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

Introduction

Fed. Ins. Co. v. American Precision Industries, Inc., 2d Cir. No. 24-842‐cv (Apr. 11, 2025), presents a dispute between three insurance carriers (Federal Insurance Company; Fireman’s Fund Insurance Company; and North River Insurance Company, collectively “the Insurers”) and a manufacturer, American Precision Industries, Inc. (“API”). At the district‐court level, cross‐motions for summary judgment produced an interlocutory order defining the Insurers’ duties to defend non‐named insureds in underlying asbestos litigation and the proper method for allocating defense costs and indemnity obligations (“all sums” vs. “pro rata”). The district court certified three questions under 28 U.S.C. § 1292(b), seeking appellate guidance on (1) when policy obligations are triggered by suits against non‐named entities; (2) whether defense costs for long‐tail claims must be paid on an “all sums” basis; and (3) whether Viking Pump, Inc. precludes pro rata indemnity allocation when bodily‐injury definitions include “death at any time.” A motions panel granted leave, but the full Second Circuit declined interlocutory review, dismissed the appeal, and remanded for further proceedings.

Summary of the Judgment

The Second Circuit held that interlocutory appeals under § 1292(b) are a “rare exception” to the final‐judgment rule and should be granted only in “exceptional circumstances.” Although each certified question arguably involved a controlling issue of law and substantial ground for difference of opinion, the court concluded that an immediate appeal would not materially advance the ultimate termination of the litigation. In particular:

Named Insured Question: Even if the Insurers prevailed, asbestos suits naming API directly (already on the docket) would still require coverage and allocation analysis.
Allocation of Defense Costs Question: Potential cross‐claims among Insurers over contribution are purely theoretical—no amendment to pleadings had been made or guaranteed.
Allocation of Indemnity Question: Closely related to cost allocation, but its resolution would not alter the overall posture absent final judgment.

Accordingly, the Circuit dismissed the interlocutory appeal and remanded to the district court for continuation toward final judgment.

Analysis

Precedents Cited

The panel referred to several controlling authorities governing interlocutory appeals under § 1292(b):

Koehler v. Bank of Bermuda Ltd., 101 F.3d 863 (2d Cir. 1996): Emphasizes that § 1292(b) is a “rare exception” to the final‐judgment rule and that courts may, in their discretion, reject interlocutory appeals even after district certification.
Tidewater Oil Co. v. United States, 409 U.S. 151 (1972): Notes that interlocutory appeal under § 1292(b) rests in the appellate court’s discretion and is not of right.
In re Flor, 79 F.3d 281 (2d Cir. 1996): Reinforces that interlocutory appeals should be strictly limited to exceptional cases where immediate review materially advances termination.
In re Viking Pump, Inc., 27 N.Y.3d 244 (2016): Although state‐law on allocation was invoked, the Second Circuit did not decide whether to certify questions to the New York Court of Appeals, noting the risk of delay.

Legal Reasoning

The court applied the three–pronged § 1292(b) test:

Controlling Question of Law: All certified questions implicated pure questions of law affecting multiple actions and future conduct.
Substantial Ground for Difference of Opinion: Disagreement existed over the scope of coverage triggers, “all sums” vs. pro rata allocation, and the impact of Viking Pump.
Material Advancement of Termination: This prong was dispositive. The court found that interlocutory review would likely fragment the proceedings, introduce additional delay—potentially requiring certification to New York’s highest court—and would not eliminate remaining issues (e.g., suits naming API directly, quantum of defense costs, hypothetical cross‐claims among carriers).

Exercising its discretion, the Circuit determined the case did not present the kind of “exceptional circumstances” warranting deviation from the final‐judgment rule. As a result, the interlocutory appeal was dismissed.

Impact

This decision reaffirms and clarifies the narrow scope for interlocutory appeals under § 1292(b) in the Second Circuit. Practitioners should take away:

District courts and litigants must show that immediate review will actually shorten the litigation—not merely allow resolution of discrete, albeit important, legal issues.
Theoretical or future developments (e.g., cross‐claims among insurers) are insufficient to justify piecemeal appeals.
Where state‐law questions may require certification to the state’s highest court, the prospect of added delay cuts against interlocutory review.

Future coverage disputes will likely see the Second Circuit apply these guidelines to reject interlocutory appeals when pressing forward to final judgment is more efficient and consistent with federal appellate policy.

Complex Concepts Simplified

Interlocutory Appeal (§ 1292(b)): An appeal before final judgment on the whole case, allowed only if a district court certifies a legal question that could control the outcome, is disputed, and would speed up the case if decided now. The appellate court then decides in its discretion whether to hear it.
All Sums vs. Pro Rata Allocation: In long‐tail liability cases (like asbestos), “all sums” means any insurer on the risk pays the full defense or indemnity obligation for claims during its policy period, seeking contribution later. “Pro rata” spreads costs among insurers according to the time each policy was in force.
Named Insured Question: Whether a policy’s duty to defend is triggered when lawsuits allege harm but do not name the insured by name, yet the insured stands legally responsible (e.g., through successor or alter‐ego theory).

Conclusion

Fed. Ins. Co. v. American Precision Industries underscores the Second Circuit’s firm commitment to limiting interlocutory appeals to truly exceptional circumstances. The court’s refusal to engage in a piecemeal review of coverage‐allocation issues and its emphasis on forward momentum toward final judgment provide critical guidance. Litigants seeking immediate appellate review under § 1292(b) must demonstrate not just legal significance but also concrete efficiency gains—otherwise, even certified appeals will be denied. This decision thus fortifies the final‐judgment rule’s central role in federal appellate jurisprudence.