2009 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-2-2009

AstenJohnson Inc v. Columbia Cslty Co

Precedential or Non-Precedential: Precedential

Docket No. 07-2305

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PRECEDENTIAL

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

NO. 07-2305

 

 ASTENJOHNSON, INC.

Appellant

v.

COLUMBIA CASUALTY COMPANY;

AMERICAN INSURANCE COMPANY

 

On Appeal From the United States 

District Court

For the Eastern District of Pennsylvania 

(D.C. Civil Action No. 03-cv-01552)

District Judge: Hon. Lawrence F. Stengel

 

Argued October 30, 2008

BEFORE: SLOVITER, STAPLETON and

TASHIMA,* Circuit Judges

 

* Hon. A. Wallace Tashima, Senior United States Circuit Judge

for the Ninth Circuit, sitting by designation.
2

(Opinion Filed: April 2, 2009)

 

Robert C. Heim (Argued)

Nory Miller

John S. Ghose

Dechert 

2929 Arch Street

Cira Centre - 18th Floor

Philadelphia, PA 19104

 and

John N. Ellison

Reed Smith

1650 Market Street

2500 One Liberty Place

Philadelphia, PA 19103

 and

Michael Conley

Anderson, Kill & Olick

1600 Market Street - Suite 2500

Philadelphia, PA 19103

 Attorneys for Appellant

Ronald P. Schiller (Argued)

Jay I. Morstein

Nicole J. Rosenblum

DLA Piper

One Liberty Place - Suite 4900

1650 Market Street

Philadelphia, PA 19103

 Attorneys for Appellee

 Columbia Casualty Company
3

Steven A. Cozen (Argued)

Jacob C. Cohn

Cozen & O’Connor

1900 Market Street - 3rd Floor

Philadelphia, PA 19103

 Attorneys for Appellee

 American Insurance Cpmpany

Andrew M. Roman

Richard A. Ejzak

Cohen & Grigsby

11 Stanwix Street - 15th Floor

Pittsburgh, PA 15222

 and

Amy Bach

United Policyholders

11 Pacific Avenue – No. 262

San Francisco, CA 94111

 Attorneys for Amicus Curiae

 United Policyholders

 

OPINION OF THE COURT

 

STAPLETON, Circuit Judge:

Appellant AstenJohnson, Inc. (“Asten”), manufactured

asbestos dryer felts and other materials used in the paper
4

industry. Appellees Columbia Casualty Company (“Columbia”)

and American Insurance Company (“American”) issued $52

million of comprehensive liability insurance to Asten in 1981

and 1982. These policies contained an exclusion from coverage

for any claim alleging “an exposure to or the contracting of

asbestosis” (“the Asbestosis Exclusion Clause”). Both

Columbia and American have denied coverage under this

exclusion for all asbestos-related bodily injury claims. Asten

here seeks, inter alia, a declaratory judgment that its coverage

under these policies includes all claims related to asbestos

exposure other than those involving the fibrotic lung disease,

asbestosis. After a three-week bench trial, the District Court

denied Asten the declaratory relief sought. The primary issues

before us are whether Asten was entitled to a jury trial under the

Seventh Amendment, and whether the District Court’s

resolution of the coverage issue should stand.

I. Background

A. The Policies At Issue (“the Subject Policies)

1. Columbia Policies

a. April 1, 1981, to April 1, 1982, Policy Period

Columbia sold Asten a one-year primary-layer

comprehensive general liability insurance policy covering the

period between April 1, 1981, and April 1, 1982 (“1981

Columbia Primary Policy”). The policy provided

occurrence/aggregate limits of $1,000,000 and had a $2,500 per

claim deductible. Columbia also sold Asten an excess thirdparty liability policy for this period, which provided

occurrence/aggregate limits of $10,000,000 (“1981 Columbia

Excess Policy”). 
5

b. April 1, 1982, to October 1, 1983, Policy Period

Columbia sold Asten a comprehensive liability policy for

the eighteen-month period between April 1, 1982, and October

1, 1983, providing occurrence/aggregate limits of $1,000,000

and having a $2,500 per claim deductible (“1982 Columbia

Primary Policy”). Columbia also sold Asten an excess third

party liability policy providing per occurrence/aggregate limits

of $10,000,000 (“1982 Columbia Excess Policy”). The policy

was in excess to the limits set forth in the underlying American

policy. 

c. Terms of the Columbia Policies

The Columbia policies contain the following “exclusion”:

It is agreed that this policy does not apply to any

claim alleging an exposure to or the contracting of

asbestosis or any liability resulting therefrom. 

It is further agreed that this policy does not apply

to any claim arising out the Insured’s membership

in the Asbestos Textile Institute. 

AI0053. “Asbestosis” was not defined in any of the policies. 

The primary policies contained a notice provision, stating

in relevant part that “[i]n the event of an occurrence, written

notice containing particulars sufficient to identify the insured

and also reasonably obtainable information . . . shall be given .

. . as soon as practicable.” AI0054. The excess policies also
6

contained a provision stating that notice shall be given “as soon

as practicable.” AI0054. 

2. American Policies

a. The 1980 Policy Period

In 1980, American sold Asten a blanket excess policy

with $10,000,000 in annual indemnity limits, excess to a

$1,000,000 primary policy issued by Argonaut Insurance

Company. The 1980 policy did not contain an asbestos-related

exclusion. The 1980 American Policy contained a products

liability endorsement, however, which stated that the policy did

not apply except insofar as “coverage is available to the insured

under primary policies.” AI0055.

b. April 1, 1981, to April 1, 1982, Policy Period

For the annual period beginning April 1, 1981, American

sold Asten a blanket excess liability policy (“1981 American

Umbrella Policy”) with a $10,000,000 annual indemnity limit,

excess to the $1,000,000 1981 Columbia Primary Policy. This

policy contained no asbestos-related language, but provided a

product liability endorsement which indicated that the policy did

not apply unless coverage was available under the Columbia

Primary Policy. It further contained a notice provision, which

stated that “[w]hen an occurrence takes place which is

reasonably likely to give rise to a claim under this policy” notice

shall be provided “as soon as practicable” to the company.

