Court Opinion

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Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

8-15-2005

Liberty Mutl Ins Co v. Treesdale Inc
Precedential or Non-Precedential: Precedential

Docket No. 04-2615

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                                      PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT

                   No: 04-2615

  LIBERTY MUTUAL INSURANCE COMPANY

                             v.

   TREESDALE, INC.; PITTSBURGH METALS
          PURIFYING COMPANY

  *Walter Piatt; Eugene McCue, Jr.; Danny R. Bailey;
                       Dennis J.
   Bailey, Co-Executors of the ESTATE OF JOHN R.
                    BAILEY; Mary
   Boniey, personal representative of the ESTATE OF
                  JOSEPH BONIEY;
Wilma Chernay, Executrix of the ESTATE OF EDWARD
                    S. CHERNAY;
Robert S. Perkins, Executor of the ESTATE OF RONALD
                     L. PERKINS,

                    Proposed Intervenors/Appellants

           *Pursuant to Rule 12(a) F.R.A.P.

                         1
         Appeal from the United States District Court
          for the Western District of Pennsylvania
                   (Civ. No. 02-cv-02179)
           District Judge: Hon. Arthur J. Schwab

         Submitted under Third Circuit LAR 34.1(a)
                       May 5, 2005

     Before: McKEE, SMITH and VAN ANTWERPEN,
                     Circuit Judges

               (Opinion filed: August 15, 2005)

Frederick J. Francis, Esq.
Beth A. Slagle, Esq.
Quinn A. Johnson, Esq.
Meyer, Unkovic & Scott
1300 Oliver Building
535 Smithfield Street
Pittsburgh, PA 15222

       Attorneys for Appellants

John C. Sullivan
Post & Schell
1600 John F. Kennedy Boulevard
Four Penn Center, 13 th Floor
Philadelphia, PA 19103

       Attorney for Appellee

                               2
                           OPINION

McKEE, Circuit Judge.

        The appellants or the decedents they represent
(hereinafter collectively referred to as “Appellants”) claim to
have sustained bodily injury from exposure to asbestos-
containing products manufactured or sold by Pittsburgh Metals
Purifying Company (“PMP”).1 They appeal the district court’s
denial of their motion to intervene in an insurance coverage
dispute between Liberty Mutual Insurance Company and PMP,
its insured. For the reasons that follow, we will affirm.

                          I. FACTS

       PMP is alleged to have manufactured and sold asbestos-
containing side boards and rings which were marketed and sold
to the steel industry under the trade name, “Soffelex,” from
approximately 1966 through 1975. The side boards and rings
were used to maximize temperature during the steel
manufacturing process. PMP has been named as a defendant,
additional defendant or third-party defendant, in numerous
lawsuits initiated by plaintiffs who allege that they have
suffered bodily injury as a result of exposure to these asbestos-
containing products. A small subset of these plaintiffs seek to

       1
        PMP is a division of Treesdale, Inc. PMP and Treesdale
refer to themselves as “PMP” in their briefs in this case, and
they refer to themselves as “Treesdale” in the companion
insurance coverage dispute.

                               3
intervene in an insurance coverage dispute between PMP and
its insurer. Several thousand such asbestos claims have been
filed to date, and Liberty Mutual has provided a complete
defense to PMP against these asbestos claims. Before initiating
this suit for a declaratory judgment, Liberty Mutual had paid
judgments and/or settlements on behalf of PMP in excess of
$5,000,000, the total coverage available under its Liberty
Mutual primary policies. Upon exhaustion of the primary
policies, PMP demanded that Liberty Mutual continue to defend
and indemnify under Umbrella Excess Liability Policies (“UEL
policies”) issued by Liberty Mutual, and Liberty Mutual claims
that it did so.

       Liberty Mutual contends that it has now paid or
committed to pay more than $5,000,000 in additional
settlements, an amount which it believes has also exhausted the
coverage under the UEL policies for these claims. In addition,
Liberty Mutual claims to have spent several million dollars in
defending PMP against the bodily injury claims. According to
Liberty Mutual, PMP agrees that coverage is no longer
available under the primary policies for the asbestos claims
against PMP.

