BROWNELL COMBS, II, Administrator C.T.A. of the Estate of LESLIE COMBS, II, Deceased v. International Insurance Company

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0002P (6th Cir.)
File Name: 04a0002p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
BROWNELL COMBS, II,
Administrator C.T.A. of the
Estate of LESLIE COMBS, II,
Deceased,
Plaintiff-Appellant,
v.
INTERNATIONAL INSURANCE
COMPANY,
Defendant-Appellee.
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No. 01-6493
Appeal from the United States District Court
for the Eastern District of Kentucky at Lexington.
No. 00-00217—Karl S. Forester, Chief District Judge.
Argued: June 11, 2003
Decided and Filed: January 6, 2004
Before: KEITH, BATCHELDER, and CLAY, Circuit
Judges.
_________________
COUNSEL
ARGUED: John H. Dwyer, Jr., PEDLEY, ZIELKE &
GORDINIER, Louisville, Kentucky, for Appellant. Louis G.
2 Combs v. Int’l Ins. Co. No. 01-6493
Corsi, LANDMAN, CORSI, BALLAINE & FORD, New
York, New York, for Appellee. ON BRIEF: John H.
Dwyer, Jr., Lawrence L. Pedley, PEDLEY, ZIELKE &
GORDINIER, Louisville, Kentucky, for Appellant. Louis G.
Corsi, Eileen H. de Callies, LANDMAN, CORSI,
BALLAINE & FORD, New York, New York, David R.
Monohan, WOODWARD, HOBSON & FULTON,
Louisville, Kentucky, for Appellee.
CLAY, J., delivered the opinion of the court, in which
KEITH, J., joined. BATCHELDER, J., concurred in Part IV
only.
_________________
OPINION
_________________
CLAY, Circuit Judge. Plaintiff, Brownell Combs, II,
Administrator C.T.A. of the Estate of Leslie Combs, II,
deceased, appeals an order granting Defendant, International
Insurance Company, summary judgment against Plaintiff’s
action in diversity, brought pursuant to 28 U.S.C. § 1332,
alleging breach of a directors and officers liability insurance
contract, breach of the implied contractual duty of good faith
and fair dealing, and bad faith denial of Defendant’s duty to
defend under the insurance policy. For the reasons set forth
below, we AFFIRM the district court.
FACTS
Decedent founded Spendthrift Farm (“Spendthrift”) in 1937
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

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No. 01-6493 Combs v. Int’l Ins. Co. 3
1The parties never define “stallion management,” but evidently prices
at Spendthrift Farm are as high as $1 million per visit.
2Plaintiff is Decedent’s son and administrator of Decedent’s estate.
winners. Decedent developed the principal method of stallion
management used today.1
By 1981, Decedent was over eighty years old and became
interested in planning his estate so that Spendthrift would
continue after his death. During the early 1980s, Decedent
tried several different methods to broaden Spendthrift’s
ownership. Initial efforts to take the company public failed
when the farm could not locate a suitable investment bank.
A 1982 effort to distribute forty percent of the ownership
interest in Spendthrift failed because of disputes between
Plaintiff2 and potential investors.
Eventually, the farm developed and implemented a private
stock placement plan described in a Private Placement
Memorandum (“PPM”). The PPM made clear that Decedent
and Plaintiff, not Spendthrift, retained exclusive control over
the private placement:
All sales are subject to the discretion of the Sellers
including the right to accept each unit as purchased or
none until the entire offering is purchased. Sellers
reserve the right, in their absolute discretion, to accept or
reject any offer to purchase, and/or to withdraw the
offering either partially or in its entirety.
(J.A. at 842.) Furthermore, the lawyers involved in both the
private placement (Charles Hembree, Decedent’s long-time
personal counsel), and the contemplated initial public offering
(“IPO”) (Frank Wheat of Gibson, Dunn & Crutcher),
distinguished between the Combs family and Spendthrift
Farm. Wheat took steps “to keep Spendthrift out of this
4 Combs v. Int’l Ins. Co. No. 01-6493
private placement” to “protect Spendthrift against claims that
might arise out of the placement.” (J.A. at 748.)
Through the PPM, the farm sold blocks of stock to certain
investors already involved in the thoroughbred industry,
thereby creating a pool of shareholders who could create a
board of directors and lead Spendthrift after Decedent’s death.
Decedent completed the stock sale in 1983. Decedent
personally received $17.5 million from the transaction and
Plaintiff received another $17.5 million.
The thoroughbred industry, including Spendthrift,
prospered during the early 1980s. Later in the decade,
however, the industry suffered a downturn from which it did
not fully recover until the mid-1990s. Spendthrift’s problems
in the mid-to-late-eighties upset many of the investors in the
private placement.
In January of 1984, Defendant issued excess policy no.
524-029517-1, which provided directors’ and officers’
liability coverage to Spendthrift for claims made against the
farm from November 17, 1983 through November 17, 1986.
The policy provided coverage as follows:
1. INSURING CLAUSE
If during the policy period any claim or claims are
made against the Insured (as herinafter defined) or
any of them for a Wrongful Act (as hereinafter
defined) while acting in their individual or
collective capacities as Directors or Officers, the
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
obligated to pay in excess of the retentions stated
in Item IV (a) and (b) of the Declarations, not
exceeding the limit of liability stated in Item III of
the Declarations.

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No. 01-6493 Combs v. Int’l Ins. Co. 5
(J.A. at 34-35.) The policy defined “Wrongful Act” as “any
actual or alleged error or misstatement or breach of duty by
the Insureds while acting in their individual or collective
capacities, or any matter not excluded by the terms and
conditions of this Policy claimed against them solely by
reason of their being Directors and Officers of the Company.”
Id.
In 1986, while the policy was in effect, Fred L. Fredricks
sued Decedent, Plaintiff, and other co-defendants “in their
individual capacity and as agents and employees of defendant
Spendthrift Farm, Inc.” (J.A. at 1049.) The Northern District
of California consolidated the Fredericks case with seven
other cases involving substantially similar claims (hereinafter
the consolidated “California Litigation”). Approximately half
of the California Litigation plaintiffs sued Spendthrift Farm
itself for the alleged misrepresentations of its officers,
directors and agents with respect to the private placement.
The other half sued only the individual agents of the farm
involved in the private placement.
Regardless, the substance of all the claims focused
primarily on representations made in the PPM regarding the
farm’s financial condition and the value of its assets.
Specifically, the plaintiffs in the California Litigation made
two allegations: (1) that the PPM relied upon financial
statements prepared on a current value basis rather than a cost
basis; and (2) that the current value presentation misled the
plaintiffs because it failed to include any provision for income
taxes, thereby overstating the value of Spendthrift’s assets by
the amount of tax liability that would result from attempting
to realize the assets’ full value. According to the plaintiffs,
the asset valuations were “substantially inflated and based on
unrealistic assumptions about the quality, confirmation and
other characteristics of the horses.” Id. The plaintiffs sought
rescission pursuant to Section 12 of the Securities Act of
1933, 15 U.S.C. § 77, along with damages for the allegedly
fraudulent misrepresentations.
6 Combs v. Int’l Ins. Co. No. 01-6493
In a letter dated November 14, 1986, Paul Renne, Plaintiff’s
counsel in San Francisco, California, notified Defendant that
the plaintiffs filed eight complaints against Defendant.
Renne’s letter sought reimbursement under the policy and
Renne requested that Defendant communicate with him about
Decedent’s coverage demand.
In Defendant’s response, Defendant’s New York counsel
explained, inter alia, that the wrongful conduct alleged
against Decedent did not involve acts solely in his capacity as
a director or officer of Spendthrift, but rather conduct in his
individual capacity as a shareholder selling his shares in
Spendthrift for his personal gain (and Plaintiff’s personal
gain) of $35 million:
The wrongful conduct alleged against the [Plaintiff and
Decedent] in the [California Litigation] arises from the
sale of their Spendthrift stock. International has
observed from a review of the Private Placement
Memorandum dated April 1, 1982 (“PPM”), which was
distributed along with a supplement thereto dated July
27, 1983 (“PPM Supplement”), in connection with a
“private placement” distribution of shares of Spendthrift
by the [Plaintiff and Decedent] that the [Plaintiff and
Decedent] offered shares in Spendthrift, in units of
twenty at $1.75 million per unit, for a total offering of
$35 million. All of the proceeds of the offering went to
the [Plaintiff and Decedent], and none of the proceeds
went to Spendthrift. The PPM states that [Decedent] is
selling the portion of stock for the purpose of estate
planning, and that [Plaintiff] is selling his portion of
stock for estate planning and to diversify his interests. . . .
As indicated above, the directors and officers of
Spendthrift are insured only for loss incurred by them
solely in their respective capacities as directors and
officers. The wrongful conduct alleged against the
[Plaintiff and Decedent] in the [California Litigation]
does not involve them solely in their capacity as directors

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No. 01-6493 Combs v. Int’l Ins. Co. 7
or officers but rather in their capacity as individuals who
are selling their shares in Spendthrift for their own
personal gain. Accordingly, International declines to
afford coverage for any loss incurred by the [Plaintiff and
Decedent] in connection with the [California Litigation].
(J.A. at 108-09.) Defendant addressed this letter to Renne, in
California, as well as to certain defense counsel (located in
California, Ohio, and Kentucky) who had an interest in the
Policy because they represented other defendants.
Decedent settled some of the claims against him for $2
million in a court-approved settlement. The trial court
dismissed numerous other claims. A few issues reached a
jury, which returned a verdict in favor of the defendants. In
a comprehensive opinion explaining the California Litigation
in detail, the Ninth Circuit affirmed. See McGonigle v.
Combs, 968 F.2d 810 (9th Cir. 1992). When the California
Litigation concluded in 1992, Decedent had spent $770,000
in attorney’s fees in addition to the $2 million he paid to settle
certain claims.
With respect to the court-approved settlement, Decedent
submitted an extensive evidentiary record to persuade the
district court that he had only a personal role in the disputed
transactions:
(1) there is no evidence that [Decedent] wrote any part of
the offering memos or that he was even consulted as to
their text; (2) there is no evidence that [Decedent]
consciously did anything wrong, or that he is guilty of
any moral turpitude in this action; and (3) there is no
evidence that [Decedent] personally misled anyone or
sought to mislead anyone. [Decedent] is in these cases
for one reason only: he was a seller, and there is a claim
for recission to which he must respond although there is
no evidence of scienter on his part.
8 Combs v. Int’l Ins. Co. No. 01-6493
(J.A. at 379-80.) The evidence Decedent submitted to the
district court in the California Litigation included a due
diligence memorandum prepared by counsel following a July
26, 1983 meeting with Decedent and Plaintiff. This
memorandum distinguishes between the conduct of Decedent
and Plaintiff as sellers, and their conduct as officers or
directors for Spendthrift:
On Tuesday morning, July 26, we met with [Plaintiff] to
discuss with him the timing of the private placement.
[Plaintiff] informed us in rather blunt terms that he had
no intention of delaying the private placement. He
informed us that he was willing to accept the risks of lack
of full disclosure and non-compliance with state
securities laws. I advised [Plaintiff] that the risks of lack
of going forward could be rather significant as it was my
view that prudence called for a delay of the private
placement of at least two weeks. [Plaintiff] informed the
group that he knew each of the investors personally and
had conducted a significant amount of business with
them in the past. He informed us that he would give
back any monies if the investors complained about the
adequacy of the disclosure or non-compliance with Blue
Sky laws.
(J.A. at 716-20.) Decedent’s factual submission to the district
court in the California Litigation also established that
Decedent “was only interested in [the private placement]
being done and having his check delivered to him and
[Plaintiff] was supposed to take care of everything.” (J.A. at
395.) Decedent quoted Plaintiff as stating that “his father had
reached the point in his life where he would not have an
attention span sufficient to go through complex legal
documents or, for that matter, a conversation that lasted more
than five minutes.” (J.A. at 413.) Plaintiff did not dispute
any part of the factual record submitted to the district court in
support of the settlement in the California Litigation.