AI0056. 

c. April 1, 1982, to October 1, 1983
7

For the eighteen-month period beginning April 1, 1982,

American sold Asten a blanket excess liability coverage (“1982

American Umbrella Policy”) that was substantially identical to

the 1981 American Umbrella Policy. The relevant notice

portion of the policy stated that “[t]he Insured shall immediately

advise the company of any occurrence or disaster which will

probably result in liability under this Policy.” AI0059.

American also sold to Asten an additional blanket excess

liability policy for the policy period April 1, 1982, to October 1,

1983 (“1982 American Excess Policy”). The American Excess

Policy had liability limits of $10,000,000, excess to the

underlying limits contained in the 1982 American Umbrella

Policy and the 1982 Columbia Excess Policy.

B. Pretrial Proceedings.

Asten’s March 13, 2003, complaint asserted three claims

relating to its asbestos litigation which it describes as claims for

“legal relief”: declaratory judgment claims against Columbia

and American and a breach of contract claim against Columbia.

It insists that the District Court improperly denied it a jury trial

on these claims.

Count I, containing the “declaratory judgment” claims,

alleged that Columbia and American had refused to honor their

obligations under the insurance contracts and asked, inter alia,

for a declaration that Asten was entitled to have Columbia and

American “reimburse AstenJohnson for, or pay on behalf of

AstenJohnson, any and all judgments or settlements reached in

the Underlying Actions, until such time as the total aggregate
8

limits of each of the foregoing insurance policies have been

exhausted.” AV0231. The “Underlying Actions” were

asbestos-related suits filed against Asten as of the filing of the

complaint. Count I also sought a declaratory judgment with

respect to the aggregate limits of liability under American’s

1982 Umbrella and Excess Policies and with respect to

American’s duty to pay defense costs under its 1982 Excess

Policy.

Count II alleged a “breach of contract” claim against

Columbia for refusing to defend and indemnify Asten for certain

asbestos-related claims that had been tendered to it in the Fall of

2001. It asks for “an award requiring Columbia . . . to pay . . .

all monetary damages suffered” by Asten. AV0233.

After the close of discovery and in anticipation of the

final pre-trial conference on January 23, 2006, and the then

scheduled January 30, 2006, trial, the parties were required by

local rule to file pre-trial memoranda including “a list of every

item of monetary damage claimed, including (as appropriate)

computations.” Asten’s pre-trial memorandum contained no

itemization or computation of the money damages it had thus far

suffered and identified no expert witnesses who intended to

testify about those damages. At the pre-trial conference, Asten’s

counsel was unable to articulate in response to the Court’s direct

questions what damages Asten had suffered. As a result,

Columbia and American filed motions to strike Asten’s jury

demands.

The trial was delayed and the motions to strike were not

heard until June 20, 2006, four months after their filing. Prior
9

to that hearing, Asten tendered no description of the damages it

sought or the evidence it proposed to introduce in support of its

damage claim. At the hearing, Asten’s counsel acknowledged

to the Court that Asten had not yet suffered “out-of-pocket”

losses because it had “had its other carriers pay” to defend and

indemnify it. When asked what Asten would be asking the jury

to award it, the response was as follows:

THE COURT: What will you be asking the jury

to award to you?

MR. ELLISON: We’ll be asking the jury to

award us the amount of insurance we have had to

use up in pre-1981 coverage, that is coverage that

had to be used for non-asbestosis claims, that was

– that we were required to use or needed to use

because the coverage that was available under the

Columbia policy was wrongfully denied to us and

– and same with American.

THE COURT: And what’s that amount?

MR. ELLISON: That amount, Your Honor, is –

is millions of dollars. I – I don’t know the exact

number. Mr. Young and Mr. Gibson both have

firsthand knowledge of – of that process.

THE COURT: Well, you’re – you’re ten days

from trial and you can’t tell me what number

you’re going to ask the jury to award to you?
10

MR. ELLISON: I – I can tell you it’s millions of

dollars. The burn rate over the last couple of

years has been about $2 million a year in coverage

that they have used up.

THE COURT: So, on the jury interrogatory

where – where we say to the jury, what amount do

you award to the plaintiff, you want them to write

in millions of dollars?

MR. ELLISON: No, it will be six – roughly $6

million.

AV0306-07. There was no further tender of evidence of

damages by Asten prior to or at trial.

C. The District Court’s Decisions

The District Court granted the motion to strike Asten’s

jury demand. It noted that the Seventh Amendment right to a

jury trial “attaches to actions at law, but not actions in equity,”

AII0006, and that in its analysis it was required to look to the

substance of a claim rather than the labeling used by the party

asserting it. Because Asten as of two weeks prior to trial had

tendered no competent evidence that recoverable damage had

yet been suffered by Asten and because “resultant damages”

were an essential element of a cause of action for breach of

contract under Pennsylvania law, the Court concluded that the

breach of contract claim did not require a jury trial. It then held

that Asten’s remaining claims were equitable and, accordingly,

that a bench trial was appropriate.
11

Following a three-week bench trial, the District Court

found that the parties had intended the exclusion clause to

exclude all asbestos-related cases. It recognized that asbestosis

was a specific respiratory disease caused by inhaling asbestos

fibers. It noted, however, that read literally the phrase

“exposure to asbestosis” would only exclude liability for

someone alleging that he or she was harmed by being exposed

to a person with a non-communicable disease. The Court

therefore declined to attribute to the parties the literal meaning

of the text without considering the other permissible aids to

contract interpretation under Pennsylvania law – i.e., trade

usage, the performance of the parties, and the situation and

negotiations providing context for the parties’ original

agreement. “[I]nformed by the usage of trade, usage of the

parties, and the course of performance of the parties,” the Court

concluded that the asbestosis exclusion “len[t] itself to only one

interpretation . . . [– i.e. it] was intended by the parties to

exclude from coverage all claims deriving from the exposure to

Asten’s asbestos-containing products.” AI0142. 