        Appellants claim that from 1975 through 1984, Liberty
Mutual issued ten UEL policies to PMP with total limits in
excess of $25 million. Appellants also claim that PMP is
insolvent except for the UEL policies. Liberty Mutual disputes
that allegation arguing that there is no evidence of record that
PMP is insolvent.
          II. DISTRICT COURT PROCEEDINGS

                               4
       Liberty Mutual filed this declaratory judgment action
against PMP and Treesdale, Inc., PMP’s parent company,
seeking a declaration that it will have no further duty to defend
or indemnify PMP once $5 million has been paid under the
UEL policies. Appellants sought to intervene claiming that
Liberty Mutual’s obligation under the UEL policies is $26
million and arguing that their right to recovery for their
asbestos-related injuries could be eliminated in the declaratory
judgment action instituted by Liberty Mutual against PMP.

        Appellants filed a motion to intervene pursuant to
Fed.R.Civ.P. 24. In their reply to Liberty Mutual’s opposition
to their motion, Appellants for the first time asserted that they
were entitled to intervene as of right because they are
indispensable parties under Fed.R.Civ.P. 19(a).

       The Magistrate Judge’s Report and Recommendation
recommended that the district court deny the motion, and
dismiss a number of related motions as moot.2 Appellants filed
objections to the R&R, and Liberty Mutual responded to those
objections. Appellants were then given leave to file a
supplemental brief in support of their objections. In the

       2
         The proposed intervenors also sought to intervene on
behalf of a proposed class of all individuals who have claims for
asbestos-related bodily injury against PMP and who allege a
bodily injury that triggers coverage of the Liberty Mutual
policies between the years 1975 through 1985. Because the
district court denied their motion to intervene as individuals, it
dismissed their motion to intervene on behalf of the class.

                                5
supplemental brief, filed nine months after the initial motion to
intervene, Appellants raised an entirely new argument under
Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). Appellants now
argue that the district court should have applied state law in
determining whether they are indispensable parties to the
declaratory judgment action.

       The district court adopted the Magistrate Judge’s R&R
and entered an order denying the motion to intervene. This
appeal followed.3

                      III. DISCUSSION

        Appellants make a number of arguments in support of
their contention that the district court erred in not allowing them
to intervene; each is considered separately.

A. Appellants’ Interest Under Fed.R.Civ.P. 24(a).

Rule 24 provides, in relevant part:

       (a). Intervention of Right. Upon timely
       application anyone shall be permitted to intervene
       in an action . . . (2) when the applicant claims an

       3
        The district court also granted summary judgment to
Liberty Mutual in the underlying declaratory judgment action
against Treesdale and PMP. Treesdale/PMP has filed an appeal
from that judgment at No. 04-4172, and the opinion in that case
is being filed with this opinion.

                                6
       interest relating to the property or transaction
       which is the subject of the action and the
       applicant is so situated that the disposition of the
       action may as a practical matter impair or impede
       the applicant’s ability to protect that interest,
       unless the applicant’s interest is adequately
       represented by existing parties.

Fed.R.Civ.P. 24(a)(2). We have held that a litigant seeking
intervention as of right under Rule 24(a)(2) must establish 1) a
timely application for leave to intervene, 2) a sufficient interest
in the underlying litigation, 3) a threat that the interest will be
impaired or affected by the disposition of the underlying action,
and 4) that the existing parties to the action do not adequately
represent the prospective intervenor’s interests. Kleissler v.
United States Forest Service, 157 F.3d 964, 969 (3d Cir. 1998).
“Each of these requirements must be met to intervene as of
right.” Mountain Top Condominium Assoc. v. Dave Stabbert
Master Builder, Inc., 72 F.3d 361, 366 (3d Cir. 1995) (citation
omitted).

       The district court denied the motion to intervene based
upon its conclusion that Appellants did not have a “sufficient
interest in the litigation;” the second element of the Rule
29(a)(2) inquiry.4 Given that ruling, the district court did not

       4
         We “will reverse a district court’s determination on a
motion to intervene of right if the court has applied an improper
legal standard or reached a decision that we are confident is
incorrect.” Harris v. Pernsley, 820 F.2d 592, 597 (3d Cir.1987).

                                7
discuss the other three requirements for intervention as of right.

      To establish a sufficient interest for intervention,
Appellants must demonstrate “‘an interest relating to the
property or transaction which is the subject of the action.’”
Mountain Top, 72 F.3d at 366 (quoting Fed.R.Civ.P. 24(a)(2)).

