
the plaintiff resides and sustains the economic impact of the loss.” Id. at
485 (emphasis added). This notion is troubling because one can easily
Plaintiff next cites New York law and Global Financial envision a situation where the plaintiff resides in a different forum than
Corp. v. Triarc Corp., 715 N.E.2d 482 (N.Y. 1999). Global the one in which he sustains the economic impact of the loss; for instance,
Financial involved an action brought in New York for the a business incorporated in one jurisdiction but with its principal place of
payment of consulting fees by a corporate plaintiff located in business in another. It is unclear how New York’s rule would apply to
such a situation.
No. 01-6493 Combs v. Int’l Ins. Co. 21 22 Combs v. Int’l Ins. Co. No. 01-6493

Equally important, the notion that the cause of action v. H & R Block, Inc., 24 S.W.3d 236, 242 (Mo. Ct. App.
accrues where the injury is sustained is not particularly 2000). Since the guaranty required the guarantors to make
helpful in this case because it begs the question of where the their payment to the plaintiff in Texas, the National Heritage
plaintiff sustained the injury. Plaintiff’s action involves an court found that the cause of action “originated” there. 41
abstract injury—by allegedly breaching its promise to pay in S.W.2d at 553.
a letter Defendant mailed from New York to three
jurisdictions, Decedent was not reimbursed for litigation Following this rule, however, has not led Missouri courts
expenses accumulated primarily in California but related to a to always conclude that a cause of action “originates” in the
Kentucky enterprise. Asking where Decedent “got hurt” does forum where the injury appears to occur. In Finnegan v.
not help us.6 Squire Publishers, Inc., 765 S.W.2d 703 (Mo. Ct. App. 1989),
for instance, the Missouri Court of Appeals applied
C. Missouri’s borrowing statute in a libel case. Id. at 704.
Finnegan forced the court to determine whether the cause of
Citing National Heritage Life Ins. Co. v. Frame, 41 S.W.2d action for libel “accrue[d] in Kansas where the newspaper
544 (Mo. Ct. App. 2001), Plaintiff claims Missouri containing the defamatory statements was first published, [or]
interpreted its borrowing statute in a fashion similar to New in Missouri where [the plaintiff] is licensed to practice law
York. National Heritage involved a suit brought by a Texas and where damages to his professional reputation were
plaintiff based on a guaranty allegedly breached by Missouri sustained.” Id. Applying Missouri’s borrowing statute, the
defendants. Id. at 546-48. Missouri’s borrowing statute court found that plaintiff’s cause of action “originated” where
states that “[w]henever a cause of action has been fully barred the defendant initially published the defamatory remarks, not
by the laws of the state, territory or country in which it where the plaintiff actually suffered the greatest injury. Id. at
originated, said bar shall be a complete defense to any action 706-07. This is in tension with Plaintiff’s claim that if we
thereon, brought in any of the courts of this state.” MO . REV . properly interpret Kentucky’s borrowing statute, New York’s
STAT . § 516.190. Missouri courts analyze the “origination” statute of limitations cannot bar his claim because he suffered
of a cause of action just as they analyze its accrual for no injury in New York.
purposes of beginning the limitations period. Nat’l Heritage,
41 S.W.2d at 552; see also Penalosa Coop. Exch. v. A.S. The Finnegan court reached its conclusion in part because
Polony Co., 754 F. Supp. 722, 733 (W.D. Mo. 1991); Alvardo the “[p]laintiff’s reputation interest is invaded at the time of
publication, and arguably that is the time when his damage is
sustained.” Id. at 706. Thus, at least in Missouri, the location
6
of the wrong is determined by where the plaintiff first sustains
This case presents an unusua lly tricky pro blem beca use it involves any damage, not where he sustains the most damage. Also
an econ omic injury. If, for instance, a defendant’s tortious conduct causes significant, the Finnegan decision recognized the problems
a General M otors plant to exp lode, one can easily locate the injury. But
General Mo tors is corp orate entity— in effect, a state-created legal fiction
inherent in attempting to determine the location of an
with assets, employees, customers and shareholders around the intangible injury, like an injury to reputation. Id. at 706-07.
world—which make s finding the locus of an intangible loss difficult. If The court refused “to adopt the assumption that an attorney’s
a breach o f contract causes G eneral M otors’ stock to decline, determining reputation can only be injured in the state where the attorney
where the compa ny “got hurt” is not so easy. Cf. Leroy v. Great W. is licensed to practice law.” Id. at 706. Rhetorically, the
United Corp., 443 U.S. 173, 185 (1979) (noting the “occasionally fictive
assumption” that claims arise in one place only).
court wondered, “[w]hat would result if plaintiff is licensed
No. 01-6493 Combs v. Int’l Ins. Co. 23 24 Combs v. Int’l Ins. Co. No. 01-6493

in more than one state or by a federal court or agency? necessarily focus on the place of injury, nor has it explicitly
Should a court look to the place of first injury, any injury, or endorsed the “most significant contacts” test. In fact,
the place of greatest injury?” Id. This discussion shows that Missouri has twice rejected express invitations to reinterpret
Missouri courts seem sensitive to the pitfalls inherent in Missouri’s borrowing statute to exclude situations in which
determining accrual based on where the injury purportedly Missouri does have the “most significant contacts.” See
occurred. Dorris v. McClanahan, 725 S.W.2d 870, 872 (Mo. 1987) (en
banc) (“[T]he Missouri legislature [through its borrowing
Another case, Harris-Laboy v. Blessing Hospital, Inc., 972 statute] preempts an analysis of 2d Restatement significant
S.W.2d 522 (Mo. Ct. App. 1998), further exemplifies the contacts in this case.”), overruled on other grounds by
manner in which Missouri courts apply the state’s borrowing Thompson v. Crawford, 833 S.W.2d 868 (Mo. 1992); Trzecki
statute. Harris-Laboy involved a Missouri resident who v. Gruenewald, 532 S.W.3d 209, 211 (Mo. 1976).
brought a malpractice action against an Illinois hospital and
three Illinois physicians after she discovered the doctors left D.
a surgical sponge in her abdomen. Id. at 523. At the time of
the surgery, the plaintiff lived in Illinois, but she did not Plaintiff next emphasizes Illinois law and Employers
discover the problem until she moved to Missouri several Insurance of Wausau v. Ehlco Liquidating Trust, 723 N.E.2d
years later. Id. The defendants argued that Missouri should 689 (Ill. Ct. App. 1999) (Ehlco II), an Illinois Court of
borrow Illinois’ statute of limitations, which would bar the Appeals opinion issued on remand from the Illinois Supreme
plaintiff’s action. Id. at 523-24. The court agreed because, Court’s decision in Employers Insurance Co. v. Ehlco
under Missouri law, an action originates when and where an Liquidating Trust, 708 N.E.2d 1122 (Ill. 1999) (Ehlco I).
injury can be ascertained, and “[d]amage is sustained and Elhco II dealt with one portion of a complex insurance
capable of ascertainment when it can be discovered or made coverage dispute. 723 N.E.2d at 691. Ehlco was a trust
known, not when the plaintiff actually discovers the injury or created by order of the Delaware Chancery Court to resolve
wrongful conduct.” Id. at 524 (citing Carr v. Anding, 793 the contingent liabilities of the Edward Hines Lumber
S.W.2d 148, 150 (Mo. Ct. App. 1990)) (emphasis in original). Company (“Hines”), a dissolved Delaware corporation, and
Consequently, the plaintiff’s “damage was sustained and was various affiliated businesses. Id. at 690. Plaintiff Wausau
capable of ascertainment immediately after the sponge was instituted a declaratory judgment action against Ehlco seeking
left inside her in Illinois.” Id. at 525. Whatever the merits of
this rule, it does not appear to help Plaintiff because, applying
Harris-Laboy, Plaintiff suffered an injury the moment York) and learned that Defendant did not plan to co ver P laintiff’s
Defendant drafted its response to Plaintiff’s coverage inquiry, litigation expenses, that shows the injury occurred in New York—just as
as opposed to when Plaintiff actually learned what Defendant the plaintiff in Harris-Laboy was injured in Illinois because that was
would do.7 Viewed overall, Missouri jurisprudence does not where she could have, at least theo retically, first learned of her injury.
Harris-Laboy, 972 S.W .2d at 525 . In fact, the instant case seem s a little
easier, because the plaintiff in Harris-Laboy had no reason to investigate
whether doctors had left surgical equip ment in her body until years later,
7
when she be gan to suffer complications fro m the sp onge . Plaintiff
Under Missouri’s rule, Plaintiff could have learned of Defendant’s expressly requested that Defendant announce whether it would cover
decision at any moment after Defendant made its choice. Since, for Plaintiff’s litigation expenses, so P laintiff knew D efendant was about to
instance, one o f Plaintiff’s attorneys in California or Kentucky could have formally decide whether it would abide by the terms of the D & O policy
contacted Defendant’s New Yo rk office by telephone (or flown to New as Plaintiff saw them.
No. 01-6493 Combs v. Int’l Ins. Co. 25 26 Combs v. Int’l Ins. Co. No. 01-6493