The District Court also held (1) that Asten’s declaratory

judgment claim against Columbia, although not its claim against

American, was barred by laches; and (2) that the defendants

were entitled to reformation of the exclusion clause to clearly

exclude all asbestos-related claims. Finally, the Court ruled (3)

that the one-year aggregate liability limit applied to the entire 18

months of each of American’s 1982 policies; and (4) that

American’s excess policies did not impose a duty to defend or

pay defense costs. The Court declined to reach the defendants’

defense that Asten was barred from relief by its failure to

comply with the notice provisions of the policies.
12

II. Declaratory Judgment as a Matter of Law

Asten insists that the exclusion clause is unambiguous,

that the District Court improperly considered anything other

than the text of that clause, that there are no material disputes of

fact, and that it is entitled to the declaratory judgment it seeks as

a matter of law. We cannot agree.

The District Court properly considered the extrinsic

evidence which it did. Pennsylvania law follows the

Restatement approach to the interpretation of written, integrated

contracts. Sunbeam Corp. v. Liberty Mutual Ins. Co., 566 Pa.

494, 781 A.2d 1189 (Pa. 2001); Restatement (Second) of

Contracts § 202 (1981), et seq. Parol evidence cannot be used

to contradict the provisions of such a contract. In determining

whether such a contradiction would occur, however, the text of

the contract must first be interpreted in light of any evidence of

trade usage and the performance of the parties under the

contract. Sunbeam, 781 A.2d at 1193. If after the consideration

of such evidence, the intent of the parties remains unclear,

evidence concerning the pre-contract negotiations of the parties

may also be considered in reaching a conclusion concerning the

intention of the parties. Resolution Trust Corp. v. Urban Redev.

Auth. of Pittsburgh, 536 Pa. 219, 225-26, 638 A.2d 972, 975-76

(Pa. 1994).

The District Court first found, based on expert testimony

and the testimony of Asten’s procuring agent, Gloria Forbes,

that in the insurance world of the 1980s “the term ‘asbestosis’

was used to mean two different things. First, the term was used

to mean the specific asbestos-related disease discussed above
13

and found in a medical dictionary. Second, it was used as a

generic term, i.e., an all encompassing term that includes all

asbestos-related diseases.” AI0138. The District Court next

looked to the course of performance, finding that “Asten’s

course of performance over the twenty plus years after the

execution of the Subject Policies is the most compelling

evidence of the intention of the parties.” AI0130. In the view

of the Court, that evidence “clearly demonstrates that Asten

understood and intended the Asbestosis Exclusion to bar all

claims alleging any asbestos-related disease.” Id.

Only after these conclusions did the District Court turn

to the circumstances surrounding the entering of the policies. At

that point, there was clearly sufficient doubt about the literal

reading of the text to warrant consideration of parol evidence.

Based on the parol evidence, the Court found that the “April 2,

1981 communication between DVUA and Babb, agents for

Columbia and Asten respectively, reflect[ed] a meeting of the

minds,” AI0138, that all asbestos-related claims would be

excluded. The Court further concluded that the circumstances

surrounding the issuance of the policies strongly suggested that

the exclusion was not intended to exclude liability for asbestosis

only. As the Court put it:

Given the nature of the underlying complaints in

the early 1980s, where plaintiffs often would

allege an asbestosis injury along with other

asbestos-related injuries, the Asbestosis Exclusion

that only applied to the specific disease asbestosis

would offer an insurance company very little

protection. That is because under Pennsylvania
14

law, an insurer excluding just asbestosis claims

would still be required to defend any asbestos

lawsuit alleging asbestosis and any other of the

diseases that result from exposure to asbestos.

The insurer’s duty to defend would only be

relieved if the claimant’s disease was narrowed

down to asbestosis only. And if the diagnosis

could never be narrowed down to exclude all

disease but asbestosis, the insurer would have to

indemnify as well.

* * *

And both Asten and Columbia were well aware of

this. As it learned in Canada, Asten knew it

would not be able to acquire coverage for

asbestos-related claims. Asten manufactured

asbestos and its exposure to asbestos liability had

begun prior to 1981. Columbia knew Asten’s

history and it expressed to Asten’s agent its desire

to exclude all asbestos-related claims.

AI0139 (footnote omitted); AI0141. 

As we have indicated, we find no fault with the District

Court’s consideration of evidence beyond the text of the

policies. Asten’s primary arguments to the contrary are: (1) that

the text of the asbestosis exclusion is not ambiguous, and (2)

that consideration of evidence indicating trade use of

“asbestosis” as a catchall for asbestos-related disease was

improper because it was not shown to be “continuous, uniform,
15

and notorious.” We address those arguments in turn.

Asten points to dictionary definitions of “exposure”

which include the act of being open to something that poses a

danger or risk. Based on this definition, Asten insists that

“exposure to asbestosis” in the context of the contractual

language “exposure to or contracting of asbestosis”

unambiguously means “exposure to the risk of contracting

asbestosis.” Asten’s interpretation equates exposure to the

asbestosis disease with the risk of contracting that disease.

However, as noted by the District Court, these are separate and

distinct harms. The District Court, employing the dictionary

definition relied upon by Asten, pointed out that someone

exposed to the asbestosis disease runs no risk of contracting that

disease. While Asten’s suggested interpretation under some

circumstances might be a permissible one, it does not render

“exposure to asbestosis” unambiguous. Moreover, as we have

indicated, under Pennsylvania law, the District Court would be

entitled to consider trade usage and party performance even if

Asten’s suggested reading were consistent with a literal reading

of the text of the exclusion.