       While the precise nature of the interest required
       to intervene as of right has eluded precise and
       authoritative definition, some general guidelines
       have emerged. . . . [A]n intervenor’s interest must
       be one that is significantly protectable. [This
       means that] the interest must be a legal interest as
       distinguished from interests of a general and
       indefinite character.        The applicant must
       demonstrate that there is a tangible threat to a
       legally cognizable interest to have the right to
       intervene. This interest is recognized as one
       belonging to or one being owned by the proposed
       intervenors. . . . In general, a mere economic
       interest in the outcome of litigation is insufficient
       to support a motion to intervene. Thus, the mere
       fact that a lawsuit may impede a third party’s
       ability to recover in a separate suit ordinarily does
       not give the third party a right to intervene. . . .
       While a mere economic interest may be
       insufficient to intervene, an intervenor’s interest
       in a specific fund is sufficient to entitle
       intervention in a case affecting that fund. Thus,
       when a particular fund is at issue, an applicant
       claims an interest in the very property that is the

                                8
       subject matter of the suit.

Mountain Top, 72 F.3d at 366 (citations omitted).

       Appellants contend that they satisfy the second prong of
our inquiry under Mountain Top because they have an interest
in a specific fund, viz., the Liberty Mutual UEL policies.
According to Appellants, the insurance proceeds “constitute a
specific source or fund that is and has been providing
compensation to asbestos victims like [Appellants] for years.”
Appellants’ Br. at 17. We disagree.

       In Mountain Top, we did find that a proposed
intervenor’s interest in a specific fund can be sufficient to allow
intervention as of right. See 72 F.3d at 366. However, the
nature of the fund there was quite different from the fund at
issue here.

       Mountain Top concerned the disbursement of insurance
proceeds that the insurance carrier had already paid to a
condominium association to compensate for a loss caused by a
hurricane. The condominiums were governed by the Mountain
Top Condominium Association (“MTCA”), which was
comprised of all of the condo owners. The condo owners
delegated certain powers and duties, including the repair and
restoration of the condos, to the MTCA’s Board of Directors
pursuant to the MTCA’s bylaws and certain Virgin Islands’
statutes. Pursuant to the MCTA’s by-laws, the Board was
required to appoint an insurance trustee to approve the
adjustment of any loss and to receive all insurance proceeds in
excess of $50,000.

                                9
       However, the Board did not comply with the by-laws.
Instead, the Board took it upon itself to approve the insurance
adjustment and to determine how the reconstruction and repair
proceeds were to be distributed. Accordingly, the Board
adjusted the hurricane loss and received $1,538,163 from its
insurance carrier. It then deposited the insurance proceeds into
a separate account designated for hurricane reconstruction.

       However, instead of applying all of the proceeds to
repairing the hurricane damage, the Board decided to distribute
some of the proceeds to the individual condo of owners based
on the size of the various units. Under this plan, owners of
large units would have received more from the insurance
proceeds than owners of smaller units regardless of the damage
sustained. Moreover, there was no requirement that the
distributed funds be used to benefit the condo units.

       As part of the reconstruction plan, the Board entered into
an agreement with Dave Stabbert Master Builder, Inc., for
construction work. However, the Board became dissatisfied
with Stabbert’s work and a dispute arose between them.
Stabbert filed mechanics’ liens against the condos and the
Board responded by suing Stabbert in the district court. The
Board alleged, inter alia, fraudulent misrepresentation and
breach of contract. Stabbert then filed counterclaims against the
Board.

       In time, Stabbert agreed to release the liens and the
Board deposited $250,000 of the insurance proceeds into
escrow in the registry of the district court. The $250,000 was all
that remained of the hurricane restoration fund. Then, pursuant

                               10
to the district court’s order, the Board and Stabbert proceeded
to mediation.

        The Seipels - a couple that owned two condos that had
been damaged by the hurricane filed suit in territorial court
alleging that the Board had violated the MTCA’s by-laws by,
inter alia, failing to appoint an insurance trustee to manage the
distribution of the insurance proceeds. When th e S eipels
became aware that any settlement between the MTCA and
Stabbert might deplete all of the remaining funds allocated for
repair of the hurricane damage, they attempted to intervene in
the mediation between MTCA and Stabbert. They argued that
successful mediation between MTCA and Stabbert would result
in the distribution of the entire $250,000 escrow deposit.