a declaration, inter alia, that it had no defense or indemnity Illinois has a borrowing statute similar to Kentucky’s. Like
obligations under certain insurance policies in connection Kentucky’s, the Illinois statute states that “[w]hen a cause of
with a lawsuit filed against Ehlco relating to a contaminated action has arisen in a state or territory out of this State, or in
industrial site in Wyoming. Id. Elhco filed a counterclaim a foreign country, and, by the laws thereof, an action thereon
against Wausau alleging that the insurer breached its duty to cannot be maintained by reason of the lapse of time, an action
defend and indemnify Ehlco in connection with thereon shall not be maintained in this State.” 735 ILL. COMP.
contamination at another site in Arkansas. Id. The Elhco II STAT . 5/13-210. Arkansas’ statute of limitations barred
opinion deals exclusively with the counterclaim. Id. at 692. Ehlco’s action, but Ehlco could proceed under Illinois’ longer
limitations period. 723 N.E.2d at 692. The court relied
In 1982, pursuant to the Comprehensive Environmental heavily on the Restatement (Second) of Conflict of Laws and
Response, Compensation, and Liability Act of 1980 considered numerous connections between Illinois and the
(“CERCLA”), 42 U.S.C. §§ 9601-9675, the United States dispute including:
Environmental Protection Agency (“EPA”) sent Hines a letter
notifying Hines that it faced potential liability for cleanup the issuance of the insurance policies to Hines in Illinois,
costs at the Arkansas site. 723 N.E.2d at 692. Hines, based the location of Hines's principal place of business in
in Chicago, notified Wausau that the EPA would assert Illinois, and the licensing of Wausau to do business in
liability against Hines. Id. The insurer responded, appearing Illinois. Additional contacts with Illinois include the fact
to deny coverage based on various policy exclusions. Id. that correspondence relative to the EPA lawsuit was
Hines’ counsel then wrote to Wausau twice, once in 1982 and directed to Hines in Illinois; Hines's requests to Wausau
once in March of 1983, each time “formally” requesting that for defense originated in Illinois; Wausau's responses to
it defend Hines against the EPA’s proceedings. Id. Wausau those requests were sent to Hines in Illinois; and Hines's
replied several weeks after the March letter with a legal counsel that provided Hines's defense with respect
memorandum that referred to Wausau’s first response but also to the EPA proceedings was located in Illinois and would
requested “a copy of the [EPA] action or correspondence . . . have billed its defense fees to Hines in Illinois. Finally,
[and] copies of any complaints or summons.” Id. No further any monies found to be owing Hines by Wausau as a
communication occurred until 1987, when Hines informed result of the counterclaim would have been due Hines in
Wausau that the company had almost reached a “final Illinois.
agreement” with the EPA. Id. Wausau responded
immediately, again recounting its prior reservation of rights Ehlco II, 723 N.E.2d at 696-97 (citing RESTATEMENT
and requesting the details of the proceedings. Id. The Illinois (SECOND) CONFLICT OF LAWS § 188(2) (1971)). The court
court noted that “[t]he submissions of the parties do not show thus found that Illinois’ statute of limitations would apply
that either Hines or its counsel responded to Wausau’s [two] because Illinois uses the limitation period of the forum “that
requests for information.” Id. at 692-93. In 1988, the EPA bears the most significant relationship to the contract
filed suit against Hines in Arkansas federal district court and dispute,” id. at 723 N.E.2d at 695, although Illinois law is just
simultaneously proposed a consent decree. Id. at 693. one factor among many we must consider when making an
Wausau received news of that filing from a source other than Erie guess.
Hines. Id.
Furthermore, the Ehlco II court was careful to “note that the
inquiry as to where the cause of action arose presupposes that
No. 01-6493 Combs v. Int’l Ins. Co. 27 28 Combs v. Int’l Ins. Co. No. 01-6493

the cause of action has in fact arisen.” 723 N.E.2d at 693. In could have received that notice anywhere—even Arkansas.
Ehlco I, the Illinois Supreme Court “held that Wausau’s duty This casts doubt on Ehlco II’s reasoning.8
to defend was triggered by the filing of the EPA lawsuit in the
federal district court in Arkansas seeking entry of the Additionally, the Ehlco II Court noted that “the location of
proposed consent decree.” Id. (citing Ehlco I, 708 N.E.2d at the subject matter of the contract, such as the location of the
1130). The Illinois Supreme Court “also found that risk insured by an insurance policy, is entitled to little weight
notwithstanding the triggering event of the filing of the when the subject matter or risk is located in more than one
lawsuit, Wausau would not have had a duty to defend Hines state.” 723 N.E.2d at 694 (citing Lapham-Hickey Steel Corp.
in the EPA action unless Hines tendered the lawsuit to v. Prot. Mut. Ins. Co., 655 N.E.2d 842, 845 (Ill. 1995) and
Wausau for defense or Wausau had actual notice of the RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193, cmt. b
lawsuit.” Id. (citing Ehlco I, 708 N.E.2d at 1131). The (1971)). As a consequence, the court gave the location of the
Illinois Supreme Court remanded the notice issue to the trial risk less salience in its “most significant relationship” analysis
court with instructions that the parties “be given the because the plaintiff’s Comprehensive General Liability
opportunity to amend their pleadings to address the actual Policy (“CGL”) covered environmental risks in multiple
notice issue.” Ehlco I, 708 N.E.2d at 1131-32. The Illinois states. Similarly, Decedent’s D & O policy covered certain
Court of Appeals, however, explained that “notwithstanding D & O litigation-related expenses wherever they might occur.
the mandated examination of the notice issue by the [trial] This counsels against excessively focusing our inquiry on the
court, we should, in the interest of judicial economy and our locus of the policy’s “subject matter.”
mandate from the Supreme Court, proceed to consider the
questions of whether a cause of action arose and the residency As already alluded to, it is hard to determine where the
of the parties.” Ehlco II, 723 N.E.2d at 694. Thus, the entire risks a D & O policy insures against are located. It would be
decision in Ehlco II assumed, without deciding, that the simplistic to conclude that a risk is always located in the
plaintiff had a cause of action. insured’s state of residence because insurance protects only
against financial loss, which is ultimately felt at a person’s
This assumption, required by the Illinois Supreme Court, residence or a corporation’s headquarters. A policy can cover
probably had the unintended effect of obscuring the potential risks in multiple states, as the Second Restatement suggests,
significance of the forum in which the cause of action see RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193,
accrued. According to the Illinois Supreme Court, no cause
of action arose against Wausau unless and until Wausau had
8
actual notice of the “trigger[],” which was the EPA lawsuit. Neither decision discusses where Wausau may have received notice
Ehlco I, 708 N.E.2d at 1130-31. Therefore, the triggering of the suit, which is what the Illinois Supreme Court ordered the trial
event was the filing of the EPA’s suit in Arkansas, and the court to investigate. There is no published history after Ehlco II, so
cause of action did not arise until Wausau, the defendant, research does not reve al what the trial court determined.
received “actual notice” of the lawsuit. Conceivably, Wausau It is also unclear that the rea soning of Ehlco II is sound und er a “most
significant relationship” analysis. T he Illinois Court of Appe als applied
Illinois’ statute of limitations even though, assuming a cause of action
accrued, the EPA “triggered the possibility of accrual” in Arkansas by
filing suit there, see Ehlco I, 708 N.E.2d at 1130, and the plaintiff’s action
related to insurance obligations in connection with an Arkansas cle anup
ope ration.
No. 01-6493 Combs v. Int’l Ins. Co. 29 30 Combs v. Int’l Ins. Co. No. 01-6493