Asten further argues that the District Court improperly

considered the trade usage evidence that “asbestosis” was

commonly used in the insurance world in the early 1980s to

refer to all asbestos-related diseases. In support of this

argument, Asten points to (1) evidence that those in the industry

regularly used “asbestosis” to mean the specific disease, (2)

evidence that 1981 policies issued by others broadly excluded all

asbestos-related diseases without using “asbestosis” as

shorthand for the broad exclusion, and (3) the fact that the
16

defendants’ trade usage evidence did not include other policies

in which “asbestosis” was used to mean asbestos-related

diseases. As we read Pennsylvania law, however, to be an

interpretation aid, trade usage evidence need not demonstrate

that a particular term always carries a particular meaning or that

the particular meaning claimed cannot be otherwise stated.

While evidence of nearly universal use of a trade usage term

might well be required in order to alter what would otherwise be

an unambiguous contract term or phrase, where, as here, a literal

reading of the contract produces a nonsensical or unclear

meaning and the Court finds that the trade usage term is in

frequent use by people in the trade at the relevant time, we

conclude that the trade use evidence of the kind here presented

can properly be considered.

It follows that Asten is not entitled to judgment as a

matter of law on its declaratory judgment claims regarding the

Asbestosis Exclusion Clause.

III. Jury Trial

First, we conclude that the District Court was entitled to

find that Asten was unable to prove recoverable damages at trial

and to rely upon that fact in resolving the Seventh Amendment

issue before it. Contrary to Asten’s suggestion, this was not a

situation in which damage evidence was found to be too

speculative or uncertain. This was a situation where it was

firmly established that Asten was not prepared to prove

recoverable damages. While it is true, as Asten stresses before

us, that it is not impossible for an insured to experience

recoverable loss as a result of having to resort to alternative
 See, e.g., Flintkote Co. v. Gen. Accident Assurance Co. of 1

Canada, No. 04-01827, 2008 WL 3270922 (N.D. Cal. Aug. 6,

2008) (recoverable loss proven under the “premature

exhaustion” theory, holding inter alia that the calculations under

that theory must take into account that the alternate source may

have a contribution claim against the insurer).

 The parties have not briefed, and we express no opinion 2

with respect to, what, if any, effect this ruling has on Asten’s

17

sources of coverage, an insured is obviously not entitled to

recover litigation expenses and indemnity for a particular claim

twice from two different insurers. Moreover, far more than a

“burn rate” needs to be shown to successfully support the

“premature exhaustion” theory which Asten appears to be

pressing in its brief before us, and no such evidence was 1

tendered in response to the District Court’s call for a tender. In

short, no evidence has been tendered to prove that Asten had yet

suffered a loss as a result of Columbia’s denial of coverage.

When faced with a situation in which a party cannot

tender evidence essential to its only legal claim, a federal trial

court may strike a jury demand without offending the Seventh

Amendment. Design Strategy, Inc. v. Davis, 469 F.3d 284 (2d

Cir. 2006) (plaintiff not entitled to a jury where it failed to

provide computation and evidence of damages pursuant to Rule

26, and only remaining claims were equitable); AstraZeneca LP

v. Tap Pharm. Prods., Inc., 444 F. Supp. 2d 278 (D. Del. 2006)

(motion to strike jury granted after Court barred damage expert

testimony and party did not otherwise have damage case).2
ability to recover damages on its Count II claims based on

Columbia’s rejection of the asbestos-related claims tendered to

it in the Fall of 2001.

 Asten’s briefing before us expressly and unambiguously 3

argues that the District Court erred by denying it a jury trial on

both its declaratory judgment claims and its breach of contract

claim. Its opening brief, for example, devotes separate sections

to the declaratory judgment jury trial issue and the breach of

contract jury trial issue. At oral argument, however, counsel for

Asten answered a question of the Court in a manner that could

reasonably be understood to deny that Asten was claiming error

with respect to the denial of a jury trial on the declaratory

judgment claims. Given this response and the centrality of this

issue in the briefing, the Court asked for supplemental, postargument memoranda directed to whether counsel for Asten

intended to waive this claim of error and, if not, whether the

Court should resolve this aspect of the appeal based on the

briefing. The responses made clear that no waiver was intended,

but that Columbia and American insist that a waiver

nevertheless resulted. In the absence of prejudice to the

opposing party, we prefer resolution on the merits of an issue to

disposition of it based on an unintended waiver by counsel.

Given that Columbia’s and American’s position on the issue is

fully developed in the briefing, we perceive no prejudice to them

from our addressing it on the basis of that briefing, and we elect

18

We now turn to the issue of whether the declaratory

judgment claims that went to trial were ones that entitled Asten

to a jury trial. The controlling law is set forth in our opinion in 3
that course. See, e.g., Baker v. Corcoran, 220 F.3d 276, 295,

n.16 (4th Cir. 2000).

19

Owens-Illinois, Inc. v. Lake Shore Land Co., 610 F.2d 1185 (3d

Cir. 1979):

In this diversity action, the plaintiff asked

for a declaratory judgment establishing its right

under an option agreement to compel the

defendant’s conveyance of certain realty [at a

future date]. Asserting that its answer presented

legal issues, the defendant demanded a jury trial,

but the district court determined that the suit was

the counterpart of an equitable action for specific

performance and struck the request for a jury.

* * *

Declaratory judgments were created as a

remedy in the federal courts some four years

before the merger of law and equity took effect.

See 28 U.S.C. §§ 2201-2202. The remedy may be

granted upon either legal or equitable claims and

is sui generis. . . .