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No. 01-6493 Combs v. Int’l Ins. Co. 9
3Plaintiff evidently d oes not contest this conclusion on appe al.
PROCEDURAL HISTORY
Decedent died in April of 1990, before the California
Litigation concluded. Decedent had not yet brought an action
against Defendant for his defense fees or the settlement
payments, and Plaintiff still had not done so on Decedent’s
behalf when the California Litigation terminated in 1992.
Decedent’s estate was closed four years later, on June 21,
1996. Neither the administrator of the estate at the time, P.
Keith Nally, nor the estate’s attorney, Charles Hembree,
considered commencing a claim against Defendant on
Decedent’s behalf.
In the Spring of 2000, four years after Decedent’s estate
closed, Plaintiff reopened the estate and arranged to become
the administrator. On June 6, 2000, in the United States
District Court for the Eastern District of Kentucky, Plaintiff
commenced the action that is the subject of this appeal. Count
I of the complaint asserted a breach of contract claim; Count
II alleged a breach of the duty of good faith and fair dealing;
and Count III asserted a bad faith claim.
Following discovery, Defendant moved for summary
judgment on July 2, 2001. Defendant argued (1) that New
York’s statute of limitations applied and barred Plaintiff’s
claims; (2) equitable estoppel barred Plaintiff’s claims; and
(3) the policy did not cover the Decedent’s role in the private
placement. On September 10, 2001, the district court granted
Defendant’s motion on the basis that the applicable statute of
limitations barred Plaintiff’s claims. See Combs v. Int’l Ins.
Co., 163 F. Supp.2d 686 (E.D. Ky. 2001). The district court
also suggested that the good faith and fair dealing claim and
the bad faith claim lacked merit.3 Id. at 695-96.
On September 20, 2001, Plaintiff filed a motion under Fed.
R. Civ. P. 59(e) to amend the judgment to certify the statute
10 Combs v. Int’l Ins. Co. No. 01-6493
of limitations issue to the Kentucky Supreme Court. After
further briefing, the district court denied Plaintiff’s motion on
November 16, 2001. On November 29, 2001, Plaintiff timely
noticed his appeal.
DISCUSSION
We conduct a de novo review of summary judgment.
Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S.
451, 466 n.10 (1992); Buckeye Cmty. Hope Found. v. City of
Cuyhaoga Falls, 263 F.3d 627, 633 (6th Cir. 2001); Johnson
v. Econ. Dev. Corp., 241 F.3d 501, 509 (6th Cir. 2001).
Summary judgment is appropriate when there is no genuine
issue of material fact such that the moving party is entitled to
a judgment as a matter of law. Kocsis v. Multi-Care Mgmt.,
Inc., 97 F.3d 876, 882 (6th Cir. 1996). In Anderson v. Liberty
Lobby, Inc., 477 U.S. 242 (1986), the Supreme Court
explained that
[t]he mere existence of a scintilla of evidence in support
of the plaintiff's position will be insufficient; there must
be evidence on which the jury could reasonably find for
the plaintiff. The judge's inquiry, therefore, unavoidably
asks whether reasonable jurors could find by a
preponderance of evidence that the plaintiff is entitled to
a verdict.
Id. at 322. The “mere possibility” of a factual dispute does
not suffice to create a triable case. Gregg v. Allen-Bradley
Co., 801 F.2d 859, 863 (6th Cir. 1986). To defeat summary
judgment, the plaintiff "must come forward with more
persuasive evidence to support [his or her] claim than would
otherwise be necessary." Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). If the
defendant successfully demonstrates, after a reasonable period
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
judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S.

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No. 01-6493 Combs v. Int’l Ins. Co. 11
317, 325 (1986). When determining whether to reach this
conclusion, we view the evidence and draw all reasonable
inferences in the light most favorable to the non-moving
party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157
(1970); Williams v. Int’l Paper Co., 227 F.3d 706, 710 (6th
Cir. 2000); Smith v. Thornburg, 136 F.3d 1070, 1074 (6th Cir.
1998).
We must decide whether the district court properly ruled
that under Ky. Rev. Stat. § 413.320, the Kentucky “borrowing
statute,” the New York statute of limitations bars Plaintiff’s
action. This is a highly uncertain area of state law, forcing us
to make an educated “Erie guess.” Plaintiff contends,
alternatively, (1) that the Kentucky judiciary would interpret
Kentucky’s borrowing statute so as to apply the statute of
limitations of the jurisdiction that, considering all the facts,
has the most significant connection with the disputed
transaction, and (2) even if the locus of accrual is the only
relevant consideration, this cause of action accrued in
Kentucky, making Kentucky’s statute of limitations
applicable.
New York’s statute of limitations for breach of a written
contract is six years. N.Y. CIV. PRAC. LAW & RULES § 213.
Kentucky has a fifteen-year statute of limitations for the
breach of a written contract. KY. REV. STAT. § 413.090(2).
Defendant notified Plaintiff that it would deny coverage on
November 14, 1986, and Plaintiff brought suit on June 6,
2000. Thus, if New York’s statute of limitations applies, as
opposed to Kentucky’s, Plaintiff’s claim is barred.
In accordance with Erie Railroad Co. v. Tompkins, 304
U.S. 64 (1938), when evaluating an undecided question of
Kentucky law, a federal court sitting in diversity must make
the “‘the best prediction, even in the absence of direct state
precedent, of what the Kentucky Supreme Court would do if
it were confronted with [the] question.’” Managed Healthcare
Assocs., Inc. v. Kethan, 209 F.3d 923, 927 (6th Cir. 2000)
(quoting Welsh v. United States, 844 F.2d 1239, 1245 (6th
12 Combs v. Int’l Ins. Co. No. 01-6493
Cir. 1988)). If the relevant state judiciary has not spoken to
the issue, courts sitting in diversity should consider “all
relevant data,” Kinglsey Associates, Inc. v. Moll Plastic
Crafters, Inc., 65 F.3d 498, 507 (6th Cir. 2000), including
jurisprudence from other jurisdictions, Lexington Insurance
Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir.
1999).
The Seventh Circuit observed that federal courts “must
proceed with caution” when making pronouncements about
state law. Lexington, 165 F.3d at 1092. Sitting in diversity,
we are “not commissioned to take a position regarding the
advisability or fairness of the state rule to be applied, but
[must] determine the issue as would the highest court of the
state.” Kurczi v. Eli Lilly & Co., 113 F.3d 1426, 1429 (6th
Cir. 1997). This Court’s proper reluctance to speculate on
any trends of state law applies with special force to a plaintiff
in a diversity case, like this one, who has chosen to litigate his
state law claim in federal court. Torres v. Goodyear Tire &
Rubber, Inc., 867 F.2d 1234, 1238 (9th Cir. 1989); Shaw v.
Republic Drill Corp., 810 F.2d 149, 150 (7th Cir. 1987).
Furthermore, “[w]hen given a choice between an
interpretation of [state] law which reasonably restricts
liability, and one which greatly expands liability, we should
choose the narrower and more reasonable path.” Todd v.
Societe Bic, S.A., 21 F.3d 1402, 1412 (7th Cir. 1994) (en
banc); see also City of Phila. v. Beretta, U.S.A., Corp., 126 F.
Supp.2d 882, 906 (E.D. Pa. 2000) (declining to broaden state
law nuisance doctrine in a diversity case).
As the First Circuit explained, federal courts sitting in a
diversity case are in “a particularly poor position . . . to
endorse [a] fundamental policy innovation . . . . Absent some
authoritative signal from the legislature of the courts of [the
state], we see no basis for even considering the pros and cons
of innovative theories . . . .” Dayton v. Peck, Stow & Wilcox
Co. (Pexto), 739 F.2d 690, 694 (1st Cir. 1984). Federal
courts hearing diversity matters should be extremely cautious
about adopting “substantive innovation” in state law. Rhynes

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

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No. 01-6493 Combs v. Int’l Ins. Co. 15
Townsend, 197 F.2d 970 (3d Cir. 1952); Jackson v. Cont’l S.
Lines, Inc., 172 F. Supp. 809, 812 (W.D. Ark. 1959). In
essence, lex fori governed the determination of procedural
issues, including those associated with statutes of limitation.
Lex fori governs procedural rights, but under lex loci (the
law of the place), substantive rights are determined according
to the law of the place where the cause of action accrued. Lex
loci involves a concept of accrual similar to the idea of
vesting, which forms the basis for the vested-rights approach
to choice of law. Replacing nineteenth-century comity theory
but preceding contemporary choice of law paradigms, the
vested rights approach dominated the period from 1900 to
1950. EUGENE F. SCOLES, ET AL., CONFLICT OF LAWS § 2.7,
at 20 (3d ed. 2000). According to Professor Joseph H. Beale,
the main proponent of vested rights analysis, “[a] right having
been created by the appropriate law, that recognition of its
existence should follow anywhere.” JOSEPH H. BEALE, 3
CASES ON THE CONFLICT OF LAWS 517 (1901). As Justice
Holmes explained:
[W]hen . . . a liability is enforced in a jurisdiction foreign
to the place of the wrongful act, obviously that does not
mean that the act in any degree is subject to the lex fori,
with regard to either its quality or its consequences. On
the other hand, it equally little means that the law of the
place of the act is operative outside its own territory.
The theory of the foreign suit is that, although the act
complained of was subject to no law having force in the
forum, it gave rise to an obligation, an obligatio, which,
like other obligations, follows the person, and may be
enforced wherever the person may be found. But as the
only source of this obligation is the law of the place of
the act, it follows that that law determines not merely the
existence of the obligation, but equally determines its
extent.
Slater v. Mexican Nat’l R.R. Co., 194 U.S. 120, 126 (1904)
(citations omitted). Beale served as the reporter for the
16 Combs v. Int’l Ins. Co. No. 01-6493
4“Lex fori,” in this sentence, also refers to the place whe re the cause
of action accrued (lex loci), because borrowing statutes effectively merge
the two concepts. Borrowing statutes are substantive laws that determine
which state’s statute o f limitations (a procedural rule) will app ly.
Restatement of the Conflict of Laws (1934), which reflected
the vested rights approach. Section 384 of the Restatement
provides, for instance: “(1) [i]f a cause of action in tort is
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
created at the place of wrong, no recovery in tort can be had
in any other state.” Kentucky adopted its borrowing statute
in 1942, during the heyday of the vested rights approach.
After most states adopted borrowing statutes, problems in
the application of borrowing rules and a torrent of scholarly
criticism caused some state high courts to consider
interpreting their state’s borrowing statutes so the forum
would “borrow” another state’s limitation rule only when the
local forum lacked a significant connection to the dispute.
Critics of borrowing statutes note that this would be
consistent with the Restatement (Second) on Conflict of
Laws, which seeks to apply the law of the forum with the
most significant relationship with the parties and the dispute.
See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 6
(1969). The “most significant relationship” test that guides
the Second Restatement has at least arguable policy
advantages over lex fori because the state with the most
significant relationship with the parties and the dispute is
probably the state with the greatest interest in the action’s
outcome.4 In fact, one state, Minnesota, repealed its
borrowing statute in 1977. See MINN. STAT. § 541.14 (1976),
repealed by 1977 MINN. LAWS ch. 187 § 1.
Plaintiff cites a number of law review articles arguing that
borrowing statutes should be repealed entirely or interpreted
to incorporate a “most significant relationship” test. See, e.g.,
Ibrahim J. Wani, Borrowing Statutes, Statutes of Limitations,

