The Fourth Circuit held that duty-to-defend decisions are not appealable injunctions when the underlying litigation is over.
July 15, 2023
In Selective Insurance Company of America v. Westfield Insurance Company, the Fourth Circuit dismissed an interlocutory appeal from a duty-to-defend decision. The court assumed—as other courts have held—that duty-to-defend orders can be appealable injunctions under 28 U.S.C. § 1292(a)(1). But the underlying litigation in Selective Insurance (that is, the litigation in which the insured was seeking a defense) was resolved while the duty-to-defend appeal was pending. Because that underlying litigation was over, the duty-to-defend order no longer imposed any prospective obligations on the insurance company. The Fourth Circuit thus concluded that the duty-to-defend order “lack[ed] the character of an injunction” and thus could not be immediately appealed via § 1292(a)(1).
The Duty-to-Defend Order in Selective Insurance
Simplifying a fair bit, Selective Insurance stemmed from a dispute over insurance coverage. A construction company had been sued for allegedly defective work. That company asked its insurer to to pay for the defense of that suit. The insurance company refused. So the construction company sued the insurer. The construction company sought (among other things) a declaration that the insurance company had a duty to defend the construction company in the defective-construction action.
The district court ruled that the insurance company had a duty to defend the construction company. But disputed fact issues precluded resolution of the other claims in the action. The district court also stayed any further proceedings pending resolution of the underlying defective-construction action.
The insurance company appealed the duty-to-defend decision. While that appeal was pending, the construction company settled the underlying defective-construction action.
Immediate Appeals From Duty-To-Defend Decisions
The law governing appeals from duty-to-defend decisions does not appear to be entirely settled.
Some courts of appeals have held that these decisions are appealable injunctions via 28 U.S.C. § 1292(a)(1). To be sure, duty-to-defend orders are rarely (if ever) formal injunctions. In fact, the requested relief seems to often be a declaratory judgment. But orders having the practical effect of injunctions are also appealable under § 1292(a)(1).
The tests for “effective injunctions” vary. Courts have generally looked to the type of relief ordered, the possibility of contempt for disobeying the order, and the likelihood of irreparable harm. Duty-to-defend orders can require an insurer to (as the name implies) provide a defense to the insured, which is often the relief at issue in these cases. Though not technically enforceable via contempt, there is little doubt about how district courts would treat any flouting of the order. And providing a defense can involve expenses that the insured will not be able to repay.
I’m not aware of any court squarely holding that duty-to-defend decisions are never appealable injunctions. But I’ll note that some courts have reviewed duty-to-defend decisions via appeals from partial judgments entered under Federal Rule of Civil Procedure 54(b) or certified appeals under 28 U.S.C. § 1292(b). The use of these methods suggests at least some doubt as to whether duty-to-defend decisions can be appealed via § 1292(a)(1).
Selective Insurance’s Separate Rule for Completed Proceedings
The Selective Insurance court assumed that the duty-to-defend decision could be immediately appealed via § 1292(a)(1). But it recognized an exception to that rule when the underlying proceedings are over.
Because the underlying litigation in Selective Insurance was finished, there was no longer any possible prospective relief. All expenses that the insurance company might incur had already been incurred. So there was no longer any risk of additional irreparable harm. Review of the duty-to-defend order could wait until after a final judgment.
Selective Insurance Company of America v. Westfield Insurance Company, 2023 WL 4479322 (4th Cir. July 12, 2023), available at the Fourth Circuit and Westlaw