cmt. b (1971), and the Second Restatement cautions against With respect to contract disputes, Plaintiff cites
focusing on the location of the risk when risks are dispersed Lumberman’s Mutual Casualty Co. v. August, 530 So.2d 293
across forum boundaries, see id., which means the residence (Fla. 1988). Lumberman’s involved a Massachusetts driver
of someone insured under a D & O policy like the one insured by a policy with uninsured motorist benefits. Id. at
Decedent held should make little difference. This is further 294. The plaintiff signed the policy in Massachusetts before
underscored by the fact that many D & O policies cover having an accident with an uninsured motorist in Florida. Id.
multiple directors and officers, each potentially residing in She then brought suit against her insurer for benefits after
different fora. The limited importance given to risk location Massachusetts’ limitations period expired but before Florida’s
in the Ehlco litigation does not support the outcome Plaintiff terminated. Id. The court found Florida’s statute of
urges. limitations governed the action because “the lex loci
contractus rule determines the choice of law for interpretation
E. of provisions of uninsured motorists clauses in automobile
insurance policies just as it applies to other issues of
Florida is the final jurisdiction whose law Plaintiff asks us automobile coverage.” Id. at 295. This is because, according
to consider. Like Kentucky, Florida’s borrowing statute to the court, the lex loci contractus rule dictates that the cause
provides that “[w]hen the cause of action arose in another of action arises in the place where the contract is executed.
state or territory of the United States, or in a foreign country, Id. at 296 (citing Colhoun v. Greyhound Lines, Inc., 265
and its laws forbid the maintenance of the action because of So.2d 18, 21 (Fla. 1972)).
lapse of time, no action shall be maintained in this state.”
FLA . STAT . § 95.10. Plaintiff first cites Bates v. Cook, 509 Florida courts continue to apply the “most significant
So.2d 1112 (Fla. 1987), for the proposition that Florida relationship” test to torts only, not contract actions. See, e.g.,
applies a “most significant relationship” test to its borrowing Allstate Ins. Co. v. Clohessy, 32 F. Supp.2d 1328, 1333 (M.D.
statute when the cause of action sounds in tort. Plaintiff is Fla. 1998) (refusing to apply the “most significant
partly correct—Florida adopted the “most significant relationship” test to a contract dispute). Although Plaintiff
relationship” test in Bishop v. Florida Speciality Paint Co., does not argue that the Kentucky statute of limitations should
389 So.2d 999, 1001 (Fla. 1980), but that case did not involve govern his suit solely because Decedent executed the
Florida’s borrowing statute. Rather, Bishop adopted the insurance contract there, one should recognize in passing that
Second Restatement’s approach only with respect to the Florida’s rule is problematic because it offers no guidance in
determination of what substantive law would apply to torts.
Id. at 1000. The court said nothing about statutes of
limitations, which are procedural. The court also remained
silent about contract disputes.9 Id. Does the lex loci delicti rule govern the rights and
liabilities of the parties in tort actions, precluding
consideration by the Florida courts of other relevant
9
considera tions, such as the policies and purposes
The Bishop Court exp lained the issue b efore it: underlying the conflicting laws of a foreign jurisdiction
where the tort occurred, and the relationship of the
The District Court of Appeal, First District, affirmed the ruling occurrence and of the parties to such policies and
of the trial court but certified the following question for our purposes?
consideration:
509 So.2 d at 1000 .
No. 01-6493 Combs v. Int’l Ins. Co. 31 32 Combs v. Int’l Ins. Co. No. 01-6493

situations where the contract dispute involves the failure to Id. at 1330-31 (emphasis added). Thus, Florida does not use
execute a contract or when the parties executed the contract the test Plaintiff advocates and one Florida court emphasized
in a forum where the defendant is not amenable to process. that modifying a borrowing statute is a legislative prerogative.
A federal court forced to make an Erie guess should pause
Most important for the purposes of the instant before reinterpreting a state statute if the state law is one that
Erie problem, in Pledger v. Burnup & Sims, Inc., 432 So.2d is better modified legislatively. Whether or not the Kentucky
1323 (Fla. Dist. Ct. App. 1983), the Florida District Court of courts could reinterpret Kentucky’s borrowing statute instead
Appeals declined to construe the Bishop decision that applied of the Kentucky legislature despite the separation of powers
the “most significant relationships” to substantive conflict of concerns expressed in Pledger, the reinterpretive process
laws determinations as also covering procedural matters like raises much more problematic federalism concerns when a
the statute of limitations determination implicated by federal court construes a state statute.
Florida’s borrowing statute. Id. at 1330. The Florida District
Court of Appeals presented the issue this way: Although Plaintiff’s citations to Wyoming, New York,
Missouri, Illinois and Florida law are somewhat illuminating,
Unquestionably, Florida has the most significant contacts none of this information makes clear that the Kentucky
with the issue presented . . . . Appellant has presented a Supreme Court would interpret Kentucky’s borrowing statute
question on which he has cited no authority, in Florida or as Plaintiff suggests.
elsewhere: that is, in view of the [Florida] Supreme
Court’s adoption of Restatement (Second) Conflict of III.
Laws § 145, did the cause of action arise in New York,
or in Florida, which has the most significant As cited above, Plaintiff references various scholarly works
relationship? that urge courts to construe borrowing statutes in a manner
that incorporates the “most significant relationship” test.
Id. The court found New York’s limitations period would Despite these academic exhortations, we recognize that
apply because the Florida legislature, not the judiciary, should borrowing statutes interpreted in accordance with the accrual
make the decision that the “most significant relationship” test approach produce several meaningful policy advantages.10
should apply to Florida’s borrowing statute. Id. The Pledger
court explained: First, borrowing statutes impede forum shopping. As one
federal court sitting in diversity explained, the objective of
The Legislature has not amended [the borrowing statute] Pennsylvania’s borrowing statute is “simply to insure that a
since the [Florida] Supreme Court opinion in Bishop. We plaintiff who sues in Pennsylvania obtains no greater rights
have no hint of the legislative will on the question of than those given in the state where his cause of action arose.”
determining where a cause of action arises. They may Wilt v. Smack, 147 F. Supp. 700, 704 (E.D. Pa. 1957); see
have assumed the Bishop conflicts rule would determine also Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d Cir.
where a cause of action arises. They might equally have
assumed that Bishop, a case dealing exclusively with the
rights and liabilities of the parties, had nothing to do with
10
the procedural borrowing statute. The “accru al app roach” is a concise moniker for the interpretation
Defendant advo cates— a judicial focus exclusively on where the cause of
action accrued, no t which state has “the most significant relationship.”
No. 01-6493 Combs v. Int’l Ins. Co. 33 34 Combs v. Int’l Ins. Co. No. 01-6493

1998) (“[T]he purpose of the borrowing statute—preventing Hampshire statute of limitation despite lack of borrowing
forum shopping by plaintiffs seeking the holy grail of the statute in New Jersey, in part to prevent forum shopping).
longer period—is best served by applying the period of the
foreign state, regardless of how it is denominated.”); Faigin Second, strictly enforcing borrowing statutes best serves the
v. Doubleday Dell Publ’g Group, Inc., 98 F.3d 268, 271 (7th purpose of statutes of limitation and repose.11 Most states,
Cir. 1996) (observing “the antipathy to forum shopping including Kentucky, have tolling statutes that stall the running
reflected in Wisconsin's borrowing statute (in all such of the applicable limitations period if a cause of action
statutes, really)”); Siegemund v. Shapland, 247 F. Supp. 2d. 1, accrues against a state resident not present in the jurisdiction
6 n.17 (D. Me. 2003) (“Borrowing statutes, enacted by states when the cause of action accrues. Kentucky law explains that
to prevent forum shopping, ‘enable the forum to borrow and “[i]f, at the time any cause of action mentioned in Ky. Rev.
use the statute of limitations of another state in determining Stat. 413.090 to 413.160 accrues against a resident of this
the timeliness of an action.’”) (quoting Hossler v. Barry, 403 state, he is absent from it, the period limited for the
A.2d 762, 765 (Me. 1979)); Flowers v. Carville, 112 F. Supp. commencement of the action against him shall be computed
2d 1202, 1208 (D. Nev. 2000) (“Borrowing statutes are from the time of his return to this state.” KY . REV . STAT .
designed to prevent forum shopping.”). § 413.190(1). Furthermore,

An accrual-based approach makes forum shopping When a cause of action mentioned in KRS 413.090 to
impossible because the statute of limitations that governs in 413.160 accrues against a resident of this state, and he by
the forum where the cause of action accrued will apply no absconding or concealing himself or by any other
matter where the plaintiff files suit. In contrast, allowing indirect means obstructs the prosecution of the action, the
plaintiffs to file suit in any state that has significant contacts time of the continuance of the absence from the state or
with the dispute encourages plaintiffs to shop for the forum obstruction shall not be computed as any part of the
with the longest statute of limitations. Although limiting the period within which the action shall be commenced.
operation of a borrowing statute to only those instances where
a state has the most significant connection with the lawsuit Id. § 413.190(2). Since tolling statutes eliminate a
helps make forum shopping somewhat more difficult, many defendant’s ability to flee the jurisdiction and return after the
modern commercial transactions transcend state boundaries. statute of limitations expires, tolling statutes can inadvertently
If a contract is negotiated in Michigan between an Ohio create perpetual liability for a defendant legally residing in
company and a Kentucky company, with performance
scheduled in Tennessee, determining which state has the
11
“most” significant contacts becomes difficult and subjective Borrowing statutes apply to both foreign statutes of limitation and
enough for enterprising attorneys to capitalize on differences statutes of repo se, because both kinds o f laws serve to limit the perio d in
between limitations periods. State courts’ desire to which a plaintiff may initiate an action. Statutes of limitations and repo se
are frequently confused, but both serve similar purposes. “A statute of
discourage forum shopping is significant enough that in at limitations focuses on time measured from an injury; a statute of repo se
least one instance, the New Jersey Supreme Court applied a rests on the time from some initiating event unrelated to an injury.”
foreign jurisdiction’s limitation period even though New Roskam Baking Co., Inc. v. Lanham Mach. Co., Inc., 288 F.3d 895, 903-
Jersey does not have a borrowing statute. See Heavner v. 04 (6th Cir. 2002). Thus, a statute of limitations might bar an injured
Uniroyal, Inc. 305 A.2d 412, 418 (N.J. 1973) (applying New plaintiff from bringing a product liability action more than three years
after he discovered his injury, whereas a statute of repose would bar the
action three years after the manufacturer produ ced the pro duct.
No. 01-6493 Combs v. Int’l Ins. Co. 35 36 Combs v. Int’l Ins. Co. No. 01-6493