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

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No. 01-6493 Combs v. Int’l Ins. Co. 19
argues in the instant case that the California statute of
limitations might apply.
Finally, BHP never adopted the “substantial relationship”
test. According to the BHP decision:
The thread of the argument presented by BHP is tenuous.
The essential premise is that in Stanbury v. Larsen, 803
P.2d 349, 355 (Wyo. 1990), this Court adopted
Restatement (Second) Conflict of Laws § 188 (1971).
BHP then contends that since that provision utilizes the
“most significant relationship” test, the cause of action
arose in Wyoming because the subject matter of the
contract is Wyoming minerals. The elements articulated
in the “most significant relationship” test include “(a) the
place of contracting, (b) the place of negotiation of the
contract, (c) the place of performance, (d) the location of
the subject matter of the contract, and (e) the domicil,
residence, nationality, place of incorporation and place of
business of the parties.” RESTATEMENT (SECOND)
CONFLICT OF LAWS § 188 at 575.
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
relationship’ test of Restatement (Second) Conflict of Laws
§ 188. . . . [W]e invoked the Restatement provision only as
containing examples of factors to be considered in making the
determination as to where the cause of action arose.” Id. at
1257. Thus, BHP does not indicate that the Kentucky
Supreme Court would adopt the most substantial relationship
test.
B.
Plaintiff next cites New York law and Global Financial
Corp. v. Triarc Corp., 715 N.E.2d 482 (N.Y. 1999). Global
Financial involved an action brought in New York for the
payment of consulting fees by a corporate plaintiff located in
20 Combs v. Int’l Ins. Co. No. 01-6493
5If Decedent’s residence were the only relevant consideration under
Kentucky law, then the Kentucky statute of limitations would apply and
Plaintiff’s action could proceed. Although we must weigh Global
Financial when making our Erie guess, the case represents only one
source among many. As already observed, we consider “all relevant
data,” Kinglsey Associates, 65 F.3d at 507, when attempting to ascertain
what a state court might do in a particular situation. Moreo ver, the
authority of Global F inan cial is somewhat limited because, although the
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
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
envision a situation where the plaintiff resides in a different forum than
the one in which he sustains the economic impact of the loss; for instance,
a business incorporated in one jurisdiction but with its principal place of
business in another. It is unclear how New York’s rule would apply to
such a situation.
Delaware against a corporate defendant also located in
Delaware but with its principal place of business in
Pennsylvania. Id. at 484-85. Statutes of limitations in both
Delaware and Pennsylvania barred the action, but the suit
could proceed under New York’s longer limitations period.
Id. at 484. New York has a borrowing statute similar to
Kentucky’s. See id.
The court concluded that the breach occurred in Delaware
because, under New York’s borrowing statute, “a cause of
action accrues at the time and in the place of injury,” and
“[w]hen 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 (citations omitted).
The Global Financial court did not adopt a “most substantial
relationship” analysis of New York’s borrowing statute. In
fact, the court rejected the more holistic “center of gravity”
test, writing that the goals of New York’s borrowing statute
are “better served by a rule requiring the single determination
of a plaintiff’s residence than by a rule dependent on a litany
of events relevant to the ‘center of gravity’ of a contract
dispute.”5 Id. at 486.

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No. 01-6493 Combs v. Int’l Ins. Co. 21
6This case presents an unusua lly tricky pro blem beca use it involves
an econ omic injury. If, for instance, a defendant’s tortious conduct causes
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
with assets, employees, customers and shareholders around the
world—which make s finding the locus of an intangible loss difficult. If
a breach o f contract causes G eneral M otors’ stock to decline, determining
where the compa ny “got hurt” is not so easy. Cf. Leroy v. Great W.
United Corp., 443 U.S. 173, 185 (1979) (noting the “occasionally fictive
assumption” that claims arise in one place only).
Equally important, the notion that the cause of action
accrues where the injury is sustained is not particularly
helpful in this case because it begs the question of where the
plaintiff sustained the injury. Plaintiff’s action involves an
abstract injury—by allegedly breaching its promise to pay in
a letter Defendant mailed from New York to three
jurisdictions, Decedent was not reimbursed for litigation
expenses accumulated primarily in California but related to a
Kentucky enterprise. Asking where Decedent “got hurt” does
not help us.6
C.
Citing National Heritage Life Ins. Co. v. Frame, 41 S.W.2d
544 (Mo. Ct. App. 2001), Plaintiff claims Missouri
interpreted its borrowing statute in a fashion similar to New
York. National Heritage involved a suit brought by a Texas
plaintiff based on a guaranty allegedly breached by Missouri
defendants. Id. at 546-48. Missouri’s borrowing statute
states that “[w]henever a cause of action has been fully barred
by the laws of the state, territory or country in which it
originated, said bar shall be a complete defense to any action
thereon, brought in any of the courts of this state.” MO. REV.
STAT. § 516.190. Missouri courts analyze the “origination”
of a cause of action just as they analyze its accrual for
purposes of beginning the limitations period. Nat’l Heritage,
41 S.W.2d at 552; see also Penalosa Coop. Exch. v. A.S.
Polony Co., 754 F. Supp. 722, 733 (W.D. Mo. 1991); Alvardo
22 Combs v. Int’l Ins. Co. No. 01-6493
v. H & R Block, Inc., 24 S.W.3d 236, 242 (Mo. Ct. App.
2000). Since the guaranty required the guarantors to make
their payment to the plaintiff in Texas, the National Heritage
court found that the cause of action “originated” there. 41
S.W.2d at 553.
Following this rule, however, has not led Missouri courts
to always conclude that a cause of action “originates” in the
forum where the injury appears to occur. In Finnegan v.
Squire Publishers, Inc., 765 S.W.2d 703 (Mo. Ct. App. 1989),
for instance, the Missouri Court of Appeals applied
Missouri’s borrowing statute in a libel case. Id. at 704.
Finnegan forced the court to determine whether the cause of
action for libel “accrue[d] in Kansas where the newspaper
containing the defamatory statements was first published, [or]
in Missouri where [the plaintiff] is licensed to practice law
and where damages to his professional reputation were
sustained.” Id. Applying Missouri’s borrowing statute, the
court found that plaintiff’s cause of action “originated” where
the defendant initially published the defamatory remarks, not
where the plaintiff actually suffered the greatest injury. Id. at
706-07. This is in tension with Plaintiff’s claim that if we
properly interpret Kentucky’s borrowing statute, New York’s
statute of limitations cannot bar his claim because he suffered
no injury in New York.
The Finnegan court reached its conclusion in part because
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
of the wrong is determined by where the plaintiff first sustains
any damage, not where he sustains the most damage. Also
significant, the Finnegan decision recognized the problems
inherent in attempting to determine the location of an
intangible injury, like an injury to reputation. Id. at 706-07.
The court refused “to adopt the assumption that an attorney’s
reputation can only be injured in the state where the attorney
is licensed to practice law.” Id. at 706. Rhetorically, the
court wondered, “[w]hat would result if plaintiff is licensed

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No. 01-6493 Combs v. Int’l Ins. Co. 23
7Under Missouri’s rule, Plaintiff could have learned of Defendant’s
decision at any moment after Defendant made its choice. Since, for
instance, one o f Plaintiff’s attorneys in California or Kentucky could have
contacted Defendant’s New Yo rk office by telephone (or flown to New
in more than one state or by a federal court or agency?
Should a court look to the place of first injury, any injury, or
the place of greatest injury?” Id. This discussion shows that
Missouri courts seem sensitive to the pitfalls inherent in
determining accrual based on where the injury purportedly
occurred.
Another case, Harris-Laboy v. Blessing Hospital, Inc., 972
S.W.2d 522 (Mo. Ct. App. 1998), further exemplifies the
manner in which Missouri courts apply the state’s borrowing
statute. Harris-Laboy involved a Missouri resident who
brought a malpractice action against an Illinois hospital and
three Illinois physicians after she discovered the doctors left
a surgical sponge in her abdomen. Id. at 523. At the time of
the surgery, the plaintiff lived in Illinois, but she did not
discover the problem until she moved to Missouri several
years later. Id. The defendants argued that Missouri should
borrow Illinois’ statute of limitations, which would bar the
plaintiff’s action. Id. at 523-24. The court agreed because,
under Missouri law, an action originates when and where an
injury can be ascertained, and “[d]amage is sustained and
capable of ascertainment when it can be discovered or made
known, not when the plaintiff actually discovers the injury or
wrongful conduct.” Id. at 524 (citing Carr v. Anding, 793
S.W.2d 148, 150 (Mo. Ct. App. 1990)) (emphasis in original).
Consequently, the plaintiff’s “damage was sustained and was
capable of ascertainment immediately after the sponge was
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
Defendant drafted its response to Plaintiff’s coverage inquiry,
as opposed to when Plaintiff actually learned what Defendant
would do.7 Viewed overall, Missouri jurisprudence does not
24 Combs v. Int’l Ins. Co. No. 01-6493
York) and learned that Defendant did not plan to co ver P laintiff’s
litigation expenses, that shows the injury occurred in New York—just as
the plaintiff in Harris-Laboy was injured in Illinois because that was
where she could have, at least theoretically, 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,
when she be gan to suffer complications fro m the sp onge . Plaintiff
expressly requested that Defendant announce whether it would cover
Plaintiff’s litigation expenses, so P laintiff knew D efendant was about to
formally decide whether it would abide by the terms of the D & O policy
as Plaintiff saw them.
necessarily focus on the place of injury, nor has it explicitly
endorsed the “most significant contacts” test. In fact,
Missouri has twice rejected express invitations to reinterpret
Missouri’s borrowing statute to exclude situations in which
Missouri does have the “most significant contacts.” See
Dorris v. McClanahan, 725 S.W.2d 870, 872 (Mo. 1987) (en
banc) (“[T]he Missouri legislature [through its borrowing
statute] preempts an analysis of 2d Restatement significant
contacts in this case.”), overruled on other grounds by
Thompson v. Crawford, 833 S.W.2d 868 (Mo. 1992); Trzecki
v. Gruenewald, 532 S.W.3d 209, 211 (Mo. 1976).
D.
Plaintiff next emphasizes Illinois law and Employers
Insurance of Wausau v. Ehlco Liquidating Trust, 723 N.E.2d
689 (Ill. Ct. App. 1999) (Ehlco II), an Illinois Court of
Appeals opinion issued on remand from the Illinois Supreme
Court’s decision in Employers Insurance Co. v. Ehlco
Liquidating Trust, 708 N.E.2d 1122 (Ill. 1999) (Ehlco I).
Elhco II dealt with one portion of a complex insurance
coverage dispute. 723 N.E.2d at 691. Ehlco was a trust
created by order of the Delaware Chancery Court to resolve
the contingent liabilities of the Edward Hines Lumber
Company (“Hines”), a dissolved Delaware corporation, and
various affiliated businesses. Id. at 690. Plaintiff Wausau
instituted a declaratory judgment action against Ehlco seeking