To effectuate the statute’s neutral position

on the jury trial, postmerger courts have found it

necessary to preserve the distinction between law

and equity in the declaratory judgment context. A

workable formula that has been developed is to
20

determine in what kind of suit the claim would

have come to court if there were no declaratory

judgment remedy. See 9 C. Wright & A. Miller,

supra § 2313. If the declaratory judgment action

does not fit into one of the existing equitable

patterns but is essentially an inverted law suit – an

action brought by one who would have been a

defendant at common law – then the parties have

a right to a jury. But if the action is the

counterpart of a suit in equity, there is no such

right. See F. James, Jr. and G. Hazard, Jr., Civil

Procedure § 8.10, at 383-84 (2d ed. 1977).

Applying this test the district court

properly characterized the case at bar as equitable.

The complaint centered on the defendant’s

obligation to convey title to the plaintiff at a

certain time in the future – there was no claim for

damages or any other legal remedy. An action for

specific performance without a claim for damages

is purely equitable and historically has always

been tried to the court. See Klein v. Shell Oil Co.,

386 F.2d 659 (8th Cir. 1967); 5 Moore’s Federal

Practice, ¶ 38.21 (2d ed. 1979); 9 C. Wright & A.

Miller, supra § 2309. The plaintiff’s suit,

therefore, is not an inverted law suit, but rather is

a claim cast in declaratory judgment form because

the right to specific performance had not ripened

at the time the action was filed.3

* * *
21

See, e.g., James v. Pennsylvania General Ins. 3

Co., 121 U.S.App.D.C. 251, 253, 349 F.2d 228,

230 (D.C. Cir. 1965) (question is “whether an

action in equity could be maintained if declaratory

judgment was not available”). See also 9 C.

Wright & A. Miller, supra § 2313 (same). The

Court itself has noted that the fact that the action

is in form a declaratory judgment case should not

obscure the essential nature of the action. See

Simler v. Conner, supra at 223, 83 S. Ct. 609.

Id. at 1186 (footnote 2 omitted); 1189-90 (emphasis supplied).

The teachings of Owens-Illinois reflect the law generally.

See, e.g., Fischer Imaging Corp. v. Gen. Elec. Co., 187 F.3d

1165, 1171 (10th Cir. 1999) (finding a Seventh Amendment

right to a jury trial in a declaratory judgment action, in which the

plaintiff had not yet suffered injury, because, “absent declaratory

judgment procedures,” the plaintiff’s claim would have “come

to the court” in a suit on the contract); Am. Safety Equip. Corp.

v. J.P. Maguire & Co., 391 F.2d 821, 824 (2d Cir. 1968) (to

assess Seventh Amendment claim “courts have looked to the

basic nature of the suit in which the issues involved would have

arisen if Congress had not created the Declaratory Judgment

Act”). 

Owens-Illinois, like this case, was not an inverted lawsuit

situation, and our Court therefore looked to the nature of the

claim set forth in the complaint. It concluded that a jury trial

was not required because the issues raised in the complaint

which allege the right to compel a transfer of real estate to
22

plaintiff at a later date would come to court in a suit for specific

performance if there were no declaratory judgment remedy.

If we ask “in what kind of suit [Asten’s] claim[s] would

have come to court if there were no declaratory judgment

remedy,” Owens-Illinois, 610 F.2d at 1189, it seems clear that

the answer is an action in assumpsit for damages consisting,

inter alia, of reimbursement of litigation costs and amounts paid

to victims. See, e.g., 9 Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure § 2313 (2d ed. 1995). There is

no possibility that it would arise in a suit for specific

performance because an action in assumpsit is an available and

adequate remedy at law, see, e.g., Vanderveen v. Erie Indem.

Co., 417 Pa. 607, 208 A.2d 837 (Pa. 1965), and “in the federal

courts equity has always only acted when legal remedies were

inadequate.” Beacon Theatres, Inc. v. Westover, 359 U.S. 500,

509 (1959).

Columbia and American insist that Asten’s Count I is in

the nature of a claim for specific performance or a bill quia

timet, i.e., “[a] legal doctrine that allows a person to seek

equitable relief from a future probable harm to a specific right

or interest.” Pennsylvania Nat. Mut. Cas. Ins. Co. v. City of

Pine Bluff, 354 F.3d 945, 950, n.4 (8th Cir. 2004) (quoting

Black’s Law Dictionary 1260 (7th ed. 1999)). As we have

indicated, Asten’s claims could not be adjudicated in an action

for specific performance because it would have an adequate

remedy at law. With respect to bills of quia timet, American

cites a string of cases which state that a declaratory judgment is

“analogous to” or had “its genesis in” the equitable bill of quia

timet. None involved a situation analogous to this case, and any
23

suggestion that quia timet and declaratory judgments are

synonymous would prove too much – it would result in all

declaratory judgment actions being equitable, and we know that

not to be the case.

It is true that a bill of quia timet allows “a person to seek

equitable relief from a future probable harm,” id., that he or she

fears. As one would expect, however, it does not under all

circumstances allow relief from feared harm that has not yet

occurred. Essential to quia timet equity jurisdiction is the

absence of an adequate remedy at law. As the Supreme Court

explained in Di Giovanni v. Camden Fire Ins. Ass’n., 296 U.S.

