Strict Limitation on Interlocutory Appeals Under 28 U.S.C. § 1292(b): Denial of Certification in Fed. Ins. Co. v. Am. Precision Indus., Inc.

Introduction

In Fed. Ins. Co. v. American Precision Industries, Inc. (24-842-cv, 24-843-cv, 2d Cir. Apr. 11, 2025), the United States Court of Appeals for the Second Circuit addressed whether three certified questions under 28 U.S.C. § 1292(b) warranted interlocutory review. American Precision Industries, Inc. (“API”) had sued its insurers—Federal Insurance Company, Fireman’s Fund Insurance Company, and North River Insurance Company—for a declaration of coverage obligations in underlying asbestos lawsuits. The district court held that (1) certain non-named insureds fell within the policies’ duty-to-defend; (2) defense costs must be allocated on an “all sums” basis rather than pro rata; and (3) indemnity need not be on an “all sums” basis. The insurers and API cross-appealed those rulings. The district court certified three questions—on named-insured coverage, allocation of defense costs, and allocation of indemnity—for interlocutory appeal. A motions panel granted leave; the full panel, however, declined to decide the questions and dismissed the appeal, remanding the case.

Summary of the Judgment

The Second Circuit, exercising its discretion under 28 U.S.C. § 1292(b), concluded that none of the certified questions presented “exceptional circumstances” warranting interlocutory review. Although the questions involved controlling issues of law and there was substantial ground for difference of opinion, the court determined that an immediate appeal would not materially advance the litigation. Key reasons included:

  • Certain asbestos suits already name API, so a favorable ruling on the “named insured” question would not end the case.
  • Potential certification to the New York Court of Appeals on state-law issues could delay resolution.
  • Theoretical cross-claims among insurers over contribution were not ripe or pending.
  • The core coverage issues could be resolved post-judgment, with a comprehensive appeal after final disposition.

The court dismissed the interlocutory appeal and remanded for further proceedings on damages and coverage determinations.

Analysis

Precedents Cited

  • 28 U.S.C. § 1292(b): Permits discretionary interlocutory appeals when (1) the order involves a controlling question of law, (2) there is substantial ground for difference of opinion, and (3) an immediate appeal may materially advance the litigation.
  • Koehler v. Bank of Bermuda Ltd., 101 F.3d 863 (2d Cir. 1996): Emphasized that § 1292(b) is a “rare exception” to the final judgment rule and that courts of appeals may reconsider motions-panel grants of interlocutory leave.
  • Tidewater Oil Co. v. United States, 409 U.S. 151 (1972): Noted that § 1292(b) appeals are entirely discretionary with the court of appeals.
  • In re Viking Pump, Inc., 27 N.Y.3d 244 (2016): Addressed allocation of long-tail environmental claims and influenced the district court’s certification of the “Allocation of Indemnity Question.”
  • Fitzpatrick v. American Honda Motor Co., 78 N.Y.2d 61 (1991): A New York decision potentially governing when coverage obligations attach to non-named insureds, cited as a possible reason for certifying or deferring to the New York Court of Appeals.

Legal Reasoning

The Second Circuit’s reasoning unfolds in three steps:

  1. Discretionary Nature of § 1292(b): Even when a district court certifies questions under § 1292(b), the court of appeals “may … in its discretion permit an appeal.” The statute is a “rare exception” to the final judgment rule and must be strictly limited.
  2. Application to Certified Questions:
    • Named Insured Question: A favorable interlocutory ruling would not resolve suits that explicitly name API, and the insurers did not contend such suits could not arise.
    • Allocation of Defense Costs Question: Contribution disputes among insurers were hypothetical; no cross-claims were pending, and the court saw no urgency to decide a question that could wait for final judgment.
    • Allocation of Indemnity Question: Closely related to the defense costs question, it became unnecessary once the court declined the other two.
  3. Material Advancement of Litigation: The court concluded that an interlocutory appeal would likely delay rather than expedite the resolution—particularly if certification to the New York Court of Appeals became necessary—and that final judgment on all issues, followed by a comprehensive appeal, would better serve judicial economy.

Impact

This decision reinforces the high threshold for interlocutory appeals under § 1292(b). It signals to litigants and district courts that:

  • Certificate motions must demonstrate clear, immediate benefit to the progression of the case.
  • Theoretical or contingent issues (e.g., hypothetical cross-claims) are insufficient to justify piecemeal review.
  • Potential delays—especially those involving certification to state high courts—cut against interlocutory appeals.

Future coverage disputes involving long-tail causes of action or non-named insured issues should expect final judgment before appellate review of allocation and duty-to-defend questions.

Complex Concepts Simplified

Interlocutory Appeal
An appeal of a trial court’s non-final order. Normally prohibited until final judgment, except by statute (e.g., § 1292(b)).
28 U.S.C. § 1292(b)
A federal statute allowing district courts to certify certain non-final orders for immediate appeal when (1) they involve controlling legal questions, (2) there’s substantial ground for difference of opinion, and (3) an appeal may materially advance the litigation.
All Sums vs. Pro Rata Allocation
  • All Sums: Any insurer can be held responsible for the entire defense or indemnity obligation, with insurers thereafter sorting out contributions among themselves.
  • Pro Rata: Each insurer pays only its proportionate share of defense or indemnity based on the time period it underwrote risk.
Named Insured Question
Whether and when an insurer’s duty to defend arises when an insured is not named in the underlying third-party suit but retains liability.

Conclusion

Fed. Ins. Co. v. American Precision Industries, Inc. reaffirms that interlocutory appeals under 28 U.S.C. § 1292(b) remain the “rare exception” to the final‐judgment rule. Even where complex coverage issues and split‐rate allocation principles are at stake, courts will refuse piecemeal review unless an immediate appeal demonstrably advances termination of the litigation. The decision underscores judicial prudence: litigants challenging coverage determinations—whether over defense-cost allocation or duty to defend non-named insureds—should prepare to await final judgment and pursue review in a single, comprehensive appeal.