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No. 01-6493 Combs v. Int’l Ins. Co. 25
a declaration, inter alia, that it had no defense or indemnity
obligations under certain insurance policies in connection
with a lawsuit filed against Ehlco relating to a contaminated
industrial site in Wyoming. Id. Elhco filed a counterclaim
against Wausau alleging that the insurer breached its duty to
defend and indemnify Ehlco in connection with
contamination at another site in Arkansas. Id. The Elhco II
opinion deals exclusively with the counterclaim. Id. at 692.
In 1982, pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980
(“CERCLA”), 42 U.S.C. §§ 9601-9675, the United States
Environmental Protection Agency (“EPA”) sent Hines a letter
notifying Hines that it faced potential liability for cleanup
costs at the Arkansas site. 723 N.E.2d at 692. Hines, based
in Chicago, notified Wausau that the EPA would assert
liability against Hines. Id. The insurer responded, appearing
to deny coverage based on various policy exclusions. Id.
Hines’ counsel then wrote to Wausau twice, once in 1982 and
once in March of 1983, each time “formally” requesting that
it defend Hines against the EPA’s proceedings. Id. Wausau
replied several weeks after the March letter with a
memorandum that referred to Wausau’s first response but also
requested “a copy of the [EPA] action or correspondence . . .
[and] copies of any complaints or summons.” Id. No further
communication occurred until 1987, when Hines informed
Wausau that the company had almost reached a “final
agreement” with the EPA. Id. Wausau responded
immediately, again recounting its prior reservation of rights
and requesting the details of the proceedings. Id. The Illinois
court noted that “[t]he submissions of the parties do not show
that either Hines or its counsel responded to Wausau’s [two]
requests for information.” Id. at 692-93. In 1988, the EPA
filed suit against Hines in Arkansas federal district court and
simultaneously proposed a consent decree. Id. at 693.
Wausau received news of that filing from a source other than
Hines. Id.
26 Combs v. Int’l Ins. Co. No. 01-6493
Illinois has a borrowing statute similar to Kentucky’s. Like
Kentucky’s, the Illinois statute states that “[w]hen a cause of
action has arisen in a state or territory out of this State, or in
a foreign country, and, by the laws thereof, an action thereon
cannot be maintained by reason of the lapse of time, an action
thereon shall not be maintained in this State.” 735 ILL. COMP.
STAT. 5/13-210. Arkansas’ statute of limitations barred
Ehlco’s action, but Ehlco could proceed under Illinois’ longer
limitations period. 723 N.E.2d at 692. The court relied
heavily on the Restatement (Second) of Conflict of Laws and
considered numerous connections between Illinois and the
dispute including:
the issuance of the insurance policies to Hines in Illinois,
the location of Hines's principal place of business in
Illinois, and the licensing of Wausau to do business in
Illinois. Additional contacts with Illinois include the fact
that correspondence relative to the EPA lawsuit was
directed to Hines in Illinois; Hines's requests to Wausau
for defense originated in Illinois; Wausau's responses to
those requests were sent to Hines in Illinois; and Hines's
legal counsel that provided Hines's defense with respect
to the EPA proceedings was located in Illinois and would
have billed its defense fees to Hines in Illinois. Finally,
any monies found to be owing Hines by Wausau as a
result of the counterclaim would have been due Hines in
Illinois.
Ehlco II, 723 N.E.2d at 696-97 (citing RESTATEMENT
(SECOND) CONFLICT OF LAWS § 188(2) (1971)). The court
thus found that Illinois’ statute of limitations would apply
because Illinois uses the limitation period of the forum “that
bears the most significant relationship to the contract
dispute,” id. at 723 N.E.2d at 695, although Illinois law is just
one factor among many we must consider when making an
Erie guess.
Furthermore, the Ehlco II court was careful to “note that the
inquiry as to where the cause of action arose presupposes that

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No. 01-6493 Combs v. Int’l Ins. Co. 27
the cause of action has in fact arisen.” 723 N.E.2d at 693. In
Ehlco I, the Illinois Supreme Court “held that Wausau’s duty
to defend was triggered by the filing of the EPA lawsuit in the
federal district court in Arkansas seeking entry of the
proposed consent decree.” Id. (citing Ehlco I, 708 N.E.2d at
1130). The Illinois Supreme Court “also found that
notwithstanding the triggering event of the filing of the
lawsuit, Wausau would not have had a duty to defend Hines
in the EPA action unless Hines tendered the lawsuit to
Wausau for defense or Wausau had actual notice of the
lawsuit.” Id. (citing Ehlco I, 708 N.E.2d at 1131). The
Illinois Supreme Court remanded the notice issue to the trial
court with instructions that the parties “be given the
opportunity to amend their pleadings to address the actual
notice issue.” Ehlco I, 708 N.E.2d at 1131-32. The Illinois
Court of Appeals, however, explained that “notwithstanding
the mandated examination of the notice issue by the [trial]
court, we should, in the interest of judicial economy and our
mandate from the Supreme Court, proceed to consider the
questions of whether a cause of action arose and the residency
of the parties.” Ehlco II, 723 N.E.2d at 694. Thus, the entire
decision in Ehlco II assumed, without deciding, that the
plaintiff had a cause of action.
This assumption, required by the Illinois Supreme Court,
probably had the unintended effect of obscuring the potential
significance of the forum in which the cause of action
accrued. According to the Illinois Supreme Court, no cause
of action arose against Wausau unless and until Wausau had
actual notice of the “trigger[],” which was the EPA lawsuit.
Ehlco I, 708 N.E.2d at 1130-31. Therefore, the triggering
event was the filing of the EPA’s suit in Arkansas, and the
cause of action did not arise until Wausau, the defendant,
received “actual notice” of the lawsuit. Conceivably, Wausau
28 Combs v. Int’l Ins. Co. No. 01-6493
8Neither decision discusses where Wausau may have received notice
of the suit, which is what the Illinois Supreme Court ordered the trial
court to investigate. There is no published history after Ehlco II, so
research does not reve al what the trial court determined.
It is also unclear that the reasoning of Ehlco II is sound under 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.
could have received that notice anywhere—even Arkansas.
This casts doubt on Ehlco II’s reasoning.8
Additionally, the Ehlco II Court noted that “the location of
the subject matter of the contract, such as the location of the
risk insured by an insurance policy, is entitled to little weight
when the subject matter or risk is located in more than one
state.” 723 N.E.2d at 694 (citing Lapham-Hickey Steel Corp.
v. Prot. Mut. Ins. Co., 655 N.E.2d 842, 845 (Ill. 1995) and
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193, cmt. b
(1971)). As a consequence, the court gave the location of the
risk less salience in its “most significant relationship” analysis
because the plaintiff’s Comprehensive General Liability
Policy (“CGL”) covered environmental risks in multiple
states. Similarly, Decedent’s D & O policy covered certain
D & O litigation-related expenses wherever they might occur.
This counsels against excessively focusing our inquiry on the
locus of the policy’s “subject matter.”
As already alluded to, it is hard to determine where the
risks a D & O policy insures against are located. It would be
simplistic to conclude that a risk is always located in the
insured’s state of residence because insurance protects only
against financial loss, which is ultimately felt at a person’s
residence or a corporation’s headquarters. A policy can cover
risks in multiple states, as the Second Restatement suggests,
see RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 193,

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No. 01-6493 Combs v. Int’l Ins. Co. 29
9The Bishop Court explained the issue b efore it:
The District Court of Appeal, First District, affirmed the ruling
of the trial court but certified the following question for our
consideration:
cmt. b (1971), and the Second Restatement cautions against
focusing on the location of the risk when risks are dispersed
across forum boundaries, see id., which means the residence
of someone insured under a D & O policy like the one
Decedent held should make little difference. This is further
underscored by the fact that many D & O policies cover
multiple directors and officers, each potentially residing in
different fora. The limited importance given to risk location
in the Ehlco litigation does not support the outcome Plaintiff
urges.
E.
Florida is the final jurisdiction whose law Plaintiff asks us
to consider. Like Kentucky, Florida’s borrowing statute
provides that “[w]hen the cause of action arose in another
state or territory of the United States, or in a foreign country,
and its laws forbid the maintenance of the action because of
lapse of time, no action shall be maintained in this state.”
FLA. STAT. § 95.10. Plaintiff first cites Bates v. Cook, 509
So.2d 1112 (Fla. 1987), for the proposition that Florida
applies a “most significant relationship” test to its borrowing
statute when the cause of action sounds in tort. Plaintiff is
partly correct—Florida adopted the “most significant
relationship” test in Bishop v. Florida Speciality Paint Co.,
389 So.2d 999, 1001 (Fla. 1980), but that case did not involve
Florida’s borrowing statute. Rather, Bishop adopted the
Second Restatement’s approach only with respect to the
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.
30 Combs v. Int’l Ins. Co. No. 01-6493
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
considerations, such as the policies and purposes
underlying the conflicting laws of a foreign jurisdiction
where the tort occurred, and the relationship of the
occurrence and of the parties to such policies and
purposes?
509 So.2 d at 1000 .
With respect to contract disputes, Plaintiff cites
Lumberman’s Mutual Casualty Co. v. August, 530 So.2d 293
(Fla. 1988). Lumberman’s involved a Massachusetts driver
insured by a policy with uninsured motorist benefits. Id. at
294. The plaintiff signed the policy in Massachusetts before
having an accident with an uninsured motorist in Florida. Id.
She then brought suit against her insurer for benefits after
Massachusetts’ limitations period expired but before Florida’s
terminated. Id. The court found Florida’s statute of
limitations governed the action because “the lex loci
contractus rule determines the choice of law for interpretation
of provisions of uninsured motorists clauses in automobile
insurance policies just as it applies to other issues of
automobile coverage.” Id. at 295. This is because, according
to the court, the lex loci contractus rule dictates that the cause
of action arises in the place where the contract is executed.
Id. at 296 (citing Colhoun v. Greyhound Lines, Inc., 265
So.2d 18, 21 (Fla. 1972)).
Florida courts continue to apply the “most significant
relationship” test to torts only, not contract actions. See, e.g.,
Allstate Ins. Co. v. Clohessy, 32 F. Supp.2d 1328, 1333 (M.D.
Fla. 1998) (refusing to apply the “most significant
relationship” test to a contract dispute). Although Plaintiff
does not argue that the Kentucky statute of limitations should
govern his suit solely because Decedent executed the
insurance contract there, one should recognize in passing that
Florida’s rule is problematic because it offers no guidance in

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No. 01-6493 Combs v. Int’l Ins. Co. 31
situations where the contract dispute involves the failure to
execute a contract or when the parties executed the contract
in a forum where the defendant is not amenable to process.
Most important for the purposes of the instant
Erie problem, in Pledger v. Burnup & Sims, Inc., 432 So.2d
1323 (Fla. Dist. Ct. App. 1983), the Florida District Court of
Appeals declined to construe the Bishop decision that applied
the “most significant relationships” to substantive conflict of
laws determinations as also covering procedural matters like
the statute of limitations determination implicated by
Florida’s borrowing statute. Id. at 1330. The Florida District
Court of Appeals presented the issue this way:
Unquestionably, Florida has the most significant contacts
with the issue presented . . . . Appellant has presented a
question on which he has cited no authority, in Florida or
elsewhere: that is, in view of the [Florida] Supreme
Court’s adoption of Restatement (Second) Conflict of
Laws § 145, did the cause of action arise in New York,
or in Florida, which has the most significant
relationship?
Id. The court found New York’s limitations period would
apply because the Florida legislature, not the judiciary, should
make the decision that the “most significant relationship” test
should apply to Florida’s borrowing statute. Id. The Pledger
court explained:
The Legislature has not amended [the borrowing statute]
since the [Florida] Supreme Court opinion in Bishop. We
have no hint of the legislative will on the question of
determining where a cause of action arises. They may
have assumed the Bishop conflicts rule would determine
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
the procedural borrowing statute.
32 Combs v. Int’l Ins. Co. No. 01-6493
10The “accrual 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.”
Id. at 1330-31 (emphasis added). Thus, Florida does not use
the test Plaintiff advocates and one Florida court emphasized
that modifying a borrowing statute is a legislative prerogative.
A federal court forced to make an Erie guess should pause
before reinterpreting a state statute if the state law is one that
is better modified legislatively. Whether or not the Kentucky
courts could reinterpret Kentucky’s borrowing statute instead
of the Kentucky legislature despite the separation of powers
concerns expressed in Pledger, the reinterpretive process
raises much more problematic federalism concerns when a
federal court construes a state statute.
Although Plaintiff’s citations to Wyoming, New York,
Missouri, Illinois and Florida law are somewhat illuminating,
none of this information makes clear that the Kentucky
Supreme Court would interpret Kentucky’s borrowing statute
as Plaintiff suggests.
III.
As cited above, Plaintiff references various scholarly works
that urge courts to construe borrowing statutes in a manner
that incorporates the “most significant relationship” test.
Despite these academic exhortations, we recognize that
borrowing statutes interpreted in accordance with the accrual
approach produce several meaningful policy advantages.10
First, borrowing statutes impede forum shopping. As one
federal court sitting in diversity explained, the objective of
Pennsylvania’s borrowing statute is “simply to insure that a
plaintiff who sues in Pennsylvania obtains no greater rights
than those given in the state where his cause of action arose.”
Wilt v. Smack, 147 F. Supp. 700, 704 (E.D. Pa. 1957); see
also Stuart v. Am. Cyanamid Co., 158 F.3d 622, 627 (2d Cir.

