Facts
- John Clay bought a personal property floater insurance policy from Sun Insurance Office, Ltd. while residing in Illinois.
- The policy contained a 12-month suit-limitation clause that was valid under Illinois law.
- Clay moved to Florida, became a Florida resident, and transferred the policy to cover property located in Florida.
- The insured loss occurred in Florida about two years after the move.
- Florida law voided contractual provisions requiring suit in less than five years for the type of claim at issue.
- Clay sued in federal court in Florida (diversity jurisdiction) more than one year after the loss but within Florida’s five-year period.
- The insurer was licensed to do business in Florida and other states, and the policy did not specify that Illinois law would govern.
Issues
- Whether Florida could constitutionally apply its five-year limitations statute to an insurance contract issued in Illinois, thereby nullifying the policy’s 12-month suit-limitation clause.
- Whether applying Florida’s statute violated the Due Process Clause of the Fourteenth Amendment.
- Whether applying Florida’s statute violated the Full Faith and Credit Clause.
Decision
- The Supreme Court reversed the Fifth Circuit and held that Florida’s application of its limitations statute was constitutional.
- Florida had sufficient contacts with the parties and the transaction because Clay resided in Florida, the loss occurred there, and the insurer was licensed there and could reasonably expect to be sued there.
- The policy was “ambulatory” in that it insured movable property and contemplated that suit might arise in multiple states.
- The absence of a choice-of-law clause selecting Illinois law supported Florida’s use of its own limitations rule.
- The Court distinguished prior decisions limiting forum law where the forum’s contacts were minimal, concluding Florida’s contacts were ample.
Legal Principles
- A forum state may apply its own statute of limitations to an out-of-state insurance contract when the forum has substantial contacts with the parties and the occurrence giving rise to the claim.
- For movable-property insurance policies that contemplate multistate risk and litigation, an insurer licensed in the forum may be subject to the forum’s limitations rules without offending due process.
- Full faith and credit does not require the forum to apply another state’s limitations scheme when the forum’s relationship to the dispute is substantial.
- Where a policy lacks a governing-law provision, application of the forum’s limitations statute is more readily sustained when the forum is the place of residence and loss.
Conclusion
The Court held that Florida’s substantial connection to the insured, the loss, and the insurer allowed Florida to apply its five-year statute of limitations to invalidate the policy’s 12-month suit-limitation clause, consistent with due process and full faith and credit.