NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 18a0478n.06

Case No. 18-1153

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

UNITED OF OMAHA LIFE INSURANCE 

COMPANY,

Plaintiff,

v.

CLAIRE J. KAY; CLAYMORE 

CONSTRUCTION CO.,

Defendants-Appellants,

BANK OF AMERICA,

Defendant-Appellee.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

ON APPEAL FROM THE UNITED 

STATES DISTRICT COURT FOR 

THE EASTERN DISTRICT OF 

MICHIGAN

BEFORE: SUTTON, McKEAGUE and THAPAR, Circuit Judges. 

THAPAR, Circuit Judge. Although Dr. Kay died, his life insurance policy lives on. But 

his insurer does not know who to pay. Bank of America claims it is entitled to the life insurance 

proceeds. But Dr. Kay’s widow, Claire (“Mrs. Kay”),

1

says two statutes of limitations bar the 

Bank’s claim. Since the district court considered only one of these statutes, we affirm in part and

remand in part for proceedings consistent with this opinion. 

 

1 Consistent with a prior panel of this court, we refer to Claire Kay as Mrs. Kay. See generally Kay v. United of 

Omaha Life Ins. Co., 709 F. App’x 320 (6th Cir. 2017).
Case No. 18-1153

United of Omaha v. Kay 

- 2 -

I. 

When the Kays needed money for their business, they borrowed it from Bank of America. 

As collateral, the Kays put up Dr. Kay’s life insurance policy. To this end, the Kays drafted a 

separate contract with the Bank called the “Collateral Assignment”—saying that if the Kays did 

not pay back the loan, then the Bank could use the life insurance policy to recoup its money. And 

when the Kays defaulted on their loan, the Bank sued and obtained a judgment against the Kays 

in state court. But even with a state court judgment, the Kays did not pay—leading the Bank back 

to state court.

While the Bank and the Kays fought in court, Dr. Kay passed away. But his insurer, United 

of Omaha, refused to pay Mrs. Kay the life insurance proceeds because of an alleged policy lapse. 

So Mrs. Kay sued Omaha in federal court. While her federal lawsuit against Omaha was pending, 

the Bank and Mrs. Kay settled their separate dispute. Mrs. Kay agreed to pay the Bank some of 

what the Kays owed, and the Bank agreed to “forbear on further collection activity” until Mrs. 

Kay’s lawsuit against Omaha was “resolved.” R. 23-5, Pg. ID 453–54. 

Almost a decade later, Mrs. Kay won her lawsuit against Omaha. Kay, 709 F. App’x at 

321. Naturally, she expected Omaha to pay her. But the Bank thought it should be paid instead. 

Not knowing whether to pay Mrs. Kay or the Bank, Omaha initiated this interpleader suit—a suit 

used to “resolve conflicting claims to money or property.” First Trust Corp. v. Bryant, 410 F.3d 

842, 852 n.6 (6th Cir. 2005) (internal quotation marks omitted). The district court granted 

summary judgment to the Bank and awarded the Bank the life insurance proceeds. Mrs. Kay

appeals.
Case No. 18-1153

United of Omaha v. Kay 

- 3 -

II. 

Mrs. Kay argues that two Michigan statutes of limitations bar the Bank from collecting the 

life insurance proceeds. We review both arguments de novo. Auburn Sales, Inc. v. Cypros Trading 

& Shipping, Inc., 898 F.3d 710, 715 (6th Cir. 2018).

Debt statute of limitations (Mich. Comp. Laws § 600.5809). Mrs. Kay contends the Bank 

cannot collect the life insurance proceeds because its claim is outside the relevant ten-year statute 

of limitations for debt judgments. Mich. Comp. Laws § 600.5809(1), (3). When a party like the 

Bank obtains a judgment on a debt, the statute-of-limitations clock starts running the day the state 

court judgment is entered. Id. Since the Bank received a state court judgment on the Kays’ debt 

(i.e., the business loan) more than ten years ago, Mrs. Kay says the Bank cannot collect the life 

insurance as payment for the debt.

The problem for Mrs. Kay, however, is that the Bank is not trying to enforce the state court 

judgment, so the debt statute of limitations does not apply. Instead, the Bank is attempting to 

enforce its rights through the separate Collateral Assignment agreement. And by its terms, the 

debt statute of limitations only applies to “noncontractual money obligation[s].” Mich. Comp. 

Laws § 600.5809(1).