Kentucky accused of a tort or breach of contract that occurred in encouraging expeditious dispute resolution and the interest
in another jurisdiction. If the defendant is not present in in creating confidence that long bygone incidents will not
Kentucky when the cause of action accrues against him, he suddenly reemerge in litigation initiated at some unknown
will face liability upon his return to the State even if he future time. Interpreting Kentucky’s borrowing statute in a
returns decades later. See id. The borrowing statute manner more likely to create instances of lengthy or perpetual
minimizes this problem by using the foreign state’s statute of liability does a disservice to these objectives.
limitations when the cause of action accrues in the foreign
state, thereby eliminating the problem of perpetual liability in Third, borrowing statutes reflect respect for state
those circumstances. See George v. Douglas Aircraft Co., sovereignty. A cause of action is an attempt by the plaintiff
332 F.2d 73, 78 (2d Cir. 1964) (discussing the problem of to vindicate what he believes is a legal right or obligation
perpetual liability); Cvicich v. Giardino, 99 P.2d 573, 574-75 owed. Legal rights and obligations vest when the last event
(Cal. Ct. App. 1940) (same). necessary to create the cause of action occurs. The law of the
state where the final event occurs determines the parties’
Relieving potential defendants of uncertainty is one of the rights and responsibilities at that point because each state has
historical purposes of statutes of limitations. As the Supreme sovereignty over that which occurs within in its territory. See,
Court explained, “[s]tatutes of limitations, like the equitable e.g., RESTAT EMENT OF CONFLICT OF LAWS §§ 377-388. As
doctrine of laches, in their conclusive effects are designed to discussed, the application of the law of the place of the injury
promote justice by preventing surprises through the revival of is why this system is sometimes called the lex loci approach.
claims that have been allowed to slumber until evidence is Justice Story argued,
lost, memories have faded, and witnesses have disappeared.”
Order of R.R. Telegraphers v. Ry. Express Agency, 321 U.S. [E]very nation possesses an exclusive sovereignty and
342, 348-49 (1944). Earlier, the Supreme Court wrote that: jurisdiction within its own territory. . . . The direct
consequence of this rule is, that the laws of every state
It is a well-settled principle that a statute of limitations is affect, and bind directly all property, whether real or
the law of the forum, and operates upon all who submit personal, within its territory; and all persons, who are
themselves to its jurisdiction. . . . Of late years, the resident within it . . . ; and also all contracts made, and
courts, in England and in this country, have considered acts done within it.
statutes of limitations more favorably than formerly.
They rest upon sound policy, and tend to the peace and JOSEPH STORY , COMMENTARIES ON THE CONFLICT OF LAWS,
welfare of society. The courts do not now, unless FOREIGN AND DOMESTIC 18 (2d ed. 1841) (hereinafter
compelled by the force of former decisions, give a “COMMENTARIES”); see also Renfroe v. Eli Lilly & Co., 686
strained construction to evade the effect of those statutes. F.2d 642, 647 (8th Cir. 1982) (“[T]he cause arises where as
By requiring those who complain of injuries to seek well as when the final significant event that is essential to a
redress by action at law, within a reasonable time, a suable claim occurs.”) (citing Mack Trucks, Inc. v. Bendix-
salutary vigilance is imposed, and an end is put to Westinghouse Auto. Air Brake Co., 372 F.2d 18, 20 (3d Cir.
litigation. 1966)). The notion of vested rights, therefore, depends on
ideas of territoriality and sovereignty.
McCluny v. Silliman, 28 U.S. (3 Pet.) 270, 276-77 (1830).
Statutes of limitations and repose thus serve both the interest
No. 01-6493 Combs v. Int’l Ins. Co. 37 38 Combs v. Int’l Ins. Co. No. 01-6493

Borrowing statutes embody the idea that the foreign significant relationship” with the dispute, adopting Plaintiff’s
jurisdiction’s law should control out of respect for that approach might encourage forum shopping, work against the
jurisdiction’s territorial sovereignty. See, e.g., Devine v. purposes of statutes of limitations and repose, and
Rook, 314 S.W.2d 932, 935 (Mo. Ct. App. 1958) (“It is demonstrate an inappropriate disregard for another state’s
fundamental that the law of the place where the cause of sovereignty.
action first came to life controls the substantive law of the
cause, since the cause owes its existence, and the character of IV.
its existence, to that place.”). States, in turn, should respect
each others’ sovereign rights. In his classic explanation of the In a diversity case, the Kentucky statute of limitations will
comity argument, Justice Story wrote: be applied as interpreted by this Court. Atkins v. Schmutz
Mfg. Co., 372 F.2d 762, 763 (6th Cir. 1967). Kentucky
The true foundation of which the administration of would not apply a “most significant relationship” analysis
international law must rest is that the rules which are to when applying Kentucky’s borrowing statute to the instant
govern are those which arise from mutual interest and case.
utility, from a sense of the inconveniences which would
result from a contrary doctrine, and from a spirit of moral A.
necessity to do justice, in order that justice may be done
to us in return. The statutory language supports Defendant’s position. The
“fundamental rule of statutory construction” in Kentucky “is
COMMENTARIES, at 34. If Kentucky fails to respect that a to determine the intent of the legislature, considering the evil
cause of action accrues in a foreign jurisdiction, like New the law was intended to remedy.” Beach v. Commonwealth,
York, although the final event necessary for the cause of 927 S.W.2d 826, 828 (Ky. 1996); see also Kelly v. Marr, 185
action occurred in New York, Kentucky shows disrespect for S.W.2d 945, 949 (Ky. 1945). To ascertain legislative intent,
New York’s territoriality in derogation of comity principles Kentucky courts must refer to "the words used in enacting the
that the Kentucky Supreme Court may value. statute rather than surmising what may have been intended
but was not expressed." Flying J Travel Plaza v.
Without a borrowing statute, New York could establish a Commonwealth, 928 S.W.2d 344, 347 (1996) (citing Ky.
cause of action to remedy a particular wrong, but reach a Assoc. of Chiropractors, Inc. v. Jefferson County Med. Soc.,
legislative judgment about the significance of the problem 549 S.W.2d 817 (Ky. 1977)). To reiterate, Kentucky’s
and the importance of finality, and choose to attach a short borrowing statute states:
statute of limitations to the new cause of action. By failing to
recognize New York’s decision, Kentucky would effectively When a cause of action has arisen in another state or
undermine a quasi-substantive component of New York country, and by the laws of this state or country where
law—not something we should lightly assume the Kentucky the cause of action accrued the time for the
Supreme Court would choose to do. commencement of an action thereon is limited to a
shorter period of time than the period of limitation
Thus, despite Plaintiff’s attempt to capitalize on the prescribed by the laws of this state for a like cause of
scholarly pressure to interpret Kentucky’s borrowing statute action, then said action shall be barred in this state at the
as ineffective when Kentucky does not have the “most expiration of said shorter period.
No. 01-6493 Combs v. Int’l Ins. Co. 39 40 Combs v. Int’l Ins. Co. No. 01-6493

KY . REV . STAT . § 413.320. Nowhere in the statutory 785 S.W.2d 520 (Ky. Ct. App. 1990), the Kentucky Court of
language does the “most significant relationship” test appear. Appeals refused to apply Kentucky substantive law to a
We are “not at liberty to add or subtract from the legislative Tennessee insurance contract following an automobile
enactment nor discover meaning not reasonably ascertainable accident in Kentucky between a Kentucky driver and a
from the language used.” Commonwealth v. Gaitherwright, Tennessee driver. Id. at 521. As long as Kentucky courts
70 S.W.3d 411, 413 (Ky. 2002) (citing Commonwealth v. continue to apply the vested rights approach to contracts, and
Frodge, 962 S.W.2d 864, 866 (Ky. 1998)). Nevertheless, we insurance contracts in particular, this Court, sitting in
certainly acknowledge Plaintiff’s argument that other state diversity, lacks a basis to predict that the Kentucky Supreme
supreme courts have read elements of a “most significant Court would take a different route.
relationship” test into borrowing statutes that lacked such
express language. C.

