Clay v. Sun Insurance Office, Ltd.
377 U.S. 179, 1964 U.S. LEXIS 1276, 12 L. Ed. 2d 229 (1964)
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Rule of Law:
A state may, consistent with the Due Process and Full Faith and Credit Clauses, apply its own statute of limitations to an insurance contract entered into in another state, provided the state has significant and ample contacts with the transaction and the parties.
Facts:
- Petitioner Clay, while a resident of Illinois, purchased a 'Personal Property Floater Policy (World Wide)' from respondent Sun Insurance Office, Ltd.
- The policy contained a clause requiring any lawsuit to be filed within 12 months of the discovery of a loss.
- Sun Insurance, a British company, was licensed to do business in Illinois, Florida, and several other states.
- A few months after purchasing the policy, Clay moved to Florida, becoming a citizen and resident of that state.
- Approximately two years after moving, the insured property loss occurred in Florida.
Procedural Posture:
- Petitioner Clay filed suit against respondent Sun Insurance in the Federal District Court for the Southern District of Florida, invoking diversity jurisdiction.
- The case was previously before the U.S. Supreme Court, which remanded it.
- On remand, the U.S. Court of Appeals certified questions to the Florida Supreme Court regarding the interpretation of Florida's statute.
- The Florida Supreme Court answered the certified questions in favor of Clay, the petitioner.
- The U.S. Court of Appeals then held that applying Florida's statute to the Illinois contract was unconstitutional under the Due Process Clause and entered judgment for Sun Insurance.
- The U.S. Supreme Court granted certiorari for a second time to review the constitutional question.
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Issue:
Does the application of a Florida statute, which invalidates contractual provisions that shorten the time to file a lawsuit to less than five years, to an insurance policy purchased in Illinois violate the Due Process Clause or the Full Faith and Credit Clause of the U.S. Constitution when the policyholder subsequently moves to Florida and the insured loss occurs there?
Opinions:
Majority - Mr. Justice Douglas
No. The application of Florida's statute to this Illinois contract is not unconstitutional. Florida has ample contacts with the transaction and the parties to satisfy the requirements of both the Full Faith and Credit Clause and the Due Process Clause. Unlike prior cases where the forum state's contacts were 'too slight and too casual' or 'wholly lacking,' Florida's connections here are substantial. The policy was an 'ambulatory contract' for a 'Personal Property Floater Policy (World Wide),' meaning the insurer knew the property could be moved. The insured became a Florida resident, the insured property was in Florida, and the loss occurred in Florida. Furthermore, the insurer was licensed to do business in Florida and must have known it could be sued there. Therefore, applying Florida's public policy, as expressed in its statute of limitations, is constitutionally permissible.
Analysis:
This decision clarifies the constitutional limits on a state's application of its own law to contracts made in other states. It solidifies the principle that a state's substantial interest, demonstrated through significant contacts with a dispute, can override the contractual terms and laws of the state where the contract was formed. The ruling is particularly significant for 'ambulatory' contracts like insurance policies, putting insurers on notice that they are subject to the laws of states where their policyholders reside and where losses occur, provided the insurer also does business there. This reinforces the regulatory authority of a forum state to protect its citizens through its own public policy.