        The district court denied the motion to intervene, holding
that the Seipels’ “only conceivable interest in this lawsuit lies in
the fact that if [MTCA] is successful, plaintiff may be in a
somewhat better position to satisfy any judgment which the
Seipels may succeed in obtaining in the Territorial Court, than
would be the case if the plaintiff loses this lawsuit.” 72 F.3d at
365. On appeal, we reversed.

       We began our analysis by noting that the $250,000 in
escrow was to be held in trust by an insurance trustee for each
condo owner under the MTCA’s by-laws and Virgin Islands
statutory law. Thus, the funds in escrow “[were] assets of an
express trust, of which the individual apartment owners [were]
intended beneficiaries.” Id. at 367. Consequently, the
apartment owners “[had] a property interest in the trust res that
[was] enforceable either in law or in equity.” Id. (citation

                                11
omitted). In addition, the apartment owners “[had] an interest
in seeing that the assets of the trust [were] not diverted in a
manner that [would] defeat the purpose of the trust.” Id. We
reasoned that while the Seipels may not have had an interest in
the merits of the litigation between MTCA and Stabbert, “they
[did] have an interest in the property over which the court [had]
taken jurisdiction.” Id. at 368. Accordingly, we held that “they
[had] an interest in being heard with respect to the disposition
of that fund.” Id. “[S]uch an interest [was] sufficient to support
an applicant’s intervention as of right.” Id.

        Thus, the nature of the fund at issue in Mountain Top
differed radically from the “fund” here. The insurance proceeds
in Mountain Top were required by the MTCA by-laws and by
a Virgin Islands’ statute to be held in trust for the benefit of all
condo owners – including the Seipels. However, Appellants
here have no property interest in the Liberty Mutual UEL
policies nor do they have any other legally protectable interest
in the policies. Rather, they have the kind of economic interest
in the insurance proceeds that we have held does not support
intervention as a matter of right. See Mountain Top, 72 F.3d at
366 (“a mere economic interest in the outcome of litigation is
insufficient to support a motion to intervene.”). The proceeds
of the policies are not being held in an escrow account that they
have a legal interest in as was the case in Mountain Top.
        Appellants argue that, like the proposed intervenors in
Mountain Top, they have a statutorily created interest in the
Liberty Mutual UEL policies under the Pennsylvania Insurance
Insolvency Act (the “Act”). The Act provides:

       No policy of insurance against loss or damage

                                12
       resulting from accident to or injury suffered by an
       employee or other person and for which the
       person insured is liable, . . . shall hereafter be
       issued or delivered in this State by any
       corporation, or other insurer, authorized to do
       business in this State, unless there shall be
       contained within such policy a provision that the
       insolvency or bankruptcy of the person insured
       shall not release the insurance carrier from the
       payment of damages for injury sustained or loss
       occasioned during the life of such policy . . . .

40 P.S. § 117. However, the Act only applies if a judgment has
been obtained against an insured, and then only if execution is
returned unsatisfied because of the insured’s insolvency or
bankruptcy. That bridge has not yet been crossed. Even
assuming that Appellants’ claim that PMP is insolvent is
correct, PMP has not yet been adjudicated a bankrupt, and no
execution has been returned unsatisfied because of insolvency
or bankruptcy. Thus, even if we take Appellants’ claim of
inevitable bankruptcy at face value, Appellants would still not
qualify for protection under the Act.

       Appellants cite no controlling authority to support their
argument that plaintiffs who have asserted tort claims against
the insured can intervene as of right in an insurance coverage
declaratory judgment action between the insured and its insurer.
Instead, they cite Teague v. Bakker, 931 F.2d 259 (4th Cir.
1991). There, court did allow intervention as of right, but we
are not persuaded that Teague supports the same result here. In
Teague, a class of plaintiffs in a separate action moved to

                               13
intervene in a suit filed by the insurer of a religious
organization’s media operation against individuals within the
organization. Plaintiffs sought a declaration that it had no
obligation to pay for claims asserted against the individuals in
the separate action. The Court of Appeals for the Fourth
Circuit stated:

       the [proposed intervenors] stand to gain or lose
       by the direct legal operation of the district court’s
       judgment on [the insurer’s] complaint. After
       seeking a declaratory judgment that it is not liable
       under [the policy] with regard to the class action,
       [the insurer] cannot now be heard to claim that
       the [proposed intervenors] lack a sufficient
       interest to oppose such declaratory judgment.