B. Willits v. Peabody Coal Co., Nos. 98-5458, 98-5527, 1999
WL 701916 (6th Cir. Sept. 1, 1999) (unpublished), is the only
Kentucky last amended its borrowing statute in 1942, at a case to deal with questions like those Plaintiff presents in the
time when Kentucky still followed the vested rights approach context of Kentucky’s borrowing statute. Although Willits is
to substantive choice of law questions. See KY . REV . STAT . an unpublished opinion, its reasoning is instructive.
§ 413.320. Prior to 1967, all Kentucky case law applied lex
loci. See, e.g., Ansback v. Greensberg, 256 S.W.2d 1 (Ky. In Willits, the plaintiffs asserted a breach of contract claim
1967) (applying lex loci to an automobile accident case). In alleging, inter alia, improper calculation of royalties under
a series of cases in the late 1960s, however, Kentucky began coal mining agreements. 1999 WL 701916, at *11. The
to depart from the lex loci approach to torts. See Foster v. parties originally executed the contract in Kansas. Id. at *13.
Leggett, 484 S.W.3d 827, 828-29 (Ky. 1972); Arnett v. The defendants calculated royalty payments in Missouri and
Thompson, 433 S.W.2d 109, 112 (Ky. 1968); Story v. then mailed them to various states, including Kentucky. Id.
Burgess, 420 S.W.2d 548, 548 (Ky. 1967); Wessling v. Paris, Missouri’s shorter limitations period would have barred the
417 S.W.2d 259, 260-61 (Ky. 1967). The Kentucky Supreme plaintiffs’ claims. Id. at *12. Both parties agreed that
Court, however, did not make the same change with respect Kentucky’s borrowing statute controlled the case. Id. at *11.
to contract cases. The Willits Court explained how it would apply the
borrowing statute:
In Lewis v. American Family Ins. Group, 555 S.W.2d 579
(Ky. 1977), an Indiana resident driver insured in Indiana was The Kentucky borrowing statute requires a three step
involved in an accident in Kentucky with an uninsured analysis: (1) we must determine whether the cause of
Kentucky driver. Id. at 580. The Indiana driver filed suit in action accrued in another state; (2) if the cause of action
Kentucky against his insurer for uninsured motorist coverage did accrue in another state, we must determine whether
and the court applied Indiana substantive law. Id. at 581. that state's statute of limitations for the particular cause
Under Lewis, the rights vested in the place of insurance, of action is shorter than Kentucky's; (3) if the accrual
which was Indiana, not Kentucky, where the accident state's statue of limitations is shorter than Kentucky's, we
occurred. More recently, in State Farm Mutual Automobile apply the statute of limitations of the accrual state;
Insurance Co. v. Tennessee Farmers Mutual Insurance Co., however, if the statute of limitations for the cause of
No. 01-6493 Combs v. Int’l Ins. Co. 41 42 Combs v. Int’l Ins. Co. No. 01-6493

action in that state is longer than Kentucky's, we apply Plaintiff offers three challenges to the reasoning offered in
Kentucky's shorter statute. Willits and to the application of Willits to the matter presently
before us. First, Plaintiff notes that the district court applied
Id. at *12. The second and third parts of this process are Willits to the instant action in part because of Wisconsin
fairly simple: if the cause of action accrued in a foreign state, jurisprudence the district court found useful. Wisconsin has
then determine that state’s statute of limitations, and if the a borrowing statute similar to Kentucky’s, but Plaintiff
foreign state has a shorter limitations period than Kentucky, complains that the Wisconsin cases cited by the district court
borrow the foreign state’s shorter rule. The trouble occurs in do not clearly establish what the Kentucky Supreme Court
reaching the second and third components of the analysis would do. The district court initially cites Abraham v.
because, as Willits correctly observed, “there is little or no General Cas. Co. of Wisconsin, 576 N.W.2d 46 (Wis. 1998).
law in Kentucky concerning where a breach of contract action In Abraham, the Wisconsin Supreme Court held that a cause
accrues.” Id. (emphasis in original). of action is “foreign” when “the final significant event giving
rise to a suable claim occurs outside the state of Wisconsin.”
To help ascertain how the Kentucky judiciary might Id. at 53-54. Plaintiff disputes Abraham’s persuasive value
determine where a cause of action accrues, Willits noted that because Abraham involved a set of facts in which all
Kentucky’s statute of limitations for contracts of sale under significant events occurred in Wisconsin. See id. at 54-55
the Uniform Commercial Code (UCC) provides: “‘A cause of (Bradley, J., concurring). Yet even assuming the Abraham
action accrues when the breach occurs, regardless of the decision depended on significantly different facts than the
aggrieved party’s lack of knowledge of the breach.’” Willits, case presented here, Abraham still reinforces the vested rights
1999 WL 701916, at *13 (quoting KY . REV . STAT . § 355.2- theory that a cause of action accrues wherever the “last act”
725(2)). This supports the conclusion, relevant to Plaintiff’s necessary to create the claim occurs.
lawsuit, “that a breach can occur before the aggrieved party
actually knows of it and is damaged by it.” Id. (emphasis The district court also relied on Ristow v. Threadneedle Ins.
added). This supports Willits’ decision that the breach Co., 583 N.W.3d 452 (Wis. Ct. App. 1998). In Ristow, a
occurred in Missouri, “where [the defendant] improperly Wisconsin resident sued a South Carolina insurer because he
calculated the royalties and from whence [the defendant] never received a settlement check after suffering an injury in
mailed out the royalty payments to the Plaintiffs in their South Carolina. Id. at 453. Significantly, Ristow found that
various states of residence.”12 Id. at *14. the final event creating the cause of action was the
defendant’s failure to issue the check from its South Carolina
office, not the plaintiff’s failure to receive the check in
12
Significantly, Willits also mentions the problems presented by Wisconsin. Id. at 455. Citing Western Union Tel. Co. v.
defining accrual in a m anner related to where the p laintiff or plaintiffs Lacer, 93 S.W. 34 (Ky. 1906), Plaintiff claims the district
suffer damages. The Willits Court wrote: court should not have relied on Ristow because Kentucky
To the extent that the calculations and the resulting paym ents courts would have reached a different conclusion if faced with
were a breach of Peabod y’s obligation, that breach o ccurred in the Ristow facts. The Lacer court had to decide whether a
the office in Missouri. It would b e unworkab le and irration al to cause of action against Western Union accrued in Indiana,
hold that the cau se of action accrued whereve r each Plaintiff where the company affixed the wrong address to a telegraph,
happened to receive his or her deficient check. or in Kentucky, where the company failed to promptly deliver
199 9 W L 70 191 6, at *13 (emp hasis ad ded ). the message. Id. at 35. Although Lacer found that the cause
No. 01-6493 Combs v. Int’l Ins. Co. 43 44 Combs v. Int’l Ins. Co. No. 01-6493

of action accrued in Kentucky, that conclusion does not aide Third, in an attempt to minimize the importance of Willits
Plaintiff much because the Lacer plaintiff expressly as applied to the facts of his case, Plaintiff presents us with
contracted for Western Union to “expeditiously deliver the this hypothetical:
correct message to the addressee at the point addressed.” Id.
at 35. Neither Ristow nor Plaintiff’s case involves a contract Buyer buys a used car from Seller using a contract that
that specified a delivery point. More important, Lacer calls for a full-sized spare and shortens the statute of
requires a different “last act” analysis than Ristow because the limitations to one year (as allowed by [Ky. Rev. Stat.]
Lacer Plaintiff could not have sued Western Union until the 355.2-725). The contract also provides a one year
company failed to promptly deliver the message, whereas the warranty for all electrical components, which requires
Ristow plaintiff could have sued the defendant insurer Buyer to submit a claim form for any repair. Eleven
whenever (and however) he discovered that the defendant did months later, the alternator fails, and Buyer submits a
not mail him his settlement check. warranty claim form. Two months after that, Buyer has
a flat and discovers that there is no spare at all. Three
Plaintiff’s second direct challenge to the application of months after the flat, the warranty company delivers a
Willits to the instant problem depends upon Kentucky venue letter claiming that the alternator is not an electrical
jurisprudence. Plaintiff cites a series of cases interpreting component.
Kentucky’s venue statute, Ky. Rev. Stat. Ann. § 452.450.
See, e.g., T.C. Young Constr. Co. v. Hartford Accident & Buyer’s breach action for the lack of a spare fails because
Indem. Co., 441 S.W.2d 781 (Ky. 1969); Prudential Ins. Co. the breach occurred at delivery, as Seller could have put
of Am. v. Terry, 95 S.W.2d 1109 (Ky. 1936); Ins. Co. of N. the spare in at any time until then. Buyer could have
Am. v. Hopper, 69 S.W.2d 728 (Ky. 1934); Torrent Lodge v. discovered the spare within the year, but did not and is
Nat’l Sur. Co., 21 S.W.2d 439 (Ky. 1929). These cases, barred. By not requiring actual knowledge, the statute
however, merely address the question of venue for a suit [of limitations] places the burden on Buyer to examine
based on an insurance policy, not where a cause of action the goods on delivery, and limitations begin at the point
accrues under Kentucky’s borrowing statute. Under he should have known of the breach. This concept of
Kentucky’s venue statue, plaintiffs must bring lawsuits for accrual when the plaintiff should have known of the
breach of contract against a corporation in the county where injury is found both in other limitations statutes and case
either (1) the corporation is present; (2) its agent resides; law. See [KY . REV . STAT . ANN .] 413.140(2); Ky. Title
(3) the contract was made; or (4) the parties were to perform Trust Co. v. Weil, 136 S.W.2d 1097 (Ky. 1939).
the contract. KY . REV . STAT . § 452-450. The planned place
of performance is a possibly appropriate venue, but that says Buyer’s action for breach of the warranty, however, does
little about where a cause of action accrues pursuant to the not accrue under the statute until he receives the letter
borrowing statute.13 denying his claim, sixteen months after the purchase, and
five months after the alternator failed. Buyer could not