64, 68 (1935):

This Court has recently pointed out that

equity will not compel the cancellation and

surrender of an insurance policy procured by

fraud where the loss has occurred and a suit at law

to recover the amount of the loss is pending or

threatened. Enelow v. New York Life Insurance

Co., 293 U.S. 379. The alleged fraud of

petitioners, as well as their alleged destruction of

the property insured are defenses available in suits

at law upon the policies. While equity may afford

relief quia timet by way of cancellation of a

document if there is a danger that the defense to

an action at law upon it may be lost or prejudiced,

no such danger is apparent where, as respondent’s

bill affirmatively shows, the loss has occurred and

suits at law on the policies are imminent, and

there is no showing that the defenses cannot be set
 Appellees’ quia timet argument relies primarily on Aetna 4

Life Ins. Co. v. Haworth, 300 U.S. 227 (1937). There, an

insured claimed he was disabled and thereby contractually

relieved of his obligation to pay premiums under several life and

disability insurance policies. The insurer disputed and asserted

that the policies had lapsed for non-payment of premiums. It

filed a declaratory judgment action to secure a declaration that

the insured was not disabled. The only issue in the case was

whether there was a “case or controversy.” In the course of

concluding that there was, however, the Court noted that the

insured “on repudiation by the insurer of liability in such a case

and insistence by the insured that the repudiation was unjustified

because of his disability, the insured would have ‘such an

interest in the preservation of the contracts that he might

maintain a suit in equity to declare them still in being.’” Id. at

243-44 (quoting Burnet v. Wells, 289 U.S. 670, 680 (1933).

In Haworth, the insurer had repudiated the policy, and a

present adjudication that it was still in effect was necessary to

24

up and litigated as readily in a suit at law as in

equity. See Enelow v. New York Life Insurance

Co., supra, 384, 385.

See also In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995), vacated,

515 U.S. 1182 (1995) (“Bills quia timet were generally

appropriate if there was a danger that a defense at law might be

prejudiced or lost if not tried immediately.”); 30A C.J.S. Equity

§ 34 (2008). (The “objective [of bills quia timet] is to prevent

anticipated mischiefs which could not after their occurrence be

adequately redressed.)4
prevent irreparable injury during the policy term. Here, we have

a coverage dispute, and Asten has it within its power to put itself

in a position to pursue a legal remedy against Columbia and/or

American which equity would regard as clearly adequate.

 Columbia and American understandably do not argue that 5

they were entitled to a directed verdict and, accordingly, that the

striking of the jury demand was harmless error. In the three

weeks of trial, the Court heard conflicting testimony about many

material facts and resolved to credit one fact witness over

another, as well as one expert over another. After doing so, it

drew a host of inferences concerning the motivation of the

parties at various stages. In short, it exercised the functions that

Asten was entitled to have a jury exercise.

25

Based on these authorities, the issue posed to us is

whether a declaratory judgment claim based on a contract,

which would otherwise clearly be a legal claim entitling the

plaintiff to a jury, becomes an equitable claim when filed in

anticipation of harm but before harm has been suffered. Our

answer is “no” unless special circumstances exist which indicate

that a suit on the contract is likely to be inadequate when it is

available. Since no such circumstances have been shown to

exist, we conclude that Asten is entitled to a jury trial on its

declaratory judgment claims.5

IV. Laches

The District Court held that “Asten’s coverage suit
 Asten does not contest the District Court’s application of the 6

doctrine of laches to its “coverage suit against Columbia.”

26

against Columbia [was] barred under the doctrine of laches,”

AI0109, but that Asten’s coverage suit against American was

not. Citing our decision in Central Penn. Teamsters Pension

Fund v. McCormick Dray Line Inc., 85 F.3d 1098 (3d Cir.

1996), the District Court began its analysis by recognizing that

the “doctrine of laches consists of two essential elements: (1)

inexcusable delay in instituting suit; and (2) prejudice resulting

to the defendant from such delay.” Id. at 1108. See also Class

of Two Hundred Admin. Faculty Members v. Scanlon, 502 Pa.

275, 279, 466 A.2d 103, 105 (1983) (a laches defense poses the

issue of “whether, under the circumstances of the particular

case, the complaining party is guilty of want of due diligence in

failing to institute his action to another’s prejudice”) (quoting

Wilson v. King of Prussia Ent., Inc., 422 Pa. 128, 133, 221 A.2d

123, 126 (1966)).6

In support of the first prong of its holding, the District

Court cited (1) Asten’s failure to join Columbia in a coverage

action it brought against other insurers in 1980; (2) its failure to

notify Columbia of “its hundreds of asbestos-related claims”

when they were asserted against Asten; and (3) its two-year

delay in notifying Columbia of the underlying claims after it

“acknowledged [in 1999] its belief that the defendants may

dispute the construction of the Asbestosis Exclusion.” AI0110-

11.

Asten’s primary response to the District Court’s laches
27

holding is based on the Supreme Court of Pennsylvania’s

decision in J.H. France Refractories Co. v. Allstate Ins. Co., 534

Pa. 29, 626 A.2d 502 (Pa. 1993), a case involving an insured

with multiple insurance policies covering asbestos-related

injuries. The Court there endorsed the so-called “multiple

trigger theory of liability” and held as follows:

In keeping with this analysis, we conclude

that each insurer which was on the risk during the

development of an asbestosis-related disease is a

primary insurer. In order to accord J.H. France

the coverage promised by the insurance policies,

J.H. France should be free to select the policy or

policies under which it is to be indemnified.

* * *

When the policy limits of a given insurer

are exhausted, J.H. France is entitled to seek

indemnification from any of the remaining

insurers which was on the risk during the

development of the disease. Any policy in effect

during the period from exposure through

manifestation must indemnify the insured until its

coverage is exhausted. We believe this resolution

of the allocation of liability issue to be most

consistent with the multiple-trigger theory of

liability.

This conclusion does not alter the rules of

contribution or the provisions of “other
 Columbia also argues that J.H. France was not decided until 7

1999, and Asten had already unreasonably delayed in filing suit

prior to that decision. J.H. France does not purport to be

announcing new law, however, and we read it as explaining the

common law of Pennsylvania which we must accept as

controlling at all times here relevant.

28

insurance” clauses in the applicable policies.

Id. at 508, 509.