Id. at 261. Accordingly, the court held that the proposed
intervenors’ legally protectable interest was sufficient to
warrant intervention as of right. Id.

       However, the result in Teague is inconsistent with our
analysis in Mountain Top. As we have already stressed, in
Mountain Top, we said that “the mere fact that a lawsuit may
impede a third party’s ability to recover in a separate suit
ordinarily does not give the third party a right to intervene.”
Mountain Top, 72 F.3d at 366.            Moreover, there were
additional facts supporting intervention in Teague which are not
present here. The proposed intervenors in Teague had already
obtained a judgment against the insured in the separate action.
 Therefore, Teague is not as helpful to Appellants as they would
have us believe.

                                14
        Appellants next argue that the district court erred by
finding that they were not entitled to intervene as of right
because their interest in the declaratory judgment action is
“contingent” upon (or a “mere expectancy” of) success in an
underlying suit, i.e., their tort claims against PMP. In so
holding, the district court relied on Liberty Mutual Ins. Co. v.
Pacific Indemnity Co., 76 F.R.D. 656 (W.D. Pa. 1977). There,
a plaintiff in an underlying personal injury action sought to
intervene in an insurance coverage declaratory judgment action.
 Koenig, the plaintiff, had been injured while diving into a
swimming pool manufactured by Muskin Corporation and sold
by W.T. Grant Company. He sued the manufacturer and the
purchaser in state court. Muskin was insured by Pacific
Indemnity, and had an excess liability policy with American
Home. Grant was insured by Liberty Mutual. Liberty Mutual
filed a declaratory judgment action in the district court to
determine whether Pacific Indemnity and American Home owed
a duty to defend and indemnify Grant for any judgment Koenig
might recover in his personal injury action.

       Koenig attempted to intervene in the declaratory
judgment action as of right, arguing that because the policies at
issue “vary significantly in coverage, a judicial determination of
the obligation, if any, of Pacific Indemnity and American Home
to indemnity [Grant] may affect the amount of money he may
eventually collect if he wins a judgment in the state court suit.”
76 F.R.D. at 658.          The district court rejected Koenig’s
argument. The court ruled that, since the contested issues of fact
had to be resolved before Koenig could recover a judgment,
“his interest in intervention is contingent and not direct and
consequently, not the kind of interest courts have required for

                               15
intervention under Rule 24(a).” Id. at 660; see also Id. at 658
(“[A]n interest contingent upon a favorable result in an
associated lawsuit is not an interest sufficient to require
intervention under Rule 24(a).”).

       Appellants contend that the district court erred by relying
on Pacific Indemnity because Liberty Mutual has been
indemnifying PMP for the asbestos-related injuries of thousands
of personal injury plaintiffs for years. Therefore, Appellants
argue that the their “ability to recover a judgment against the
insolvent PMP through Liberty Mutual insurance funds can
hardly be considered ‘contingent’ or a ‘mere expectancy.’”
Appellants Br. at 21. However, Appellants are putting the
proverbial cart before the proverbial horse. Obviously,
Appellants who have neither settled their claims against PMP
nor obtained a judgment, still must prove the merits of their
cases and establish causation.5 The fact that Liberty Mutual has
been indemnifying PMP for years does not make Appellants’
claimed interest in the UEL policies significantly less
contingent upon their success in their underlying personal injury
actions.

       Appellants also criticize the district court’s reliance on

       5
        Appellants admit that four of their members have settled
with PMP and have been paid by Liberty Mutual.
Consequently, there is no longer a live case or controversy as to
those Appellants. At a minimum, therefore, the motion to
intervene appears to be moot as to them.

                               16
Pacific Indemnity because there, unlike here, the dispute
involved two insurers arguing about which one had to
indemnify and defend a defendant. However, that is a
distinction without a difference. The intervention in Pacific
Indemnity was expressly based upon Koenig’s claim that a
determination of the insurer’s obligation could affect the
amount of money he might collect from his personal injury suit.
That is precisely what Appellants argue to support their attempt
to intervene as of right.