Mrs. Kay admits as much in her brief by conceding that the Collateral Assignment creates 

a separate contractual right. Appellant Br. 23; see also 17 Williston on Contracts § 49:119 (4th 

ed.) (stating that generally “[a]n agreement assigning an insurance policy is . . . treated as an 

ordinary contract”). But, she argues, the language of the Collateral Assignment implicitly 

incorporates the debt statute of limitations. Her argument goes like this. The Collateral 

Assignment contract states that the “[p]olicy is to be held as collateral security for any and all 

liabilities . . . either now existing or that may hereafter arise . . . .” R. 1-1, Pg. ID 27. So, by Mrs. 
Case No. 18-1153

United of Omaha v. Kay 

- 4 -

Kay’s lights, the life insurance proceeds can only be used to pay off “liabilities.” And, according 

to Mrs. Kay, “liabilities” are only those debts that are legally enforceable. Assuming the Bank 

cannot legally enforce the Kays’ debt because of the debt statute of limitations, Mrs. Kay argues 

that the Kays’ debt is no longer a “liabilit[y]” that the Bank can use the life insurance to pay off. 

Therefore, she says the Bank has no rights to the proceeds under the Collateral Assignment 

contract.

Mrs. Kay is wrong for two reasons. First, even if the statute of limitations makes her debt 

legally unenforceable, it does not cancel the debt as a liability. A statute of limitations is a rule of 

procedure. Rules of procedure change only the procedures or remedies that a party can seek, not 

the party’s underlying substantive rights. Rushua v. Dep’t of Corr., 859 N.W.2d 735, 742 (Mich.

2014). So here, the debt statute of limitations changes whether the Bank can legally enforce the 

Kays’ debt in court (procedure), but it does not extinguish the debt (substantive right). Indeed, 

under Michigan Law, “[t]he running of the statute of limitations does not cancel [a] debt, it merely 

prevents a creditor from enforcing [their] claim” in court. De Vries v. Alger, 44 N.W.2d 872, 876 

(Mich. 1950); accord Midland Funding LLC v. Johnson, 137 S. Ct. 1407, 1411–12 (2017) 

(collecting states, including Michigan, where the “creditor has the right to payment of a debt even 

after the [statute of] limitations period has expired”); Buchanan v. Northland Grp., LLC, 776 F.3d 

393, 396–97 (6th Cir. 2015). So the Kays’ debt to the Bank remains a liability.

Mrs. Kay claims that legal enforceability is all that matters. Since the debt is not legally 

enforceable, she claims it is no longer a “liabilit[y]” under the Collateral Assignment contract. 

Instead, she says the term “liabilities” in that agreement refers to only legally enforceable debts, 

not any debts at all. Thus, she claims the Bank cannot use the Collateral Assignment to collect the 

life insurance proceeds. Yet while Mrs. Kay points to Black’s Law Dictionary for support, her
Case No. 18-1153

United of Omaha v. Kay 

- 5 -

selective definition of “liabilities” is unavailing. Mrs. Kay says liability means only “[t]he quality, 

state, or condition of being legally obligated or accountable.” Black’s Law Dictionary 1053 (10th 

ed. 2014) (emphasis added). Mrs. Kay fails to acknowledge the second definition in Black’s,

which makes no mention of legal obligation at all: a liability is “[a] financial or pecuniary 

obligation in a specified amount.” Id. And Black’s Law Dictionary notes that when this financial 

definition is intended, people use the plural—they write “liabilities.” Id. The Collateral 

Assignment notably also uses the plural “liabilities,” leading to the inference that the parties here 

intended the financial definition, not the legal-obligation definition. When paired with the fact 

that the Collateral Assignment is a financial agreement, it becomes all the more likely that the 

financial definition of “liabilities” is the more appropriate meaning to be gleaned from the 

Assignment’s plain text. Using this financial definition, the Kays’ debt is clearly a liability because 

(as we explained) the Bank still has a right to payment—the debt is still a debt. And Mrs. Kay still 

has not paid the Bank. See Grand Trunk W. R. Co. v. Boyd, 33 N.W.2d 120, 123 (Mich. 1948) 

(stating that the “common meaning of ‘liability’. . . is an obligation to pay a debt or amount owed”).

Thus, even if the debt statute of limitations has made the Kays’ debt legally unenforceable, the 

statute has not extinguished the right to payment itself. The “liabilit[y]” remains. 