Based on J.H. France, Asten insists that, under the

controlling law of Pennsylvania, it was entitled to select the

order in which it brought suit against its insurers and that it had

no duty to file suit against Columbia until the limits of its other

policies had been exhausted. It stresses that the claims it

tendered to Columbia in the Fall of 2001 and sued upon here on

March 3, 2003, were filed against it in 2001 and that earlier

claims had been covered by other carriers. Asten concludes that,

when an insured exercises its right to delay triggering coverage

under some policies until it exhausts others, that delay, as a

matter of law, cannot be found unreasonable. We agree.

Columbia’s primary response to J.H. France is that it “is

a tender case, not a notice case.” Appellant’s Br. at 62

(emphasis in original). This is undeniably true. Columbia fails 7

to explain, however, how a party which has not unreasonably

delayed in tendering a claim and filing suit can be barred from

going forward by laches based on a failure to give earlier notice

of its claim. Columbia has cited no authority for this
 American, like Columbia, was not joined in Asten’s 1980 8

coverage litigation.

29

proposition, and we have found none. As we have earlier noted,

laches speaks to “inexcusable delay in instituting suit” and one

who is entitled to delay bringing suit under the applicable law

cannot be found to be barred by that doctrine.

The District Court apparently took the same view of J.H.

France, as Columbia does, also without further explanation. It

rejected American’s laches defense, while sustaining

Columbia’s, based on the fact that American, unlike Columbia,

had gotten notice of the claims starting in 1979.8

We do not, of course, suggest that the history of notice

giving in these matters is irrelevant. As we have earlier noted,

the policies contain various provisions requiring that notice of

claims be given by the insured and breaches of the duties

imposed there may, indeed, bar Asten’s coverage suit against

Columbia, as well as American. But the District Court expressly

declined to rule on Columbia’s “late notice affirmative defense,”

finding it “moot” and noting that resolution of it would require

it “to unnecessarily examine an uncertain area of Pennsylvania

law.” AI0144. Without the benefit of the District Court’s views

regarding the application of the various notice provisions to the

record of this case, we, too, decline to address this issue.

V. Reformation

With respect to the defendants’ counterclaims for
30

reformation of their policies, the District Court held as follows:

Based on the same evidence used to interpret the

Asbestosis Exclusion (course of performance and

the circumstances surrounding the placement of

the Subject Policies), and given that an “exposure

to . . . asbestosis” is literally impossible, an

alternative ground for this court to reach the same

conclusion regarding the scope of the exclusion is

through the doctrine of reformation. If the

Asbestosis Exclusion is interpreted to bar only

asbestosis claims then that construction fails to set

forth the true agreement of the parties. The

parties believed that the Asbestosis Exclusion

excluded all asbestos-related claims and

reformation allows me to reform the exclusion to

reflect that intent.

AI0149.

As is apparent from this holding, the reformation

counterclaim and Asten’s declaratory judgment claims regarding

the asbestosis exclusion involve common issues. When

litigation involves both legal and equitable claims, even if it is

the plaintiff that joins such claims, the right to a jury trial on the

legal claim, including all issues common to both claims, must be

preserved by trying the legal claim to a jury first, or at least

simultaneously with the equitable claim, and by accepting the

jury’s findings on common facts for all purposes. Lytle v.

Household Mfg. Inc., 494 U.S. 545 (1990); Tull v. United States,

481 U.S. 412 (1987). It follows, a fortiori, that Asten’s right to
31

a jury trial on its declaratory judgment claims cannot be

eliminated by the filing of an equitable counterclaim, like one

for reformation. Accordingly, we will vacate the District

Court’s judgment on the defendants’ counterclaim for

reformation and remand for further proceedings on that

counterclaim.

VI. Duty to Defend and Pay Defense Costs

 Under the American Excess Policy 

 In response to Asten’s request for a declaratory judgment

regarding American’s duty to defend or pay defense costs under

its 1982 excess policy, the District Court pointed to the

following provisions of that policy:

The Company shall not . . . be called upon to

assume charge of the settlement or defense of any

claims made or suits brought, or proceedings

instituted against the Insured, but shall have the

right and opportunity to be associated with the

Insured in the defense and trial of any such

claims, suits or proceedings relative to any

occurrence which, in the opinion of the Company

may create liability on the part of the Company

under the terms of the policy. If the Company

avails itself of such right and opportunity, the

Insured and the Company shall cooperate in all

respects so as to effect a final determination of the

claim or claims.

* * *
32

Loss expenses and legal expenses, including court

costs and interest, if any, which may be incurred

by the Insured with the consent of the Company in

the adjustment or defense of claims, suits or

proceedings shall be borne by the Company and

the Insured in the proportion that each party’s

share of loss bears to the total amount of said loss.

Loss expense hereunder shall not include salaries

and expense of the Insured’s employees incurred

in investigation, adjustment and litigation.

AVI0002.

Based on these provisions, the District Court concluded

as follows:

According to the unambiguous terms of [the]

1982 American Express [sic] Policy, American is

not obligated to provide or fund a defense for

Asten. American is only required to reimburse

Asten for any defense expenses it incurs with

American’s consent.

AI0156 (emphasis in original).

Asten does not maintain that the above quoted language

is ambiguous. Rather, it insists (1) that a “follow form clause”

of the policy incorporates a duty to defend clause from an

underlying policy, and (2) that implied by law in every “consent

to defend” clause of this kind is a prohibition against

unreasonable refusals to defend. Accordingly, Asten agrees
We reach a different conclusion with respect to Asten’s 9

declaratory judgment claim regarding the aggregate liability

limit under American’s 1982 Umbrella and Excess Liability

Policies. The District Court heard extrinsic evidence regarding

this issue which is conflicting in part and portions of which are

relied upon by each side. The District Court, for example, noted

that Gloria Forbes, acting in her capacity as a procuring agent

for Asten, requested that the policies “each be written for an 18-

month term, each for one premium, and each providing one

aggregate limit of $10,000,000.” AI103. Accordingly, it is not

clear at this point that this issue should be resolved without the

assistance of a jury. In the interest of judicial efficiency, we will

say only that the testimony of Jerry Leddy, American’s Rule

30(b)(6) witness, does not resolve the matter in Asten’s favor.