        Moreover, the holding in Pacific Indemnity is thoroughly
consistent with the general principle announced in Mountain
Top that “a mere economic interest in the outcome of litigation
is insufficient to support a motion to intervene. Thus, the mere
fact that a lawsuit may impede a third party’s ability to recover
in a separate suit ordinarily does not give the third party a right
to intervene.” 72 F.3d at 366. In fact, in Mountain Top, we
commented that the district court’s denial of the Seipels’ motion
to intervene as of right would have been correct if the Seipels’
“only interest in the present case was to ensure that MTCA
would have sufficient resources to satisfy any judgment they
may be able to obtain in the territorial court.” Id. That is
precisely the situation here.

        Appellants also claim that the district court erred in
denying their motion to intervene as of right because the ruling
ignored our decision in Kleissler v. United States Forest
Service, 157 F.3d 964 (3d Cir. 1998). They claim that we there
criticized prior caselaw holding that contingent or expectant
interests are inadequate for intervention as of right.        In
Kleissler, lumber companies and others sought to intervene in

                                17
a suit brought by environmentalists against the Forest Service.
The “intervenors” argued that the Forest Service violated the
National Environmental Policy Act (“NEPA”) by approving
two projects that permitted substantial tree cutting in the
Allegheny National Forest. They sought an injunction to halt
all logging activity and suspend or cancel contracts for logging
in the forest.

       The district court held that only those lumber companies
with existing contracts under the new projects had a sufficient
interest to support intervention. We reversed. We held that even
the timber companies that had not yet received contracts under
the challenged plan had a sufficient interest to intervene as of
right. We based that decision on those companies’ longstanding
reliance on contractual relations with the Forest Service and
their “considerable stake” in ensuring that the new projects
remain in place. 157 F.3d at 973.

       Appellants take their cue from the timber companies that
did not have contracts and claim a “considerable stake” in
ensuring that the UEL policies remain in place so that they can
be compensated for their asbestos-related injuries. They thus
rely upon the Kleissler rationale in arguing that they have an
interest sufficient to warrant intervention as of right.

       However, Kleissler is not an insurance case, and it
certainly could not overrule Mountain Top.6 We agree with

       6
        Absent circumstances not present here, a panel of this
court has no authority to overturn a published decision of a prior

                               18
Liberty Mutual’s contention that Kleissler “stands only for the
proposition that a Court should not apply a mechanical
approach when evaluating the relevant interests for
intervention, but instead should examine the facts to determine
whether the suit would directly alter contractual or other legally
protectable rights of the proposed intervenors.” Liberty
Mutual’s Br. at 26.

       Moreover, Appellants are not in the same position as the
timber companies in Kleissler. The latter had a history of
contractual relations with the Forest Service and an interest in
seeing that new projects remained in place. Here, however,
Appellants have no contractual relationship with either Liberty
Mutual or PMP, and the declaratory judgment action between
Liberty Mutual and PMP will not have an immediate, adverse
effect on them. Rather, the impact is collateral and (given the
dispute about PMP’s solvency) speculative. At most, the
declaratory judgment action may impact their ability to collect
any judgment obtained in their personal injury actions.
However, that is not enough to support intervention of right
under Mountain Top.

       Appellants further argue that they should be permitted to
intervene as of right because PMP is insolvent and lacks
sufficient funds to either satisfy judgments or to adequately
defend their interests. They claim that in a letter to their
counsel, dated July 21, 2003, PMP’s counsel advised that PMP

panel of the court. See Reich v. D. M. Sabia Co., 90 F.3d 854,
858 (3d Cir. 1996).

                               19
is “no longer in business and [has] no material assets other than
the insurance policies issued by Liberty Mutual covering
Asbestos Claims.” Therefore, argue Appellants, if their
asbestos claims are not covered by the UEL policies, PMP will
be unable to satisfy any judgments whatsoever. According to
them, if they are not allowed to intervene and Liberty Mutual
“escapes its defense and indemnification obligations under the
policies, the intervenors will have no adequate remedy in their
underlying action.” Appellants’ Br. at 26. In addition,
Appellants claim that because PMP is insolvent, it does not
have sufficient funds to adequately defend the declaratory
judgment action and thereby adequately represent their interests.
In Appellants’ view, this counsels in favor of intervention.