13
Plaintiff also cites Allstate Insurance Co. v. Napier, 505 S.W.2d policy provisions, not deciding arguments over which state’s statute of
169 (Ky. 1974) and Louisville Gas and Elec. Co. v. Employer’s Mut. Liab. limitation would apply. Both parties to this action agree on the
Ins. Co., 548 S.W.2d 843 (Ky. Ct. App. 1977). Both cases concern substantive choice-of-law question—K entucky’s borrowing statute
substantive choice of law disputes in the context of interpreting insurance app lies, not that of som e other state.
No. 01-6493 Combs v. Int’l Ins. Co. 45 46 Combs v. Int’l Ins. Co. No. 01-6493

sue the warranty company when the alternator failed geographical spot.” 1999 WL 701916, at *12 (emphasis
because he had not complied with the condition added) (quoting Helmers v. Anderson, 156 F.2d 47, 51 (6th
precedent of submitting the claim form at that point. The Cir. 1946), aff’d sub nom. Cope v. Anderson, 331 U.S. 461
breach is only discovered when the Buyer receives the (1947)). As discussed above, Willits concluded “that a breach
letter denying the claim and, under the statute [of can occur before the aggrieved party actually knows of it and
limitations], the cause accrues at that point in time and is damaged by it.” 1999 WL 701916, at *13.
(under the analysis in Willits) space.
Although Willits is an unpublished opinion that constitutes
(Pl.’s Br. at 18-19) (emphasis in original). This hypothetical only persuasive authority, Willits supports Defendant, not
is somewhat deceptive. Plaintiff.
Plaintiff implies that the warranty in this hypothetical is D.
like the D & O policy. Presumably, Plaintiff intends the
hypothetical to demonstrate the difference between the breach As already discussed, the judicial activity in other states
of contract action based on the spare tire (which the does not constitute particularly persuasive evidence that the
hypothetical concedes the statute of limitations would bar) Kentucky Supreme Court would reinterpret Kentucky’s
and the breach of warranty action based on the failed borrowing statute to limit its function when Kentucky has the
alternator. Plaintiff’s analysis of the spare tire issue is correct “most significant relationship” to the disputed transaction.
because Buyer could have discovered the breach at any time Although a few state judiciaries have interpreted their
after the sale and brought suit accordingly. Of course, borrowing statutes somewhat progressively, Plaintiff’s
Plaintiff could (but does not) explain it this way: as soon as references to the law in other jurisdictions are too equivocal
Seller sold the car without the spare tire, the breach of to form a sound basis for an Erie guess.
contract claim “accrued” because selling the car without the
spare was the final act necessary to create the cause of action. To summarize, Wyoming has not adopted the Second
Restatement’s approach. See BHP, 1 P.3d at 1256. New
Plaintiff wants us to confuse the “final act” notion of York’s “place of injury” test is different from the “most
accrual with a discovery concept more favorable to his significant relationship” test and not particularly helpful when
position in this case. In the hypothetical, Plaintiff assumes the injury is intangible, as in this case. See Global Financial,
that Buyer had no warranty action until he received the letter 715 N.E.2d at 486. Plaintiff also points to Missouri, but
from the warranty company declaring that an alternator does Missouri has twice rejected invitations to apply the Second
not qualify as an electrical component. Only then, argues Restatement’s approach to its borrowing statute. See Dorris,
Plaintiff, did Buyer discover his cause of action. Yet the final 725 S.W.2d at 872; Trzecki, 532 S.W.3d at 211. And despite
act necessary to create the cause of action was the warranty Plaintiff’s attempt to use Florida law to his advantage, the
company’s decision to deny the claim—a judgment that most Florida Court of Appeals declined to adopt the Second
likely transpired where the company posted the letter, not Restatement approach without a clear legislative instruction.
where Buyer received it. Quoting one of this Court’s earlier See Pledger, 432 So.2d at 1330-31. That leaves Illinois,
decisions, Willits notes that “‘[t]he final act which transforms which applied the “most significant relationship” test in Ehlco
the liability into a cause of action necessarily has aspects of II, although that case’s unusual procedural posture lessens its
time and place. It occurs at a certain time and in a certain precedential value.
No. 01-6493 Combs v. Int’l Ins. Co. 47 48 Combs v. Int’l Ins. Co. No. 01-6493

There is also relevant information from jurisdictions shopping, effectuate the goals of statutes of limitations and
Plaintiff neglects to mention. Minnesota repealed its repose, and demonstrate respect for other states’ sovereignty.
borrowing statute, but a federal court sitting in diversity
dutifully applied Minnesota’s borrowing statute before the This Court has a circumspect role when sitting in diversity
Minnesota legislature revoked it. See Devine v. Rayette- and should not unduly speculate about what a state court
Faberge, Inc., 285 F. Supp. 1006, 1008 (D. Minn. 1968) might conclude, nor should we impose whatever rule we think
(finding plaintiff’s action time-barred by using Minnesota’s best. Given (1) the borrowing statute’s language;
borrowing statute to apply New York’s more restrictive (2) Kentucky’s focus on vested rights in interstate contract
statute of limitations). More important, in Mack Trucks, Inc. litigation; (3) our unpublished Willits decision; (4) Plaintiff’s
v. Bendix-Westinghouse Auto. Air Brake Co., 372 F.2d 18 (3d inability to construct a strong argument based on the law of
Cir. 1966), the Third Circuit expressly declined a plaintiff’s other jurisdictions; and (5) the policy interests supported by
invitation to interpret Pennsylvania’s borrowing statute so as leaving Kentucky’s borrowing statute unadulterated by the
to apply “the law of the place having the most significant Second Restatement, we conclude that the Kentucky Supreme
contacts with the relevant transactions and with the parties Court would apply the borrowing statute by focusing only on
rather than by the law of the place of the wrong.”14 Id. at 20- where the cause of action accrued, not on which state has the
21. greatest interest in the dispute.

The opinions from other jurisdictions that Plaintiff cites do V.
not make a compelling case upon which we can make a
judicious Erie guess. If anything, developments elsewhere Having decided that the Kentucky Supreme Court would
tend to affirmatively indicate that the Kentucky Supreme determine the applicable statute of limitations by looking only
Court would not limit the application of its borrowing statute to where the cause of action accrued, we must now attempt to
to those situations in which Kentucky has the “most apply that rule to the facts of the case before us.
significant relationship” with the dispute.
A.
E.
Where an insurance policy is breached depends in part on
Although the Kentucky Supreme Court might heed the whether the contract is a liability policy or an indemnity
scholarly criticism of borrowing statutes interpreted in policy. “[U]nder a liability policy a cause of action accrues
accordance with the accrual theory, the Kentucky Supreme when liability attaches, whereas under an indemnification
Court might just as easily choose to respect the strong policy policy there is no cause of action until the liability has been
interests borrowing statutes serve: they impede forum discharged, as by payment of the judgment by the insured.”
Quinlan v. Liberty Bank & Trust Co., 575 So.2d 336, 355
(La. 1990).
14 Plaintiff’s D & O policy defines “loss” as “any amount
In 1966, Pe nnsylvania’s borrowing statute had language similar to
that in Kentucky’s borrowing provision: “When a cause of action has which Insureds are legally obligated to pay for a claim or
been fully barred by the laws of the state or country in which it arose, claims against them for Wrongful Acts.” (J.A. at 16.) As the
such bar shall be a complete defense to an action thereon brought in any
of the courts of this commonwealth.” 12 P A . C O N S . S TAT . § 39 .
No. 01-6493 Combs v. Int’l Ins. Co. 49 50 Combs v. Int’l Ins. Co. No. 01-6493