Leddy’s testimony in regard to the aggregate limit contained no

factual admissions, nor did it discuss the intention of the parties

when forming the contract. Rather, he offered only his own

interpretation of the contract based on his reading of it at trial.

This type of legal conclusion is not binding on American, and

American was entitled to produce contrary evidence at trial. See

R & B Appliance Parts, Inc., v. Amana Co., 258 F.3d 783, 787

(8th Cir. 2001) (distinguishing between matters of fact and

conclusions of law in regard to Rule 30(b)(6) depositions).

33

with the District Court that this issue is to be resolved as a

matter of law from the face of the documents. Thus, while

Asten would have a right to have a jury determine this issue if

there were material issues of fact to be resolved, the absence of

a jury presents no problem in this context.9

Asten insists that the 1982 American Excess Policy

follows form to the 1982 American Umbrella Policy, and that it

accordingly creates a duty to defend identical to that contained

in the Umbrella Policy. The follow-form clause states in

relevant part:
34

The insurance afforded by this policy is subject to

the same warranties, terms (including the terms

used to describe the application of the limits of

liability), conditions and exclusions as are

contained in the underlying insurance . . . except,

unless otherwise specifically provided in this

policy, any such warranties, terms, conditions or

exclusions relating to premium, the obligation to

investigate and defend, the amount and limits of

liability, and any renewal agreement. 

AVI0002 (emphasis added). 

Interpreting the above language, the District Court

determined that any “‘obligation to investigate or defend’ which

may be contained in the underlying 1982 American Umbrella

Policy, to which the 1982 American Excess Policy follows form,

[is] not incorporated into the 1982 American Excess Policy.”

AI107. The District Court’s determination was based on a plain

reading of the contractual language, which clearly carves out

any obligation to defend. We find no error in the District

Court’s analysis and, accordingly, affirm its holding that no

obligation to defend arises from the follow-form clause. 

We are likewise unconvinced by Asten’s argument that

every “consent to defend” clause contains by implication a

prohibition against the unreasonable refusals to defend. The

District Court noted that the American Excess Policy requires

American to indemnify Asten for its “ultimate net loss” in

excess of its underlying insurance, and that the policy defines

ultimate net loss to include “all sums actually paid or which the

Insured is legally obligated to pay as damages in settlement of

satisfaction of claims or suits for which insurance is afforded by

this policy. . . .” AI0105. Notably, defense costs are not

included within this language. 
35

In determining that American had no obligation to

defend, the District Court stated the unremarkable proposition

that “the duty to defend is contractual and if there is no contract

to defend than [sic] there is no duty to defend.” AI156 (citing

7C Appleman, Insurance Law and Practice § 4682 (1979 &

Supp. 1995); City of Burlington v. Arthur J. Gallagher & Co.,

944 F.Supp. 333, 335-36 (D. Vt. 1996)). We agree with the

District Court’s determination that American has no obligation

to defend Asten in the absence of contractual language creating

such an obligation. See also Stonewall Ins. Co. v. Asbestos

Claims Mgmt. Corp., 73 F.3d 1178, 1219 (2d Cir. 1995) (“[T]he

insurer has no duty to defend or pay costs, but only has the right

to do so at its own election. The insurer can permit the insured’s

defense to proceed and take the chance that the insured might

exceed the limits of other liability coverage, or participate in the

defense and agree to pay all or part of the defense costs

incurred.”); City of Burlington, 944 F.Supp. at 337 (“Courts

across the country have construed policy language requiring the

consent of the insurer as creating an option, but not a duty, to

defend.”); Crown Ctr. Redev. Corp. v. Occidental Fire &

Casualty Co., 716 S.W. 2d 348, 357 (Mo. Ct. App. 1986)

(interpreting the same language at issue here and holding “the

obligation of American to pay defense costs is neither fixed nor

absolute . . . the entire obligation is conditioned on the consent

of American and not simply the procedure by which the

obligation is carried out.”).

In asserting that the consent to defend clause contains an

implied prohibition against unreasonable refusals, Asten cites to

consent to settlement cases. Courts have generally required

insurers to consent to reasonable settlements because of the

potential for a conflict of interest between the insured party and

the insurer, which could result in insurers wrongfully denying

insured parties access to coverage they have paid for and are

entitled to receive. See 14 Lee R. Russ & Thomas F. Segalla,
36

Couch on Insurance § 203.13 (3d ed. 2005) (“While the insured

may prefer to settle within policy limits and avoid the risk of

trial, the insurer may have an incentive to reject offers at or

close to policy limits and proceed to trial with the hope of a

lower judgement or a verdict in its favor.”); Nationwide Mut.

Ins. Co. v. Lehman, 743 A.2d 933, 941 (Pa. Super. Ct. 1999) (an

insured party is legitimately entitled to claim benefits from the

insurer unless the insurer comes forward and proves that the

settlement prejudiced its interests). We find no similar conflict

of interest in the context of defending insurance claims, and we

decline to read into the contractual language a prohibition

against unreasonable refusals where none exists.

VIII. Conclusion

We will affirm the judgment of the District Court insofar

as it declared the obligations of American with respect to the

duty to defend or pay defense costs under the 1982 American

Excess Policy. Asten was entitled to a jury trial on its other

declaratory judgment claims, however, and in all other respects

the judgment of the District Court will be reversed, and this case

will be remanded for further proceedings consistent with this

opinion.