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No. 01-6493 Combs v. Int’l Ins. Co. 33
1998) (“[T]he purpose of the borrowing statute—preventing
forum shopping by plaintiffs seeking the holy grail of the
longer period—is best served by applying the period of the
foreign state, regardless of how it is denominated.”); Faigin
v. Doubleday Dell Publ’g Group, Inc., 98 F.3d 268, 271 (7th
Cir. 1996) (observing “the antipathy to forum shopping
reflected in Wisconsin's borrowing statute (in all such
statutes, really)”); Siegemund v. Shapland, 247 F. Supp. 2d. 1,
6 n.17 (D. Me. 2003) (“Borrowing statutes, enacted by states
to prevent forum shopping, ‘enable the forum to borrow and
use the statute of limitations of another state in determining
the timeliness of an action.’”) (quoting Hossler v. Barry, 403
A.2d 762, 765 (Me. 1979)); Flowers v. Carville, 112 F. Supp.
2d 1202, 1208 (D. Nev. 2000) (“Borrowing statutes are
designed to prevent forum shopping.”).
An accrual-based approach makes forum shopping
impossible because the statute of limitations that governs in
the forum where the cause of action accrued will apply no
matter where the plaintiff files suit. In contrast, allowing
plaintiffs to file suit in any state that has significant contacts
with the dispute encourages plaintiffs to shop for the forum
with the longest statute of limitations. Although limiting the
operation of a borrowing statute to only those instances where
a state has the most significant connection with the lawsuit
helps make forum shopping somewhat more difficult, many
modern commercial transactions transcend state boundaries.
If a contract is negotiated in Michigan between an Ohio
company and a Kentucky company, with performance
scheduled in Tennessee, determining which state has the
“most” significant contacts becomes difficult and subjective
enough for enterprising attorneys to capitalize on differences
between limitations periods. State courts’ desire to
discourage forum shopping is significant enough that in at
least one instance, the New Jersey Supreme Court applied a
foreign jurisdiction’s limitation period even though New
Jersey does not have a borrowing statute. See Heavner v.
Uniroyal, Inc. 305 A.2d 412, 418 (N.J. 1973) (applying New
34 Combs v. Int’l Ins. Co. No. 01-6493
11Borrowing statutes apply to both foreign statutes of limitation and
statutes of repo se, because both kinds o f laws serve to limit the period in
which a plaintiff may initiate an action. Statutes of limitations and repo se
are frequently confused, but both serve similar purposes. “A statute of
limitations focuses on time measured from an injury; a statute of repo se
rests on the time from some initiating event unrelated to an injury.”
Roskam Baking Co., Inc. v. Lanham Mach. Co., Inc., 288 F.3d 895, 903-
04 (6th Cir. 2002). Thus, a statute of limitations might bar an injured
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 produced the pro duct.
Hampshire statute of limitation despite lack of borrowing
statute in New Jersey, in part to prevent forum shopping).
Second, strictly enforcing borrowing statutes best serves the
purpose of statutes of limitation and repose.11 Most states,
including Kentucky, have tolling statutes that stall the running
of the applicable limitations period if a cause of action
accrues against a state resident not present in the jurisdiction
when the cause of action accrues. Kentucky law explains that
“[i]f, at the time any cause of action mentioned in Ky. Rev.
Stat. 413.090 to 413.160 accrues against a resident of this
state, he is absent from it, the period limited for the
commencement of the action against him shall be computed
from the time of his return to this state.” KY. REV. STAT.
§ 413.190(1). Furthermore,
When a cause of action mentioned in KRS 413.090 to
413.160 accrues against a resident of this state, and he by
absconding or concealing himself or by any other
indirect means obstructs the prosecution of the action, the
time of the continuance of the absence from the state or
obstruction shall not be computed as any part of the
period within which the action shall be commenced.
Id. § 413.190(2). Since tolling statutes eliminate a
defendant’s ability to flee the jurisdiction and return after the
statute of limitations expires, tolling statutes can inadvertently
create perpetual liability for a defendant legally residing in

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No. 01-6493 Combs v. Int’l Ins. Co. 35
Kentucky accused of a tort or breach of contract that occurred
in another jurisdiction. If the defendant is not present in
Kentucky when the cause of action accrues against him, he
will face liability upon his return to the State even if he
returns decades later. See id. The borrowing statute
minimizes this problem by using the foreign state’s statute of
limitations when the cause of action accrues in the foreign
state, thereby eliminating the problem of perpetual liability in
those circumstances. See George v. Douglas Aircraft Co.,
332 F.2d 73, 78 (2d Cir. 1964) (discussing the problem of
perpetual liability); Cvicich v. Giardino, 99 P.2d 573, 574-75
(Cal. Ct. App. 1940) (same).
Relieving potential defendants of uncertainty is one of the
historical purposes of statutes of limitations. As the Supreme
Court explained, “[s]tatutes of limitations, like the equitable
doctrine of laches, in their conclusive effects are designed to
promote justice by preventing surprises through the revival of
claims that have been allowed to slumber until evidence is
lost, memories have faded, and witnesses have disappeared.”
Order of R.R. Telegraphers v. Ry. Express Agency, 321 U.S.
342, 348-49 (1944). Earlier, the Supreme Court wrote that:
It is a well-settled principle that a statute of limitations is
the law of the forum, and operates upon all who submit
themselves to its jurisdiction. . . . Of late years, the
courts, in England and in this country, have considered
statutes of limitations more favorably than formerly.
They rest upon sound policy, and tend to the peace and
welfare of society. The courts do not now, unless
compelled by the force of former decisions, give a
strained construction to evade the effect of those statutes.
By requiring those who complain of injuries to seek
redress by action at law, within a reasonable time, a
salutary vigilance is imposed, and an end is put to
litigation.
McCluny v. Silliman, 28 U.S. (3 Pet.) 270, 276-77 (1830).
Statutes of limitations and repose thus serve both the interest
36 Combs v. Int’l Ins. Co. No. 01-6493
in encouraging expeditious dispute resolution and the interest
in creating confidence that long bygone incidents will not
suddenly reemerge in litigation initiated at some unknown
future time. Interpreting Kentucky’s borrowing statute in a
manner more likely to create instances of lengthy or perpetual
liability does a disservice to these objectives.
Third, borrowing statutes reflect respect for state
sovereignty. A cause of action is an attempt by the plaintiff
to vindicate what he believes is a legal right or obligation
owed. Legal rights and obligations vest when the last event
necessary to create the cause of action occurs. The law of the
state where the final event occurs determines the parties’
rights and responsibilities at that point because each state has
sovereignty over that which occurs within in its territory. See,
e.g., RESTAT EMENT OF CONFLICT OF LAWS §§ 377-388. As
discussed, the application of the law of the place of the injury
is why this system is sometimes called the lex loci approach.
Justice Story argued,
[E]very nation possesses an exclusive sovereignty and
jurisdiction within its own territory. . . . The direct
consequence of this rule is, that the laws of every state
affect, and bind directly all property, whether real or
personal, within its territory; and all persons, who are
resident within it . . . ; and also all contracts made, and
acts done within it.
JOSEPH STORY, COMMENTARIES ON THE CONFLICT OF LAWS,
FOREIGN AND DOMESTIC 18 (2d ed. 1841) (hereinafter
“COMMENTARIES”); see also Renfroe v. Eli Lilly & Co., 686
F.2d 642, 647 (8th Cir. 1982) (“[T]he cause arises where as
well as when the final significant event that is essential to a
suable claim occurs.”) (citing Mack Trucks, Inc. v. Bendix-
Westinghouse Auto. Air Brake Co., 372 F.2d 18, 20 (3d Cir.
1966)). The notion of vested rights, therefore, depends on
ideas of territoriality and sovereignty.

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No. 01-6493 Combs v. Int’l Ins. Co. 37
Borrowing statutes embody the idea that the foreign
jurisdiction’s law should control out of respect for that
jurisdiction’s territorial sovereignty. See, e.g., Devine v.
Rook, 314 S.W.2d 932, 935 (Mo. Ct. App. 1958) (“It is
fundamental that the law of the place where the cause of
action first came to life controls the substantive law of the
cause, since the cause owes its existence, and the character of
its existence, to that place.”). States, in turn, should respect
each others’ sovereign rights. In his classic explanation of the
comity argument, Justice Story wrote:
The true foundation of which the administration of
international law must rest is that the rules which are to
govern are those which arise from mutual interest and
utility, from a sense of the inconveniences which would
result from a contrary doctrine, and from a spirit of moral
necessity to do justice, in order that justice may be done
to us in return.
COMMENTARIES, at 34. If Kentucky fails to respect that a
cause of action accrues in a foreign jurisdiction, like New
York, although the final event necessary for the cause of
action occurred in New York, Kentucky shows disrespect for
New York’s territoriality in derogation of comity principles
that the Kentucky Supreme Court may value.
Without a borrowing statute, New York could establish a
cause of action to remedy a particular wrong, but reach a
legislative judgment about the significance of the problem
and the importance of finality, and choose to attach a short
statute of limitations to the new cause of action. By failing to
recognize New York’s decision, Kentucky would effectively
undermine a quasi-substantive component of New York
law—not something we should lightly assume the Kentucky
Supreme Court would choose to do.
Thus, despite Plaintiff’s attempt to capitalize on the
scholarly pressure to interpret Kentucky’s borrowing statute
as ineffective when Kentucky does not have the “most
38 Combs v. Int’l Ins. Co. No. 01-6493
significant relationship” with the dispute, adopting Plaintiff’s
approach might encourage forum shopping, work against the
purposes of statutes of limitations and repose, and
demonstrate an inappropriate disregard for another state’s
sovereignty.
IV.
In a diversity case, the Kentucky statute of limitations will
be applied as interpreted by this Court. Atkins v. Schmutz
Mfg. Co., 372 F.2d 762, 763 (6th Cir. 1967). Kentucky
would not apply a “most significant relationship” analysis
when applying Kentucky’s borrowing statute to the instant
case.
A.
The statutory language supports Defendant’s position. The
“fundamental rule of statutory construction” in Kentucky “is
to determine the intent of the legislature, considering the evil
the law was intended to remedy.” Beach v. Commonwealth,
927 S.W.2d 826, 828 (Ky. 1996); see also Kelly v. Marr, 185
S.W.2d 945, 949 (Ky. 1945). To ascertain legislative intent,
Kentucky courts must refer to "the words used in enacting the
statute rather than surmising what may have been intended
but was not expressed." Flying J Travel Plaza v.
Commonwealth, 928 S.W.2d 344, 347 (1996) (citing Ky.
Assoc. of Chiropractors, Inc. v. Jefferson County Med. Soc.,
549 S.W.2d 817 (Ky. 1977)). To reiterate, Kentucky’s
borrowing statute states:
When a cause of action has arisen in another state or
country, and by the laws of this state or country where
the cause of action accrued the time for the
commencement of an action thereon is limited to a
shorter period of time than the period of limitation
prescribed by the laws of this state for a like cause of
action, then said action shall be barred in this state at the
expiration of said shorter period.

