Restricting Interlocutory Appeals under 28 U.S.C. § 1292(b) in Insurance Coverage Litigation

Introduction

In Federal Insurance Company v. American Precision Industries, Inc., the Second Circuit confronted three certified interlocutory questions arising from cross-motions for summary judgment in an insurance‐coverage dispute tied to asbestos liabilities. At issue were: (1) whether policy obligations are triggered when non-named insureds face third-party suits; (2) whether defense costs for “long-tail” claims must be borne on an “all‐sums” basis or allocated pro rata; and (3) whether Viking Pump, Inc. precludes pro rata allocation of indemnity when bodily‐injury definitions include “death at any time.” The court, in a summary order, exercised its discretion under 28 U.S.C. § 1292(b) to dismiss the interlocutory appeal and remand the case for further proceedings, emphasizing the “rare exception” nature of § 1292(b) appeals.

Summary of the Judgment

The Second Circuit held that:

The appeal under § 1292(b) would not materially advance termination because key questions—especially the “named‐insured” issue—would not resolve all claims and could spawn certification to New York’s highest court, thereby delaying the case further.
The theoretical possibility of future cross-claims for contribution among insurers did not justify interlocutory review of the “all sums” defense‐costs question.
Given the lack of exceptional circumstances, the court declined to entertain the certified questions, dismissed the appeal, and remanded for resolution of defense‐cost quantum and other remaining issues.

Analysis

Precedents Cited

Koehler v. Bank of Bermuda Ltd. (101 F.3d 863): Established that § 1292(b) is a narrow exception to the final‐judgment rule and that even when certification is granted, the appellate court retains discretion to decline review.
Tidewater Oil Co. v. United States (409 U.S. 151): Confirmed that interlocutory appeals under § 1292(b) are discretionary and subject to appellate case‐by‐case evaluation.
In re Flor (79 F.3d 281): Stressed the “strictly limited” use of § 1292(b) certification and the requirement of “exceptional circumstances.”
In re Viking Pump, Inc. (27 N.Y.3d 244): Addressed allocation of coverage for long‐tail claims when policy definitions include “death at any time,” informing one of the certified questions.

Legal Reasoning

Section 1292(b) allows interlocutory appeals only when three criteria are met: (1) a controlling question of law; (2) substantial ground for difference of opinion; and (3) immediate appeal would materially advance termination. The Second Circuit recognized that while the district court certified three questions, this court was not bound to accept them. Applying Koehler and Flor, the panel emphasized:

The “named‐insured” issue could not dispose of all claims, as some underlying suits expressly name API, ensuring further coverage disputes.
Potential certification to the New York Court of Appeals, as urged by defendants, would prolong rather than expedite resolution.
The “all‐sums” defense‐costs question, although significant, did not present ripe contribution disputes among insurers and relied on a purely theoretical risk of future cross-claims.
No “exceptional circumstances” justified piecemeal appellate review at this stage.

Impact

This decision reaffirms the narrow scope of interlocutory appeals under § 1292(b), particularly in complex multi-policy, long-tail liability contexts. Insurers and insureds should expect that:

Disputes over policy triggers and allocation will generally be resolved at final judgment, not in interlocutory appeals.
Theoretical or future cross-claims will carry limited weight in justifying immediate appellate review.
Certification to state courts, while possible, may be deemed counterproductive if it delays final resolution.

Complex Concepts Simplified

Interlocutory Appeal (28 U.S.C. § 1292(b)): An appeal of a non-final order before the case concludes. Allowed only in exceptional cases.
All-Sums Allocation: The insurer pays all defense costs regardless of when claims arose during the policy period, then seeks contribution from co-insurers.
Pro Rata Allocation: Defense and indemnity costs are split among insurers according to the time each policy was in effect.
Long-Tail Claims: Claims like asbestos exposure that may give rise to liability years after the policy period.
Named Insured vs. Non-Named Insured: Whether the policy protects only expressly listed entities or also successors, assigns, or affiliates identified by notice.

Conclusion

Fed. Ins. Co. v. Am. Precision Indus., Inc. underscores the Second Circuit’s commitment to final‐judgment appeals and circumscribes interlocutory review under § 1292(b). By dismissing the appeal of certified questions—despite their importance—the court signals that appellate intervention before finality demands truly exceptional justification. The decision thus serves as a guidepost for litigants in insurance coverage and other complex cases: plan for final adjudication of key allocation issues, and do not rely on early appellate shortcuts unless circumstances are extraordinary.