Eighth Circuit described a similarly-worded D & O policy attorney’s fees, settlements, or other related sums. The two-
issued by American Casualty Company: page letter sent from Plaintiff’s California counsel to
Defendant is simply a list of the eight different lawsuits filed
The definition of "Loss" unequivocally includes defense in the California Litigation. Renne, Plaintiff’s California
costs, and seems to require American Casualty to pay counsel, made clear in the text that “this letter constitutes a
these costs when the insureds are "legally obligated to claim by [the officers and directors of Spendthrift] under the
pay" them, i.e., when the costs are incurred, and not, as terms of the above-captioned policy and they will look to you
American Casualty appears to suggest, when the lawsuit [Defendant] for reimbursement of all costs and damages
is finally disposed of and American Casualty has which may be assessed against them.”15 (J.A. at 102.) Thus,
determined that the claims were covered. This is clearly at the moment Defendant received Renne’s letter, Defendant
a liability policy, despite American Casualty's attempt to had no obligation to reimburse Decedent—the letter did not
treat it as an indemnity policy. The significance of this include any demand for the reimbursement of a specific
distinction is that under a liability policy, whenever a amount of money. Rather, it notified Defendant that the
covered "loss" occurs (i.e., the insureds are "legally Spendthrift directors would attempt to recoup from Defendant
obligated to pay"), American Casualty must pay that “all costs and damages which may be assessed against them.”
amount—payment by the insurer is not conditioned upon Id.
a previous payment by the insured, as in an indemnity
policy. B.
McCuen v. Am. Cas. Co., 946 F.2d 1401, 1406-07 (8th Cir. Since Defendant renounced the D & O policy (with respect
1991); see also Little v. MGIC Indem. Corp., 836 F.2d 789, to the California Litigation) before Defendant had any
793 (3d Cir. 1987) (“A ‘loss’ is defined as an amount that the obligation to make payments pursuant to the policy,
insured is ‘legally obligated to pay.’ Although this section [of Defendant’s behavior constituted an anticipatory
the policy] does not explicitly speak to the timing of the repudiation.16 As the Supreme Court explained, “[i]t has
insurer’s duty to pay, the only reasonable interpretation is that always been the law that where a party deliberately
the duty arises at the time the insured becomes ‘legally incapacitates himself or renders performance of his contract
obligated to pay.’”); Okada v. MGIC Indem. Corp., 823 F.2d impossible, his act amounts to an injury to the other party,
276, 280 (9th Cir. 1986) (“In a liability contract, the insurer which gives the other party a cause of action for breach of
agrees to cover liability for damages. If the insured is liable, contract.” Roehm v. Horst, 178 U.S. 1, 18 (1900); see
the insurance company must pay the damages. In an also Hochster v. De la Tour, 2 El. & Bl. 678 (1853). “The
indemnity contract, by contrast, the insurer agrees to disclaimer of a contractual duty is a breach of contract even
reimburse expenses to the insurer that the insured is liable to
pay and has paid.”) (quoting Cont’l Oil Co. v. Bonanza Corp.,
677 F.2d 455, 459 (5th Cir.1982)). Plaintiff, therefore, held 15
a liability policy, not an indemnity policy. No te how Renne uses the future tense: “[My client] will look to
you . . . for reimbursement.” (J.A . at 102 ) (emp hasis ad ded ).
Assuming Defendant had an obligation to pay under the 16
policy’s language, Defendant had no responsibility before The phrases “anticipatory b reach ,” “anticipatory repudiation,” and
Decedent himself became “legally obligated to pay” “renunciation” are used intercha ngeably. See 17B C.J.S. Con tracts § 534,
at 196 (1999 ).
No. 01-6493 Combs v. Int’l Ins. Co. 51 52 Combs v. Int’l Ins. Co. No. 01-6493

if the time specified in the contract for performing the duty 1998) (citing 4 ARTHUR L. CORBIN , CORBIN ON CONTRACTS
has not yet arrived. It is what is called anticipatory breach.” § 962 (1951)), or to both bilateral and unilateral contracts,
Wis. Power & Light Co. v. Century Indem. Co., 130 F.3d 787, see, e.g., Placid Oil Co. v. Humphrey, 244 F. 2d 184 (5th Cir.
793 (7th Cir. 1977); see also Quivirian Dev. Co. v. Poteet, 1957). Insurance policies are generally unilateral contracts.17
268 F.2d 433, 439 (8th Cir. 1959) (“An anticipatory A D & O insurance policy is a unilateral contract—the
repudiation is declared to exist when a promisor, not insured has already performed by paying the premium in
otherwise in default, engages in making, without justification, exchange for the insurance company’s promise to provide
a positive statement to the promisee, or other person having insurance.18 Nevertheless, there is ample authority for the
a right under the contract, indicating that the promisor will
not or cannot substantially perform his contract duties.”).
Kentucky has recognized the doctrine of anticipatory breach. 17
Warren v. Confederation Life Ass’n., 401 F.2d 48 7, 489 (1st Cir.
See, e.g., Jordon v. Nickell, 253 S.W.2d 237, 239 (1952); Fid. 1968) (“A life insurance policy is a unilateral contract – the applicant may
& Deposit Co. of Md. v. Brown, 20 S.W.2d 284, 286 (Ky. Ct. pay the premium, or not, as he cho oses; he is under no legal obligation to
App. 1929); Paducah Cooperage Co. v. Ark. Stave Co., 237 do so.”); Winters v. State Farm & Cas. Co., 35 F. Supp. 2d 842, 845 (E.D.
S.W. 412, 413 (1922). Okla. 1999) (“despite the many acts to be done by the insured under a fire
insurance policy, the fire contract is a unilateral contract.”); Wal-M art
Stores, Inc. Assocs. Health & Welfa re Pla n v. Scott, 27 F. Supp. 2d 1166,
The repudiation must be absolute or unequivocal. Thunder 1170 (W.D. Ark. 1998) (“it is a unilateral contract of insurance”); Int’l
Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d Adm’rs., Inc. v. Life Ins. Co., 541 F. Supp. 1080, 1083 (N.D. Ill. 1982)
1205, 1213 (10th Cir. 1997); Sys. Council EM-3, Int’l Bhd. of (“But an offer for a unilateral contract–like this one–may be ‘accepted’ by
Elec. Workers, AFL-CIO v. AT & T, 972 F. Supp. 21 (D.D.C. rendering performance. Placement of the insurance with LINA constituted
1997); Brownsboro Rd. Rest., Inc. v. Jerrico, Inc., 674 such performance.”); Continental Cas. Co. v. Nat’l Steel Corp., 533 F.
Supp. 369, 373 (W.D. Pa. 1982) (“The insurance contract was a unilateral
S.W.2d 40, 42 (Ky. Ct. App. 1984) (citing 17 AM . JUR. 2d contract”); Ho me Ins. Co. v. Aetna Cas. & Sur. Co., 197 7 U .S. Dist.
Contracts § 448 (1964)). Courts determine whether LEX IS 13726, at *16 (S.D.N.Y. 1977) (“insurance policies are genera lly
anticipatory repudiation has occurred on a case-by-case basis, unilateral contracts prepared by the insurer”); SouthTrust Bank v.
depending on the particular contract language involved. Williams, 775 So . 2d 184, 188 (Ala. 2000) (“all forms of insurance are
Truman L. Flatt & Sons Co., Inc. v. Schupf, 649 N.E.2d 990, presumed to be unilateral contracts.”) (quo ting Winters v. State Farm &
Fire Cas. Co., 35 F . Supp. 2d 842 , 845 (E.D . Okla. 199 9)); London
994 (Ill. App. Ct. 1995). No precise set of words is necessary Assurance Corp. v. Thompson, 170 N.Y . 94, 100 (1902) (“The general
to constitute an unequivocal repudiation. Ewing v. Von rule is that . . . insurance policies are unilateral contracts prepared by the
Nieda, 76 F.2d 177, 182 (8th Cir. 1935). Nevertheless, insurers”).
Defendant’s reply to the Renne inquiry explained in detail
18
why Defendant would not reimburse Plaintiff for expenses The insured has not made any promise but, rather, has performed.
related to the California Litigation. The five-page letter made Thus, the contract fits within the stand ard d efinition o f a unilateral
completely clear that Defendant “declines to afford coverage contract:
for any loss incurred by the [Plaintiff and Decedent] in A unilateral contract consists of a promise or group of promises
connection with the [California Litigation].” (J.A. at 109.) made by one of the contracting parties only, usually assented to
by the other. There are many c ases in which suc h an assent is
There is some disagreement as to whether the doctrine of not required. A bilateral contract con sists of mutual promises,
anticipatory repudiation applies only to bilateral contracts, mad e in exchange for each other by each of the two contracting
parties. In the case of a unilateral contract, there is only one
see, e.g., Saewitz v. Epstein, 6 F. Supp. 2d 151 (N.D. N.Y. promisor. . . . In a bilateral contract, both parties are promisors
No. 01-6493 Combs v. Int’l Ins. Co. 53 54 Combs v. Int’l Ins. Co. No. 01-6493