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No. 01-6493 Combs v. Int’l Ins. Co. 39
KY. REV. STAT. § 413.320. Nowhere in the statutory
language does the “most significant relationship” test appear.
We are “not at liberty to add or subtract from the legislative
enactment nor discover meaning not reasonably ascertainable
from the language used.” Commonwealth v. Gaitherwright,
70 S.W.3d 411, 413 (Ky. 2002) (citing Commonwealth v.
Frodge, 962 S.W.2d 864, 866 (Ky. 1998)). Nevertheless, we
certainly acknowledge Plaintiff’s argument that other state
supreme courts have read elements of a “most significant
relationship” test into borrowing statutes that lacked such
express language.
B.
Kentucky last amended its borrowing statute in 1942, at a
time when Kentucky still followed the vested rights approach
to substantive choice of law questions. See KY. REV. STAT.
§ 413.320. Prior to 1967, all Kentucky case law applied lex
loci. See, e.g., Ansback v. Greensberg, 256 S.W.2d 1 (Ky.
1967) (applying lex loci to an automobile accident case). In
a series of cases in the late 1960s, however, Kentucky began
to depart from the lex loci approach to torts. See Foster v.
Leggett, 484 S.W.3d 827, 828-29 (Ky. 1972); Arnett v.
Thompson, 433 S.W.2d 109, 112 (Ky. 1968); Story v.
Burgess, 420 S.W.2d 548, 548 (Ky. 1967); Wessling v. Paris,
417 S.W.2d 259, 260-61 (Ky. 1967). The Kentucky Supreme
Court, however, did not make the same change with respect
to contract cases.
In Lewis v. American Family Ins. Group, 555 S.W.2d 579
(Ky. 1977), an Indiana resident driver insured in Indiana was
involved in an accident in Kentucky with an uninsured
Kentucky driver. Id. at 580. The Indiana driver filed suit in
Kentucky against his insurer for uninsured motorist coverage
and the court applied Indiana substantive law. Id. at 581.
Under Lewis, the rights vested in the place of insurance,
which was Indiana, not Kentucky, where the accident
occurred. More recently, in State Farm Mutual Automobile
Insurance Co. v. Tennessee Farmers Mutual Insurance Co.,
40 Combs v. Int’l Ins. Co. No. 01-6493
785 S.W.2d 520 (Ky. Ct. App. 1990), the Kentucky Court of
Appeals refused to apply Kentucky substantive law to a
Tennessee insurance contract following an automobile
accident in Kentucky between a Kentucky driver and a
Tennessee driver. Id. at 521. As long as Kentucky courts
continue to apply the vested rights approach to contracts, and
insurance contracts in particular, this Court, sitting in
diversity, lacks a basis to predict that the Kentucky Supreme
Court would take a different route.
C.
Willits v. Peabody Coal Co., Nos. 98-5458, 98-5527, 1999
WL 701916 (6th Cir. Sept. 1, 1999) (unpublished), is the only
case to deal with questions like those Plaintiff presents in the
context of Kentucky’s borrowing statute. Although Willits is
an unpublished opinion, its reasoning is instructive.
In Willits, the plaintiffs asserted a breach of contract claim
alleging, inter alia, improper calculation of royalties under
coal mining agreements. 1999 WL 701916, at *11. The
parties originally executed the contract in Kansas. Id. at *13.
The defendants calculated royalty payments in Missouri and
then mailed them to various states, including Kentucky. Id.
Missouri’s shorter limitations period would have barred the
plaintiffs’ claims. Id. at *12. Both parties agreed that
Kentucky’s borrowing statute controlled the case. Id. at *11.
The Willits Court explained how it would apply the
borrowing statute:
The Kentucky borrowing statute requires a three step
analysis: (1) we must determine whether the cause of
action accrued in another state; (2) if the cause of action
did accrue in another state, we must determine whether
that state's statute of limitations for the particular cause
of action is shorter than Kentucky's; (3) if the accrual
state's statue of limitations is shorter than Kentucky's, we
apply the statute of limitations of the accrual state;
however, if the statute of limitations for the cause of

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No. 01-6493 Combs v. Int’l Ins. Co. 41
12Significantly, Willits also mentions the problems presented by
defining accrual in a manner related to where the plaintiff or plaintiffs
suffer damages. The Willits Court wrote:
To the extent that the calculations and the resulting paym ents
were a breach of Peabod y’s obligation, that breach o ccurred in
the office in Missouri. It would b e unworkab le and irration al to
hold that the cau se of action accrued wherever each Plaintiff
happened to receive his or her deficient check.
199 9 W L 70 191 6, at *13 (emp hasis ad ded ).
action in that state is longer than Kentucky's, we apply
Kentucky's shorter statute.
Id. at *12. The second and third parts of this process are
fairly simple: if the cause of action accrued in a foreign state,
then determine that state’s statute of limitations, and if the
foreign state has a shorter limitations period than Kentucky,
borrow the foreign state’s shorter rule. The trouble occurs in
reaching the second and third components of the analysis
because, as Willits correctly observed, “there is little or no
law in Kentucky concerning where a breach of contract action
accrues.” Id. (emphasis in original).
To help ascertain how the Kentucky judiciary might
determine where a cause of action accrues, Willits noted that
Kentucky’s statute of limitations for contracts of sale under
the Uniform Commercial Code (UCC) provides: “‘A cause of
action accrues when the breach occurs, regardless of the
aggrieved party’s lack of knowledge of the breach.’” Willits,
1999 WL 701916, at *13 (quoting KY. REV. STAT. § 355.2-
725(2)). This supports the conclusion, relevant to Plaintiff’s
lawsuit, “that a breach can occur before the aggrieved party
actually knows of it and is damaged by it.” Id. (emphasis
added). This supports Willits’ decision that the breach
occurred in Missouri, “where [the defendant] improperly
calculated the royalties and from whence [the defendant]
mailed out the royalty payments to the Plaintiffs in their
various states of residence.”12 Id. at *14.
42 Combs v. Int’l Ins. Co. No. 01-6493
Plaintiff offers three challenges to the reasoning offered in
Willits and to the application of Willits to the matter presently
before us. First, Plaintiff notes that the district court applied
Willits to the instant action in part because of Wisconsin
jurisprudence the district court found useful. Wisconsin has
a borrowing statute similar to Kentucky’s, but Plaintiff
complains that the Wisconsin cases cited by the district court
do not clearly establish what the Kentucky Supreme Court
would do. The district court initially cites Abraham v.
General Cas. Co. of Wisconsin, 576 N.W.2d 46 (Wis. 1998).
In Abraham, the Wisconsin Supreme Court held that a cause
of action is “foreign” when “the final significant event giving
rise to a suable claim occurs outside the state of Wisconsin.”
Id. at 53-54. Plaintiff disputes Abraham’s persuasive value
because Abraham involved a set of facts in which all
significant events occurred in Wisconsin. See id. at 54-55
(Bradley, J., concurring). Yet even assuming the Abraham
decision depended on significantly different facts than the
case presented here, Abraham still reinforces the vested rights
theory that a cause of action accrues wherever the “last act”
necessary to create the claim occurs.
The district court also relied on Ristow v. Threadneedle Ins.
Co., 583 N.W.3d 452 (Wis. Ct. App. 1998). In Ristow, a
Wisconsin resident sued a South Carolina insurer because he
never received a settlement check after suffering an injury in
South Carolina. Id. at 453. Significantly, Ristow found that
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
Wisconsin. Id. at 455. Citing Western Union Tel. Co. v.
Lacer, 93 S.W. 34 (Ky. 1906), Plaintiff claims the district
court should not have relied on Ristow because Kentucky
courts would have reached a different conclusion if faced with
the Ristow facts. The Lacer court had to decide whether a
cause of action against Western Union accrued in Indiana,
where the company affixed the wrong address to a telegraph,
or in Kentucky, where the company failed to promptly deliver
the message. Id. at 35. Although Lacer found that the cause

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No. 01-6493 Combs v. Int’l Ins. Co. 43
13Plaintiff also cites Allstate Insurance Co. v. Napier, 505 S.W.2d
169 (Ky. 1974) and Louisville Gas and Elec. Co. v. Employer’s Mut. Liab.
Ins. Co., 548 S.W.2d 843 (Ky. Ct. App. 1977). Both cases concern
substantive choice of law disputes in the context of interpreting insurance
of action accrued in Kentucky, that conclusion does not aide
Plaintiff much because the Lacer plaintiff expressly
contracted for Western Union to “expeditiously deliver the
correct message to the addressee at the point addressed.” Id.
at 35. Neither Ristow nor Plaintiff’s case involves a contract
that specified a delivery point. More important, Lacer
requires a different “last act” analysis than Ristow because the
Lacer Plaintiff could not have sued Western Union until the
company failed to promptly deliver the message, whereas the
Ristow plaintiff could have sued the defendant insurer
whenever (and however) he discovered that the defendant did
not mail him his settlement check.
Plaintiff’s second direct challenge to the application of
Willits to the instant problem depends upon Kentucky venue
jurisprudence. Plaintiff cites a series of cases interpreting
Kentucky’s venue statute, Ky. Rev. Stat. Ann. § 452.450.
See, e.g., T.C. Young Constr. Co. v. Hartford Accident &
Indem. Co., 441 S.W.2d 781 (Ky. 1969); Prudential Ins. Co.
of Am. v. Terry, 95 S.W.2d 1109 (Ky. 1936); Ins. Co. of N.
Am. v. Hopper, 69 S.W.2d 728 (Ky. 1934); Torrent Lodge v.
Nat’l Sur. Co., 21 S.W.2d 439 (Ky. 1929). These cases,
however, merely address the question of venue for a suit
based on an insurance policy, not where a cause of action
accrues under Kentucky’s borrowing statute. Under
Kentucky’s venue statue, plaintiffs must bring lawsuits for
breach of contract against a corporation in the county where
either (1) the corporation is present; (2) its agent resides;
(3) the contract was made; or (4) the parties were to perform
the contract. KY. REV. STAT. § 452-450. The planned place
of performance is a possibly appropriate venue, but that says
little about where a cause of action accrues pursuant to the
borrowing statute.13
44 Combs v. Int’l Ins. Co. No. 01-6493
policy provisions, not deciding arguments over which state’s statute of
limitation would apply. Both parties to this action agree on the
substantive choice-of-law question—K entucky’s borrowing statute
app lies, not that of som e other state.
Third, in an attempt to minimize the importance of Willits
as applied to the facts of his case, Plaintiff presents us with
this hypothetical:
Buyer buys a used car from Seller using a contract that
calls for a full-sized spare and shortens the statute of
limitations to one year (as allowed by [Ky. Rev. Stat.]
355.2-725). The contract also provides a one year
warranty for all electrical components, which requires
Buyer to submit a claim form for any repair. Eleven
months later, the alternator fails, and Buyer submits a
warranty claim form. Two months after that, Buyer has
a flat and discovers that there is no spare at all. Three
months after the flat, the warranty company delivers a
letter claiming that the alternator is not an electrical
component.
Buyer’s breach action for the lack of a spare fails because
the breach occurred at delivery, as Seller could have put
the spare in at any time until then. Buyer could have
discovered the spare within the year, but did not and is
barred. By not requiring actual knowledge, the statute
[of limitations] places the burden on Buyer to examine
the goods on delivery, and limitations begin at the point
he should have known of the breach. This concept of
accrual when the plaintiff should have known of the
injury is found both in other limitations statutes and case
law. See [KY. REV. STAT. ANN.] 413.140(2); Ky. Title
Trust Co. v. Weil, 136 S.W.2d 1097 (Ky. 1939).
Buyer’s action for breach of the warranty, however, does
not accrue under the statute until he receives the letter
denying his claim, sixteen months after the purchase, and
five months after the alternator failed. Buyer could not

