An Appellate Trap Arising In Liability Coverage Rulings – An Order Finding That An Insurer Has a Duty to Defend Must Actually Compel The Insurer To Defend To Be Immediately Appealable
By Melinda S. Kollross
In Zenith Ins. Co. v. Newell, No. 21-1748 (3rd Cir. 8-24-23), the Third Circuit Court of Appeal identified a fatal jurisdictional error to having an appellate court review a trial court interlocutory order declaring that an insurer had a duty to defend its insured…and the decision illustrates the wisdom of always having appellate counsel review orders to make sure they “dot all the i’s and cross all the t’s” so that subject matter jurisdiction can be transferred from the trial court to the appellate court.
In Zenith, the insurer sued to declare that it was not contractually obligated to defend its insured in a workplace liability lawsuit. The insured counterclaimed for breach of contract and moved for partial summary judgment that Zenith had a duty to defend it and reimburse it for defense costs. The trial court granted the partial summary judgment holding that Zenith did have a duty to defend because the claim potentially fell within the ambit of Zenith’s policy. Zenith then appealed to the Third Circuit.
On appeal, the Third Circuit issued a precedential opinion dismissing the appeal for lack of appellate jurisdiction. According to the Court, while an interlocutory order requiring an insurer to defend its insured can be immediately appealed as an order granting injunctive relief, an interlocutory order that does no more than declare the rights of the parties is not an injunction and cannot be immediately appealed. Because the interlocutory order in Zenith did not direct the insurer to undertake a defense or advance or reimburse costs, it was not an injunction and could not be immediately appealed.
Melinda S. Kollross