proposition that the promising party can anticipatorily 1900); McKee v. Phoenix Ins. Co., 28 Mo. 383 (1859);
repudiate a unilateral contract. See, e.g., Dingley v. Oler, 117 Garland v. Jefferson Standard Life Ins. Co., 101 S.E. 616
U.S. 490, 502-04 (1886) (evaluating a claim that defendant (N.C. 1919); Fischer v. Hope Mut. Life Ins. Co., 69 N.Y. 161
had anticipatorily repudiated a unilateral contract without (1877); Am. Ins. Union v. Woodward, 247 P. 398 (Okla.
mentioning the contention that anticipatory repudiation might 1926); Gaskill v. Pittsburgh Life & Trust Co., 104 A. 775 (Pa.
not apply to unilateral contracts); Xebec Dev. Partners, Ltd. 1918); Mut. Reserve Fund Life Ass’n v. Taylor, 37 S.E. 854
v. Nat’l Union Fire Ins. Co., 15 Cal. Rptr. 2d 726, 740 (Cal. (Va. 1901); Merrick v. Northwestern Nat’l Life Ins. Co., 102
Ct. App. 1993) (finding that case law does not “establish that N.W. 593 (Wis. 1905). The long list of cases involving the
there can never be an anticipatory repudiation of an insurance alleged anticipatory repudiation of an insurance contract
contract”); Cameron v. Eynon, 3 A.2d 423, 423-25 (Pa. 1939) includes disputes, like this one, that involve the alleged
(recognizing an anticipatory breach of a unilateral contract). renunciation of a D & O policy. See, e.g., Fed. Sav. & Loan
Ins. Corp. v. Oldenburg, 671 F. Supp. 720, 724 (D. Utah
To limit anticipatory repudiation to bilateral contracts 1987) (finding insurer had anticipitorily repudiated a D & O
makes little sense. The theory, presumably, is that if the first insurance contract through letter that “was a definitive
party has already performed when the second party announces statement of an intent not to perform sent to the insured while
his intention to breach, the first party (the injured party) has there was a claim pending”); Xebec, 15 Cal. Rptr. 2d at 740
nothing to gain through an immediate action for damages (finding, in litigation over a directors and officers insurance
based on anticipatory breach. Yet “[t]he harm caused to the policy, that case law does not “establish that there can never
plaintiff is equally great [whether or not he has already be an anticipatory repudiation of an insurance contract”). If
performed]; and it seems strange to deny to a plaintiff a a breach occurred, Defendant’s response to the Renne letter
remedy [for anticipatory breach] merely on the ground that he breached the insurance contract by anticipatorily repudiating
has already fully performed as his contract required.” Defendant’s alleged obligations. We must next ask where the
9 ARTHUR L. CORBIN , CORBIN ON CONTRACTS § 962, at 767 breach (or the repudiation) occurred.
(interim ed. 1979).
C.
Furthermore, courts have frequently recognized
anticipatory repudiation in insurance coverage disputes, and We acknowledge that the question of where an anticipatory
insurance policies are unilateral agreements. See, e.g., N.Y. repudiation occurs “ha[s] not yet been clearly settled.” 9
Life Ins. Co. v. Viglas, 297 U.S. 672 (1936); Lovell v. St. ARTHUR L. CORBIN , CORBIN ON CONTRACTS § 988, at 851
Louis Mut. Life Ins. Co., 111 U.S. 264 (1884); Caminetti v. (interim ed. 1979). Nevertheless, there are a few cases
Manierre, 142 P.2d 741 (Cal. 1943); Scott v. Life & Cas. Ins. involving disputes over where a repudiation occurred when
Co., 129 S.E. 303 (Ga. 1925); Van Werden v. Equitable Life the repudiating party sent the renunciation from one
Assurance Soc’y of the United States, 68 N.W. 892 (Iowa jurisdiction to the non-repudiating party in a second
1896); Ebert v. Mut. Res. Fund L. Ass’n, 83 N.W. 506 (Minn. jurisdiction. The limited available jurisprudence strongly
suggests that a repudiation occurs in the place where the
repudiator posts the renunciation, not where the other party
received notice. See Auglaize Box Bd. Co. v. Kansas City
and bo th parties are promisees. Firbre Box Co., 35 F.2d 822, 823 (6th Cir. 1923) (holding
1 A RTHUR L. C O RBIN , C O R B IN ON C ONTRACTS § 1.23, at 87 (1993 ).
action to have arisen in jurisdiction where repudiation
No. 01-6493 Combs v. Int’l Ins. Co. 55 56 Combs v. Int’l Ins. Co. No. 01-6493

occurred, not place of performance); Wester v. Casein Co. of Ireland. Later, the defendant mailed a letter to his agent in
Am., 100 N.E. 488, 513-14 (N.Y. 1912) (concluding, when Scotland abrogating their agreement in advance. As
anticipatory repudiation was cabled from New York, Chancellor Naish explained, “I consider that the dismissal
addressed to and later received by the other party in South took place in Glasgow by the posting of the letter in Glasgow.
America, that the breach occurred in New York, because The dropping of the letter in to the post office there was, I
“[t]he breach of the contract occurred in this case upon think, the act of dismissal.” Id. at 301. Chancellor Porter
delivery of the cablegram to the telegraph company, and agreed that the contract ended “the moment the notice of
constituted a breach, not only at that time, but also at that dismissal had left the hands and control of the defendant,
place.”); Kumar v. Embassy Kosher Tours, Inc., 696 So.2d which it did in Glasgow.” Id. at 302.
393, 394 (Fla. Dist. Ct. App. 1997) (“[A]n anticipatory breach
is deemed to ‘accrue,’ if at all, in the county . . . from which In Holland v. Bennett, 1 K.B. 867 (1902), the proprietor of
the ‘breachor’ transmits the repudiation, rather than where the a periodical who resided in France employed a London
‘breachee’ receives it.”); Karson Indus., Inc. v. Superior correspondent. The proprietor discharged the plaintiff in a
Court, 77 Cal. Rptr. 714, 716 (Cal. Ct. App. 1969) (deciding, letter mailed from Italy. Justice Williams concluded that
in a dispute where a letter cancelling a contract for mobile “[t]he effect is that there was a complete breach of the
homes was posted in one county but received in another, “that contract when the letter giving notice of dismissal was posted
the weight of authority and the better reasoned cases support abroad.” Id. at 869. Finally, Matthews v. Alexander, [1873]
the rule that repudiation by letter is a breach at the time when Ir. R.-C.L. 573, involved a wholesale tea dealer residing in
and the place where the letter is dispatched”). London who hired a salesman and sent him to Ireland. Id. at
575. The salesman received a letter of dismissal before he
These cases ultimately derive their holdings from a series could begin his work. Id. at 576. The message arrived in
of nineteenth-century British and Irish decisions that reached Dublin, but the letter was posted in London. Id. According
similar conclusions. In Cherry v. Thompson, 7 Q.B. 573 to Judge Whiteside, “[t]he act in this case was done in
(1872), for instance, the court found that the anticipatory England. The letter informs the Plaintiff that the Defendant
breach of a contract to marry occurred in Germany when the in England had renounced the relation that had subsisted
defendant mailed a letter from Germany withdrawing from between them; and if that was a breach of contract, it took
the engagement. As Judge Blackburn explained: place in England.” Id. at 579. This view is shared by the
Restatement of Contracts, which explains that the repudiation
In this case the receipt of the letter by the plaintiff in occurs “as of the time when and the place where the letter or
England furnished him with evidence that the defendant telegram is dispatched.” RESTATEMENT OF CONTRACTS
had in Germany renounced [their] relation. Had his § 321. Williston also felt that repudiation by letter is a breach
letters followed him to Ireland he would have received “as of the time when and the place where the letter or
the evidence in Ireland. But the act which he had the telegram is dispatched.” 11 WILLISTON ON CONTRACTS
option to treat as a breach took place in Germany, and § 1332, at 174 (3d ed. 1968).
in Germany alone.
Thus, although the jurisprudence is fairly sparse, the
Id. at 579 (emphasis added). Similarly, in Hamilton v. Barr, available information strongly indicates that an anticipatory
[1886] 18 L.R. Ir. 297, the plaintiff made a contract in breach occurs where the breaching party posts its letter of
Scotland with the defendant to act as the defendant’s agent in
No. 01-6493 Combs v. Int’l Ins. Co. 57

renunciation.19 Since Defendant posted the message in New
York, the breach occurred in New York. Under Kentucky’s
borrowing statute, Ky. Rev. Stat. § 413.320, the Kentucky
Supreme Court would apply New York’s statute of
limitations, rendering Plaintiff’s claim eight years late.
Consequently, the district court properly ruled that under Ky.
Rev. Stat. § 413.320, the New York statute of limitations bars
Plaintiff’s action.
For the aforementioned reasons, we AFFIRM the district
court’s decision.

19
This rule nicely avoids the problem of determining where an
anticipatory breach occurred when the letter is posted in one jurisdiction
but received in multiple places.