appeal an adverse judgment against the
insured if there are reasonable grounds to
believe that the insured’s interest would
be furthered by appeal.
Moreover, courts have held that the
duty to defend “precludes an insurer from
interpleading its policy limits and walk-
ing away from the defense of its insured,
at either the trial or appellate level.”
Under the reasonable-grounds test,
an insurer must conduct an adequate
investigation to determine if reasonable
grounds exist for an appeal. When con-
sidering whether there are reasonable
grounds for appeal, the insurer should
assess (1) objections and motions at the
district court level, ( 2) the district court’s
rulings, ( 3) jury instructions given, and
( 4) applicable law on appealable issues.
The insurer should give great weight to
defense counsel’s opinion when consider-
ing whether reasonable grounds exist.
Excess insurance policies generally
follow form to underlying policies and
do not contain a duty to defend, with a
possible exception where underlying limits have been exhausted. Thus, an excess
insurer generally does not have a duty to
appeal for an insured. But in some states,
it may bring a subrogation claim against a
primary insurer where the primary insurer fails to appeal and the excess insurer
assumes the insured’s defense.
Motions. Before pursuing an appeal, an
insurer should first consider whether
there are grounds for a sort of appeal
without filing an appeal. For instance,
a party may move the district court to
amend a judgment. [Fed. R. Civ. P. 59(e)].
Such a motion can be used to establish
a manifest error of law, to account for a
change in law, or to present newly discovered evidence.
A party may also move for relief where
there has been a clerical error. [Fed. R.
Civ. P. 60(a)]. Or a party may move for
relief from a judgment based on (1) mistake, ( 2) newly discovered evidence, ( 3)
misrepresentation by an opposing party,
or ( 4) a void judgment, where the court
lacks subject matter jurisdiction. [Fed. R.
Civ. P. 60(b)].
Stay of Execution. If an adverse judg-
ment is entered against an insured, the
prevailing party will want to execute on
the judgment, to be paid right away, with
either the insured’s own assets or insur-
ance limits. Insurers should be aware that
the time for which a prevailing party must
wait before executing on the judgment de-
pends on the jurisdiction. For example, in
federal court there is an automatic 14-day
stay during which a party may not execute
on the judgment. [Fed. R. Civ. P. 62(a)].
State courts may differ.
Similarly, insurers must be cognizant
that filing an appeal does not automatically stay execution on the judgment.
Rather, courts generally require an appellant to execute a supersedeas bond or
provide other security before granting a
stay. Fed. R. Civ. P. 62(d). The takeaway is
that once an adverse judgment is entered,
an insurer must be prepared to respond
quickly to defense counsel’s requests and
protect the insured’s assets by preventing
execution on the judgment.
If there are no grounds for filing a post-judgment motion and, an insurer has a
duty to appeal on its insured’s behalf because there are reasonable grounds to believe that the insured’s interest would be
furthered by appeal, then the question is
the strategy for appeal.
Determine the Issues. The primary focus on appeal is determining the appealable issues and properly framing them.
Claim handlers should discuss with defense counsel how to narrow an appeal to
only the most important issues in order
to increase the chances of success by not
distracting the appellate court with weaker arguments.
Standard of Review. The applicable
standard of review might influence which
issues to appeal and how to frame them.
A standard of review is the level of deference an appellate court affords the district
court’s ruling. The probability of success
might depend on what standard applies.
De Novo. Rulings on questions of law
are subject to de novo review (Latin for
“over again”). The appellate court will
review, without deference, the district
court’s interpretation and application of
the law. Such standard makes the chance
of reversal greater than a deferential
standard of review. A de novo standard
applies where the district court granted
a motion to dismiss or a summary judg-
Clearly Erroneous. In contrast, a
clearly erroneous review is significantly
deferential. Such standard applies to a
district court’s findings of facts, which are
difficult to reverse. Under this standard,
the appellate court must accept the district court’s findings unless it is left with
the “definite and firm conviction that a
mistake has been committed.”
Chances of Success. Besides considering standards of review to determine the
likelihood of success, it is helpful to consider statistics regarding success on appeal
in order to have realistic expectations and
as an additional consideration for potential settlement discussions. Reversal rates
differ depending on the jurisdiction, but
in general, it is far likelier that the nonappealing party will prevail. For example,
the reversal rate in 2012-2013 for civil cases in federal court was 11. 2 percent. (U.S.
Courts, Administrative Office Table B- 5)
Cost of Appeal. Decision makers
should also be aware of an appeal’s cost.
Appeals are not cheap, particularly if the
insurer must post a supersedeas bond.
Thus, insurers should be aware of the
amount of money required to stay execution on the judgment. In addition,
a prevailing party may be entitled to
post-judgment interest, which will be at
a higher rate than what is commercially
reasonable and will accrue throughout
the appeal. Decision makers must also
factor in attorney fees and costs for filing
documents, briefing, and oral argument.
Attorney fees might equal the trial defense cost.
Counsel. Another important consideration is whether to use trial counsel for
the appeal. If liability exposure is high
or bad precedent might be set, paying an
appellate specialist might be warranted if
the district court lawyer lacks appellate
experience. Appellate specialists are often
used to write appellate briefs. A hybrid
approach is to use the lawyer from the
district court, but also pay an appellate
lawyer to help formulate arguments and
provide guidance on appellate procedural
requirements. It might also be advisable
to consult an appellate specialist during