Reaffirmation of Strict Limitation on Interlocutory Appeals under 28 U.S.C. § 1292(b)

Introduction

In Federal Insurance Company et al. v. American Precision Industries, Inc., 24-842-cv (L) (2d Cir. Apr. 11, 2025), the Second Circuit considered whether to entertain an interlocutory appeal under 28 U.S.C. § 1292(b) from a district court’s ruling on cross-motions for summary judgment. The district court had held that (1) certain non-named insureds in underlying asbestos litigation were entitled to a defense, (2) defense costs must be allocated on an “all sums” basis, and (3) indemnity need not be paid on an “all sums” basis. The defendants-appellants (three insurance carriers) and the plaintiff-appellee (API) cross-appealed those rulings. The district court certified three controlling questions of law—known as the Named Insured Question, the Allocation of Defense Costs Question, and the Allocation of Indemnity Question—for interlocutory review. A motions panel of the Second Circuit granted leave, but the full panel ultimately dismissed the appeal and remanded for further proceedings.

Summary of the Judgment

The Second Circuit’s summary order, by Judges Leval, Bianco, and Nardini, explained:

Section 1292(b) is a narrow exception to the final judgment rule, requiring a “controlling question of law,” “substantial ground for difference of opinion,” and that an immediate appeal “may materially advance the ultimate termination of the litigation.”
Even if those prerequisites were met, interlocutory review is discretionary; exceptional circumstances are needed to outweigh the policy against piecemeal appeals.
The court examined each certified question and concluded that none would materially accelerate resolution:
- The Named Insured Question would not dispose of all coverage disputes, since some asbestos suits have named API directly.
- The Allocation of Defense Costs Question involved only a theoretical possibility of future cross-claims among insurers, insufficient to warrant immediate appeal.
- The Allocation of Indemnity Question was “closely related” but unnecessary once the first two questions were declined.
The court dismissed the interlocutory appeal and remanded for further district-court proceedings on defense-cost quantum and final judgment.

Analysis

Precedents Cited

28 U.S.C. § 1292(b) – Governs interlocutory appeals by certification.
Koehler v. Bank of Bermuda Ltd., 101 F.3d 863 (2d Cir. 1996) – Emphasizes § 1292(b) as a “rare exception” to the final judgment rule and affirms appellate discretion to deny certification.
Tidewater Oil Co. v. United States, 409 U.S. 151 (1972) – Notes that even certified questions are subject to appellate discretion.
In re Viking Pump, Inc., 27 N.Y.3d 244 (2016) – State-law decision regarding allocation of long-tail insurance claims; invoked by district court for the Allocation of Indemnity Question.
Fitzpatrick v. American Honda Motor Co., 78 N.Y.2d 61 (1991) – State-law precedent on named-insured coverage; potentially relevant for the Named Insured Question.
Additional district-court decisions (e.g., Emergency Physician Servs. of N.Y. v. UnitedHealth Grp., Inc.) illustrating the delays attendant to interlocutory review and state-court certification.

Legal Reasoning

The panel walked through the three § 1292(b) criteria in light of the district court’s certification order:

Controlling Question of Law: Even assuming all three questions were “controlling,” the court noted that questions over coverage and allocation do not end the litigation.
Substantial Ground for Difference of Opinion: While the insurers pointed to state-law uncertainty (Fitzpatrick, Viking Pump), the Second Circuit underscored that uncertainty alone does not override the policy against piecemeal appeals.
Material Advancement of Termination:
- The Named Insured Question would not eliminate coverage disputes where API is explicitly sued.
- The Allocation of Defense Costs Question depended on speculative cross-claims among insurers—no active pleading or requirement to amend existed at that stage.
- The Allocation of Indemnity Question was ancillary to the defense-cost issue and unnecessary once review of the first two was declined.

Concluding that none of the certified questions met § 1292(b)’s advancement prong, and recognizing the discretionary nature of interlocutory review, the court dismissed the appeal.

Impact

This decision reinforces several key principles:

Interlocutory appeals under § 1292(b) remain a narrow, discretionary remedy, reserved for truly exceptional circumstances.
Appellate courts will scrutinize whether an immediate appeal actually speeds resolution or merely creates delay—particularly when state-law questions might require certification to the state’s highest court.
Litigants should not rely on § 1292(b) to obtain early rulings on “all sums” versus pro rata allocation of long-tail insurance claims absent a clear and dispositive breakthrough in the case.

Complex Concepts Simplified

Interlocutory Appeal: An appeal of a non-final order (i.e., before final judgment). Generally disfavored because it fragments litigation.
28 U.S.C. § 1292(b): Allows the district court to certify, and the court of appeals to accept, an interlocutory appeal if the order involves a controlling legal question, there is substantial ground for difference of opinion, and it may materially advance termination of the suit.
“All Sums” vs. Pro Rata Allocation: Two methods for dividing responsibility among insurers for defense costs in long-tail claims. “All sums” requires any one insurer to pay the full cost and seek contribution; pro rata spreads costs based on period of coverage.

Conclusion

Federal Insurance Co. v. American Precision Industries offers a clear reaffirmation that interlocutory appeals under § 1292(b) are exceptional rather than routine. The Second Circuit’s dismissal underscores that even when complex coverage issues arise—such as duty to defend non-named insureds and “all sums” cost allocation—appellate courts will insist on final judgments unless the appeal clearly speeds case resolution. This decision serves as a guidepost for litigants and courts on the proper, restrained use of § 1292(b) certification.