        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.