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No. 01-6493 Combs v. Int’l Ins. Co. 45
sue the warranty company when the alternator failed
because he had not complied with the condition
precedent of submitting the claim form at that point. The
breach is only discovered when the Buyer receives the
letter denying the claim and, under the statute [of
limitations], the cause accrues at that point in time and
(under the analysis in Willits) space.
(Pl.’s Br. at 18-19) (emphasis in original). This hypothetical
is somewhat deceptive.
Plaintiff implies that the warranty in this hypothetical is
like the D & O policy. Presumably, Plaintiff intends the
hypothetical to demonstrate the difference between the breach
of contract action based on the spare tire (which the
hypothetical concedes the statute of limitations would bar)
and the breach of warranty action based on the failed
alternator. Plaintiff’s analysis of the spare tire issue is correct
because Buyer could have discovered the breach at any time
after the sale and brought suit accordingly. Of course,
Plaintiff could (but does not) explain it this way: as soon as
Seller sold the car without the spare tire, the breach of
contract claim “accrued” because selling the car without the
spare was the final act necessary to create the cause of action.
Plaintiff wants us to confuse the “final act” notion of
accrual with a discovery concept more favorable to his
position in this case. In the hypothetical, Plaintiff assumes
that Buyer had no warranty action until he received the letter
from the warranty company declaring that an alternator does
not qualify as an electrical component. Only then, argues
Plaintiff, did Buyer discover his cause of action. Yet the final
act necessary to create the cause of action was the warranty
company’s decision to deny the claim—a judgment that most
likely transpired where the company posted the letter, not
where Buyer received it. Quoting one of this Court’s earlier
decisions, Willits notes that “‘[t]he final act which transforms
the liability into a cause of action necessarily has aspects of
time and place. It occurs at a certain time and in a certain
46 Combs v. Int’l Ins. Co. No. 01-6493
geographical spot.” 1999 WL 701916, at *12 (emphasis
added) (quoting Helmers v. Anderson, 156 F.2d 47, 51 (6th
Cir. 1946), aff’d sub nom. Cope v. Anderson, 331 U.S. 461
(1947)). As discussed above, Willits concluded “that a breach
can occur before the aggrieved party actually knows of it and
is damaged by it.” 1999 WL 701916, at *13.
Although Willits is an unpublished opinion that constitutes
only persuasive authority, Willits supports Defendant, not
Plaintiff.
D.
As already discussed, the judicial activity in other states
does not constitute particularly persuasive evidence that the
Kentucky Supreme Court would reinterpret Kentucky’s
borrowing statute to limit its function when Kentucky has the
“most significant relationship” to the disputed transaction.
Although a few state judiciaries have interpreted their
borrowing statutes somewhat progressively, Plaintiff’s
references to the law in other jurisdictions are too equivocal
to form a sound basis for an Erie guess.
To summarize, Wyoming has not adopted the Second
Restatement’s approach. See BHP, 1 P.3d at 1256. New
York’s “place of injury” test is different from the “most
significant relationship” test and not particularly helpful when
the injury is intangible, as in this case. See Global Financial,
715 N.E.2d at 486. Plaintiff also points to Missouri, but
Missouri has twice rejected invitations to apply the Second
Restatement’s approach to its borrowing statute. See Dorris,
725 S.W.2d at 872; Trzecki, 532 S.W.3d at 211. And despite
Plaintiff’s attempt to use Florida law to his advantage, the
Florida Court of Appeals declined to adopt the Second
Restatement approach without a clear legislative instruction.
See Pledger, 432 So.2d at 1330-31. That leaves Illinois,
which applied the “most significant relationship” test in Ehlco
II, although that case’s unusual procedural posture lessens its
precedential value.

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No. 01-6493 Combs v. Int’l Ins. Co. 47
14In 1966, Pe nnsylvania’s borrowing statute had language similar to
that in Kentucky’s borrowing provision: “When a cause of action has
been fully barred by the laws of the state or country in which it arose,
such bar shall be a complete defense to an action thereon brought in any
of the courts of this commonwealth.” 12 PA. CO N S. STAT. § 39 .
There is also relevant information from jurisdictions
Plaintiff neglects to mention. Minnesota repealed its
borrowing statute, but a federal court sitting in diversity
dutifully applied Minnesota’s borrowing statute before the
Minnesota legislature revoked it. See Devine v. Rayette-
Faberge, Inc., 285 F. Supp. 1006, 1008 (D. Minn. 1968)
(finding plaintiff’s action time-barred by using Minnesota’s
borrowing statute to apply New York’s more restrictive
statute of limitations). More important, in Mack Trucks, Inc.
v. Bendix-Westinghouse Auto. Air Brake Co., 372 F.2d 18 (3d
Cir. 1966), the Third Circuit expressly declined a plaintiff’s
invitation to interpret Pennsylvania’s borrowing statute so as
to apply “the law of the place having the most significant
contacts with the relevant transactions and with the parties
rather than by the law of the place of the wrong.”14 Id. at 20-
21.
The opinions from other jurisdictions that Plaintiff cites do
not make a compelling case upon which we can make a
judicious Erie guess. If anything, developments elsewhere
tend to affirmatively indicate that the Kentucky Supreme
Court would not limit the application of its borrowing statute
to those situations in which Kentucky has the “most
significant relationship” with the dispute.
E.
Although the Kentucky Supreme Court might heed the
scholarly criticism of borrowing statutes interpreted in
accordance with the accrual theory, the Kentucky Supreme
Court might just as easily choose to respect the strong policy
interests borrowing statutes serve: they impede forum
48 Combs v. Int’l Ins. Co. No. 01-6493
shopping, effectuate the goals of statutes of limitations and
repose, and demonstrate respect for other states’ sovereignty.
This Court has a circumspect role when sitting in diversity
and should not unduly speculate about what a state court
might conclude, nor should we impose whatever rule we think
best. Given (1) the borrowing statute’s language;
(2) Kentucky’s focus on vested rights in interstate contract
litigation; (3) our unpublished Willits decision; (4) Plaintiff’s
inability to construct a strong argument based on the law of
other jurisdictions; and (5) the policy interests supported by
leaving Kentucky’s borrowing statute unadulterated by the
Second Restatement, we conclude that the Kentucky Supreme
Court would apply the borrowing statute by focusing only on
where the cause of action accrued, not on which state has the
greatest interest in the dispute.
V.
Having decided that the Kentucky Supreme Court would
determine the applicable statute of limitations by looking only
to where the cause of action accrued, we must now attempt to
apply that rule to the facts of the case before us.
A.
Where an insurance policy is breached depends in part on
whether the contract is a liability policy or an indemnity
policy. “[U]nder a liability policy a cause of action accrues
when liability attaches, whereas under an indemnification
policy there is no cause of action until the liability has been
discharged, as by payment of the judgment by the insured.”
Quinlan v. Liberty Bank & Trust Co., 575 So.2d 336, 355
(La. 1990).
Plaintiff’s D & O policy defines “loss” as “any amount
which Insureds are legally obligated to pay for a claim or
claims against them for Wrongful Acts.” (J.A. at 16.) As the

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No. 01-6493 Combs v. Int’l Ins. Co. 49
Eighth Circuit described a similarly-worded D & O policy
issued by American Casualty Company:
The definition of "Loss" unequivocally includes defense
costs, and seems to require American Casualty to pay
these costs when the insureds are "legally obligated to
pay" them, i.e., when the costs are incurred, and not, as
American Casualty appears to suggest, when the lawsuit
is finally disposed of and American Casualty has
determined that the claims were covered. This is clearly
a liability policy, despite American Casualty's attempt to
treat it as an indemnity policy. The significance of this
distinction is that under a liability policy, whenever a
covered "loss" occurs (i.e., the insureds are "legally
obligated to pay"), American Casualty must pay that
amount—payment by the insurer is not conditioned upon
a previous payment by the insured, as in an indemnity
policy.
McCuen v. Am. Cas. Co., 946 F.2d 1401, 1406-07 (8th Cir.
1991); see also Little v. MGIC Indem. Corp., 836 F.2d 789,
793 (3d Cir. 1987) (“A ‘loss’ is defined as an amount that the
insured is ‘legally obligated to pay.’ Although this section [of
the policy] does not explicitly speak to the timing of the
insurer’s duty to pay, the only reasonable interpretation is that
the duty arises at the time the insured becomes ‘legally
obligated to pay.’”); Okada v. MGIC Indem. Corp., 823 F.2d
276, 280 (9th Cir. 1986) (“In a liability contract, the insurer
agrees to cover liability for damages. If the insured is liable,
the insurance company must pay the damages. In an
indemnity contract, by contrast, the insurer agrees to
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
a liability policy, not an indemnity policy.
Assuming Defendant had an obligation to pay under the
policy’s language, Defendant had no responsibility before
Decedent himself became “legally obligated to pay”
50 Combs v. Int’l Ins. Co. No. 01-6493
15No te how Renne uses the future tense: “[My client] will look to
you . . . for reimbursement.” (J.A . at 102 ) (emp hasis ad ded ).
16The phrases “anticipatory breach,” “anticipatory repudiation,” and
“renunciation” are used intercha ngeably. See 17B C.J.S. Con tracts § 534,
at 196 (1999 ).
attorney’s fees, settlements, or other related sums. The two-
page letter sent from Plaintiff’s California counsel to
Defendant is simply a list of the eight different lawsuits filed
in the California Litigation. Renne, Plaintiff’s California
counsel, made clear in the text that “this letter constitutes a
claim by [the officers and directors of Spendthrift] under the
terms of the above-captioned policy and they will look to you
[Defendant] for reimbursement of all costs and damages
which may be assessed against them.”15 (J.A. at 102.) Thus,
at the moment Defendant received Renne’s letter, Defendant
had no obligation to reimburse Decedent—the letter did not
include any demand for the reimbursement of a specific
amount of money. Rather, it notified Defendant that the
Spendthrift directors would attempt to recoup from Defendant
“all costs and damages which may be assessed against them.”
Id.
B.
Since Defendant renounced the D & O policy (with respect
to the California Litigation) before Defendant had any
obligation to make payments pursuant to the policy,
Defendant’s behavior constituted an anticipatory
repudiation.16 As the Supreme Court explained, “[i]t has
always been the law that where a party deliberately
incapacitates himself or renders performance of his contract
impossible, his act amounts to an injury to the other party,
which gives the other party a cause of action for breach of
contract.” Roehm v. Horst, 178 U.S. 1, 18 (1900); see
also Hochster v. De la Tour, 2 El. & Bl. 678 (1853). “The
disclaimer of a contractual duty is a breach of contract even