Now, the second issue with Mrs. Kay’s proposed reading of the Collateral Assignment: 

even if she is right that “liabilities” means only legally enforceable debt, her argument fails because 

she does not account for all the words in the Collateral Assignment. The agreement secures 

“liabilities . . . either now existing or that may hereafter arise . . . .” R. 1-1, Pg. ID 27. So

“liabilities” must be read together with both the phrase “now existing” and “may hereafter arise.” 

See Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431, 434 (Mich. 1992) (stating that, under 

Michigan law, a “court must look at the contract as a whole and give meaning to all terms”); 
Case No. 18-1153

United of Omaha v. Kay 

- 6 -

see also 17 Williston on Contracts § 49:119 (4th ed.) (“An agreement assigning an insurance 

policy is . . . interpreted under general contract principles.”). And when we look at both of these 

phrases with Mrs. Kay’s “legally enforceable” definition of “liabilit[y],” we can see that the 

Collateral Assignment covers two types of liabilities: (1) those legally-enforceable liabilities that 

existed when the parties signed the agreement (“now existing”) and (2) new legally-enforceable 

liabilities created later (“hereafter arise”). Read in context, the Kays’ debt falls into the first 

category. The Kays’ debt existed when the parties signed the Collateral Assignment, and the debt

was legally enforceable back then. If the Kays and the Bank wanted the Collateral Assignment to 

cover only liabilities that remained legally enforceable, then they could have drafted the contract 

that way. But they did not. Since the “liabilit[y] . . . now existing” (i.e., the Kays’ debt) has not 

been paid in the years since, the Collateral Assignment explicitly allows the Bank to collect the 

insurance to pay off that debt.

Accordingly, we affirm the district court insofar as it held that Mich. Comp. Laws

§ 600.5809 does not bar the Bank’s claim on the insurance proceeds. 

Contract statute of limitations (Mich. Comp. Laws § 600.5807(9)).

2

 Mrs. Kay alleges that 

a different Michigan statute of limitations applies to contracts like the Collateral Assignment. 

Mich. Comp. Laws § 600.5807(9). Claims for breach of contract have to be brought within six 

years. Id. Since the Collateral Assignment is based on Dr. Kay’s life insurance, Mrs. Kay says 

the statute-of-limitations clock started running either when Dr. Kay died or when Omaha first 

declined to pay out the life insurance proceeds. Both of those events occurred in 2009, so the 

 

2 Michigan has amended its statutes of limitations, effective May 7, 2018. 2018 Mich. Pub. Acts 8. Mrs. Kay points 

to a provision that used to be Mich. Comp. Laws § 600.5807(8), but now appears to be Mich. Comp. Laws 

§ 600.5807(9). How the changes made to the amended Mich. Comp. Laws § 600.5807(9) may impact this case are 

also questions best left to the district court in the first instance.
Case No. 18-1153

United of Omaha v. Kay 

- 7 -

statute-of-limitations clock would have run out in 2015—two years before the Bank became 

involved in this suit. Therefore, Mrs. Kay argues, the Bank’s claim is too late.

The district court did not consider the contract statute of limitations. Accordingly, the 

district court also did not reach the Bank’s argument that the settlement agreement tolled the statute 

of limitations. Since the Bank agreed with Mrs. Kay to “forbear on further collection activity” in 

the earlier settlement agreement, the Bank says the contract statute of limitations has not run out 

yet—it has been tolled. If true, the contract statute of limitations would not bar the Bank’s claim 

to the insurance proceeds.

The record, however, is undeveloped with respect to the settlement agreement. With full

briefing and argument, the text of the settlement agreement may be found ambiguous, requiring 

the court to inquire into the parties’ intentions. And under Michigan law, parties’ intentions in 

contract interpretation are questions of fact. See Klapp v. United Ins. Grp. Agency, Inc., 

663 N.W.2d 447, 453–54 (Mich. 2003). Given the state of the record, and district courts’ “special 

competence” for factfinding, the district court should consider the proper interpretation of the 

settlement agreement and the contract statute of limitations in the first instance. Teva Pharm. USA, 

Inc. v. Sandoz, Inc., 135 S. Ct. 831, 850 (2015) (Thomas, J., dissenting); cf. Solo v. United Parcel 

Serv. Co., 819 F.3d 788, 797 (6th Cir. 2016) (“We are not inclined to decide this matter before it 

has been fully briefed by both parties and considered by the district court in the first instance.”).

* * *

We AFFIRM the district court’s holding as to Mich. Comp. Laws § 600.5809 and 

REMAND to the district court for additional consideration of Mich. Comp. Laws § 600.5807(9) 

and further proceedings consistent with this opinion.