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No. 01-6493 Combs v. Int’l Ins. Co. 51
if the time specified in the contract for performing the duty
has not yet arrived. It is what is called anticipatory breach.”
Wis. Power & Light Co. v. Century Indem. Co., 130 F.3d 787,
793 (7th Cir. 1977); see also Quivirian Dev. Co. v. Poteet,
268 F.2d 433, 439 (8th Cir. 1959) (“An anticipatory
repudiation is declared to exist when a promisor, not
otherwise in default, engages in making, without justification,
a positive statement to the promisee, or other person having
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.
See, e.g., Jordon v. Nickell, 253 S.W.2d 237, 239 (1952); Fid.
& Deposit Co. of Md. v. Brown, 20 S.W.2d 284, 286 (Ky. Ct.
App. 1929); Paducah Cooperage Co. v. Ark. Stave Co., 237
S.W. 412, 413 (1922).
The repudiation must be absolute or unequivocal. Thunder
Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d
1205, 1213 (10th Cir. 1997); Sys. Council EM-3, Int’l Bhd. of
Elec. Workers, AFL-CIO v. AT & T, 972 F. Supp. 21 (D.D.C.
1997); Brownsboro Rd. Rest., Inc. v. Jerrico, Inc., 674
S.W.2d 40, 42 (Ky. Ct. App. 1984) (citing 17 AM. JUR. 2d
Contracts § 448 (1964)). Courts determine whether
anticipatory repudiation has occurred on a case-by-case basis,
depending on the particular contract language involved.
Truman L. Flatt & Sons Co., Inc. v. Schupf, 649 N.E.2d 990,
994 (Ill. App. Ct. 1995). No precise set of words is necessary
to constitute an unequivocal repudiation. Ewing v. Von
Nieda, 76 F.2d 177, 182 (8th Cir. 1935). Nevertheless,
Defendant’s reply to the Renne inquiry explained in detail
why Defendant would not reimburse Plaintiff for expenses
related to the California Litigation. The five-page letter made
completely clear that Defendant “declines to afford coverage
for any loss incurred by the [Plaintiff and Decedent] in
connection with the [California Litigation].” (J.A. at 109.)
There is some disagreement as to whether the doctrine of
anticipatory repudiation applies only to bilateral contracts,
see, e.g., Saewitz v. Epstein, 6 F. Supp. 2d 151 (N.D. N.Y.
52 Combs v. Int’l Ins. Co. No. 01-6493
17Warren v. Confederation Life Ass’n., 401 F.2d 48 7, 489 (1st Cir.
1968) (“A life insurance policy is a unilateral contract – the applicant may
pay the premium, or not, as he cho oses; he is under no legal obligation to
do so.”); Winters v. State Farm & Cas. Co., 35 F. Supp. 2d 842, 845 (E.D.
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,
1170 (W.D. Ark. 1998) (“it is a unilateral contract of insurance”); Int’l
Adm’rs., Inc. v. Life Ins. Co., 541 F. Supp. 1080, 1083 (N.D. Ill. 1982)
(“But an offer for a unilateral contract–like this one–may be ‘accepted’ by
rendering performance. Placement of the insurance with LINA constituted
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
contract”); Ho me Ins. Co. v. Aetna Cas. & Sur. Co., 197 7 U.S. Dist.
LEX IS 13726, at *16 (S.D.N.Y. 1977) (“insurance policies are generally
unilateral contracts prepared by the insurer”); SouthTrust Bank v.
Williams, 775 So . 2d 184, 188 (Ala. 2000) (“all forms of insurance are
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
Assurance Corp. v. Thompson, 170 N.Y . 94, 100 (1902) (“The general
rule is that . . . insurance policies are unilateral contracts prepared by the
insurers”).
18The insured has not made any promise but, rather, has performed.
Thus, the contract fits within the stand ard d efinition of a unilateral
contract:
A unilateral contract consists of a promise or group of promises
made by one of the contracting parties only, usually assented to
by the other. There are many cases in which such an assent is
not required. A bilateral contract consists of mutual promises,
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
promisor. . . . In a bilateral contract, both parties are promisors
1998) (citing 4 ARTHUR L. CORBIN, CORBIN ON CONTRACTS
§ 962 (1951)), or to both bilateral and unilateral contracts,
see, e.g., Placid Oil Co. v. Humphrey, 244 F. 2d 184 (5th Cir.
1957). Insurance policies are generally unilateral contracts.17
A D & O insurance policy is a unilateral contract—the
insured has already performed by paying the premium in
exchange for the insurance company’s promise to provide
insurance.18 Nevertheless, there is ample authority for the

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No. 01-6493 Combs v. Int’l Ins. Co. 53
and bo th parties are promisees.
1 ARTHUR L. CO RBIN, CO R B IN O N CONTRACTS § 1.23, at 87 (1993 ).
proposition that the promising party can anticipatorily
repudiate a unilateral contract. See, e.g., Dingley v. Oler, 117
U.S. 490, 502-04 (1886) (evaluating a claim that defendant
had anticipatorily repudiated a unilateral contract without
mentioning the contention that anticipatory repudiation might
not apply to unilateral contracts); Xebec Dev. Partners, Ltd.
v. Nat’l Union Fire Ins. Co., 15 Cal. Rptr. 2d 726, 740 (Cal.
Ct. App. 1993) (finding that case law does not “establish that
there can never be an anticipatory repudiation of an insurance
contract”); Cameron v. Eynon, 3 A.2d 423, 423-25 (Pa. 1939)
(recognizing an anticipatory breach of a unilateral contract).
To limit anticipatory repudiation to bilateral contracts
makes little sense. The theory, presumably, is that if the first
party has already performed when the second party announces
his intention to breach, the first party (the injured party) has
nothing to gain through an immediate action for damages
based on anticipatory breach. Yet “[t]he harm caused to the
plaintiff is equally great [whether or not he has already
performed]; and it seems strange to deny to a plaintiff a
remedy [for anticipatory breach] merely on the ground that he
has already fully performed as his contract required.”
9 ARTHUR L. CORBIN, CORBIN ON CONTRACTS § 962, at 767
(interim ed. 1979).
Furthermore, courts have frequently recognized
anticipatory repudiation in insurance coverage disputes, and
insurance policies are unilateral agreements. See, e.g., N.Y.
Life Ins. Co. v. Viglas, 297 U.S. 672 (1936); Lovell v. St.
Louis Mut. Life Ins. Co., 111 U.S. 264 (1884); Caminetti v.
Manierre, 142 P.2d 741 (Cal. 1943); Scott v. Life & Cas. Ins.
Co., 129 S.E. 303 (Ga. 1925); Van Werden v. Equitable Life
Assurance Soc’y of the United States, 68 N.W. 892 (Iowa
1896); Ebert v. Mut. Res. Fund L. Ass’n, 83 N.W. 506 (Minn.
54 Combs v. Int’l Ins. Co. No. 01-6493
1900); McKee v. Phoenix Ins. Co., 28 Mo. 383 (1859);
Garland v. Jefferson Standard Life Ins. Co., 101 S.E. 616
(N.C. 1919); Fischer v. Hope Mut. Life Ins. Co., 69 N.Y. 161
(1877); Am. Ins. Union v. Woodward, 247 P. 398 (Okla.
1926); Gaskill v. Pittsburgh Life & Trust Co., 104 A. 775 (Pa.
1918); Mut. Reserve Fund Life Ass’n v. Taylor, 37 S.E. 854
(Va. 1901); Merrick v. Northwestern Nat’l Life Ins. Co., 102
N.W. 593 (Wis. 1905). The long list of cases involving the
alleged anticipatory repudiation of an insurance contract
includes disputes, like this one, that involve the alleged
renunciation of a D & O policy. See, e.g., Fed. Sav. & Loan
Ins. Corp. v. Oldenburg, 671 F. Supp. 720, 724 (D. Utah
1987) (finding insurer had anticipitorily repudiated a D & O
insurance contract through letter that “was a definitive
statement of an intent not to perform sent to the insured while
there was a claim pending”); Xebec, 15 Cal. Rptr. 2d at 740
(finding, in litigation over a directors and officers insurance
policy, that case law does not “establish that there can never
be an anticipatory repudiation of an insurance contract”). If
a breach occurred, Defendant’s response to the Renne letter
breached the insurance contract by anticipatorily repudiating
Defendant’s alleged obligations. We must next ask where the
breach (or the repudiation) occurred.
C.
We acknowledge that the question of where an anticipatory
repudiation occurs “ha[s] not yet been clearly settled.” 9
ARTHUR L. CORBIN, CORBIN ON CONTRACTS § 988, at 851
(interim ed. 1979). Nevertheless, there are a few cases
involving disputes over where a repudiation occurred when
the repudiating party sent the renunciation from one
jurisdiction to the non-repudiating party in a second
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
Firbre Box Co., 35 F.2d 822, 823 (6th Cir. 1923) (holding
action to have arisen in jurisdiction where repudiation

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No. 01-6493 Combs v. Int’l Ins. Co. 55
occurred, not place of performance); Wester v. Casein Co. of
Am., 100 N.E. 488, 513-14 (N.Y. 1912) (concluding, when
anticipatory repudiation was cabled from New York,
addressed to and later received by the other party in South
America, that the breach occurred in New York, because
“[t]he breach of the contract occurred in this case upon
delivery of the cablegram to the telegraph company, and
constituted a breach, not only at that time, but also at that
place.”); Kumar v. Embassy Kosher Tours, Inc., 696 So.2d
393, 394 (Fla. Dist. Ct. App. 1997) (“[A]n anticipatory breach
is deemed to ‘accrue,’ if at all, in the county . . . from which
the ‘breachor’ transmits the repudiation, rather than where the
‘breachee’ receives it.”); Karson Indus., Inc. v. Superior
Court, 77 Cal. Rptr. 714, 716 (Cal. Ct. App. 1969) (deciding,
in a dispute where a letter cancelling a contract for mobile
homes was posted in one county but received in another, “that
the weight of authority and the better reasoned cases support
the rule that repudiation by letter is a breach at the time when
and the place where the letter is dispatched”).
These cases ultimately derive their holdings from a series
of nineteenth-century British and Irish decisions that reached
similar conclusions. In Cherry v. Thompson, 7 Q.B. 573
(1872), for instance, the court found that the anticipatory
breach of a contract to marry occurred in Germany when the
defendant mailed a letter from Germany withdrawing from
the engagement. As Judge Blackburn explained:
In this case the receipt of the letter by the plaintiff in
England furnished him with evidence that the defendant
had in Germany renounced [their] relation. Had his
letters followed him to Ireland he would have received
the evidence in Ireland. But the act which he had the
option to treat as a breach took place in Germany, and
in Germany alone.
Id. at 579 (emphasis added). Similarly, in Hamilton v. Barr,
[1886] 18 L.R. Ir. 297, the plaintiff made a contract in
Scotland with the defendant to act as the defendant’s agent in
56 Combs v. Int’l Ins. Co. No. 01-6493
Ireland. Later, the defendant mailed a letter to his agent in
Scotland abrogating their agreement in advance. As
Chancellor Naish explained, “I consider that the dismissal
took place in Glasgow by the posting of the letter in Glasgow.
The dropping of the letter in to the post office there was, I
think, the act of dismissal.” Id. at 301. Chancellor Porter
agreed that the contract ended “the moment the notice of
dismissal had left the hands and control of the defendant,
which it did in Glasgow.” Id. at 302.
In Holland v. Bennett, 1 K.B. 867 (1902), the proprietor of
a periodical who resided in France employed a London
correspondent. The proprietor discharged the plaintiff in a
letter mailed from Italy. Justice Williams concluded that
“[t]he effect is that there was a complete breach of the
contract when the letter giving notice of dismissal was posted
abroad.” Id. at 869. Finally, Matthews v. Alexander, [1873]
Ir. R.-C.L. 573, involved a wholesale tea dealer residing in
London who hired a salesman and sent him to Ireland. Id. at
575. The salesman received a letter of dismissal before he
could begin his work. Id. at 576. The message arrived in
Dublin, but the letter was posted in London. Id. According
to Judge Whiteside, “[t]he act in this case was done in
England. The letter informs the Plaintiff that the Defendant
in England had renounced the relation that had subsisted
between them; and if that was a breach of contract, it took
place in England.” Id. at 579. This view is shared by the
Restatement of Contracts, which explains that the repudiation
occurs “as of the time when and the place where the letter or
telegram is dispatched.” RESTATEMENT OF CONTRACTS
§ 321. Williston also felt that repudiation by letter is a breach
“as of the time when and the place where the letter or
telegram is dispatched.” 11 WILLISTON ON CONTRACTS
§ 1332, at 174 (3d ed. 1968).
Thus, although the jurisprudence is fairly sparse, the
available information strongly indicates that an anticipatory
breach occurs where the breaching party posts its letter of

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No. 01-6493 Combs v. Int’l Ins. Co. 57
19This 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.
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.

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