        These arguments are based in part on New Hampshire
Ins. Co. v. Greaves, 110 F.R.D. 549 (D.R.I.1986). There, a boat
operated by Greaves collided with another boat. Two people
in the other boat were injured, and one later died from her
injuries. The injured passengers brought a personal injury
action against Greaves in state court. Shortly before that suit
was brought in state court, New Hampshire Insurance Company
filed a declaratory judgment action in district court to determine
the validity of a $300,000 liability policy it had issued to
Greaves. The insurer alleged that the policy should be
rescinded because of alleged misrepresentations by Greaves. It
was undisputed that, absent the liability policy, Greaves had
insufficient assets to either satisfy a judgment or adequately
defend the insurer’s declaratory judgment action, and the
personal injury plaintiffs therefore sought to intervene as a
matter of right. The district court granted intervention because
Greaves did not have sufficient assets to satisfy a judgment or

                               20
adequately defend the declaratory judgment action.

        As we noted above, Liberty Mutual disputes whether
PMP is insolvent. Liberty Mutual contends that Appellants’
claim of PMP’s insolvency is baseless. Liberty Mutual points
to the fact that PMP hired counsel, answered the complaint and
asserted a counterclaim, filed a summary judgment motion and
otherwise appropriately and aggressively litigated the
declaratory judgment action. PMP filed objections to the R&R,
and has appealed the district court’s adoption of the R&R. See
n.3, supra. We agree that PMP’s active participation in the
declaratory judgment action undermines the claim that PMP is
insolvent and unable to defend itself against potential lawsuits.

        Appellants final argument in this portion of their appeal
is that the district court erred in failing to recognize that their
interests could be impaired by stare decisis and that this
possibility creates a legally sufficient interest to warrant
intervention as of right. They cite Brody v. Spang, 957 F.3d
1108 (3d Cir. 1992), where we wrote, in relevant part, as
follows:

       Once an applicant for intervention has established
       that he or she possesses a sufficient legal interest
       in the underlying dispute, the applicant must also
       show that this claim is in jeopardy in the lawsuit.
       Under this element of the test, the [proposed
       intervenors] must demonstrate that their legal
       interests may be affected or impaired, as a
       practical matter by the disposition of the action. In
       making this determination, we are required to

                                21
       assess the practical consequences of the litigation,
       and may consider any significant legal effect on
       the applicant's interest.

       It is not sufficient that the claim be incidentally
       affected; rather, there must be a tangible threat to
       the applicant's legal interest. Yet, this factor may
       be satisfied if, for example, a determination of the
       action in the applicants' absence will have a
       significant stare decisis effect on their claims, or
       if the applicants' rights may be affected by a
       proposed remedy.

Id. at 1122-23 (emphasis added). Appellants argue that if
intervention is not allowed and if Liberty Mutual is found to
have no duty to defend or indemnify PMP, they will sue Liberty
Mutual under the Pennsylvania Insurance Insolvency Act, 40
P.S. § 117. Appellants surmise that in that suit under the Act,
Liberty Mutual will raise, as stare decisis, the holding of the
district court in the declaratory judgment action that the UEL
policies have been exhausted. Therefore, they argue that if they
are not permitted to intervene, there is a strong possibility that
their claims against Liberty Mutual in a suit under the Act will
be impaired or even eliminated through stare decisis.
        This argument fails to recognize that the “interest
element” and the “impairment element” are separate and distinct
aspects of our intervention as of right inquiry. See Kleissler,
157 F.3d at 969. We examine the impairment element only
after the applicant for intervention as of right has shown a
protectable legal interest. Brody, 957 F.2d at 1122 (“Once an
applicant for intervention has established that he or she

                               22
possesses a sufficient legal interest in the underlying dispute, the
applicant must also show that this claim is in jeopardy in the
lawsuit.”). However, as we explained above, Appellants have
not established a sufficient interest to intervene as of right.
Therefore, we do not proceed to the impairment inquiry.

  B. Permissive Intervention Under Fed.R.Civ.P. 24(b).

       Rule 24 provides in relevant part:

       (b) Permissive intervention. Upon timely
       application anyone may be permitted to intervene
       in an action: . . . (2) when an applicant’s claim or
       defense and the main action have a question of
       law or fact in common.

Fed.R.Civ.P. 24(b)(2). The district court did not believe there
were common questions of law or fact between Appellants’
personal injury actions against PMP and the declaratory
judgment action between Liberty Mutual and PMP. We agree.
In fact, the argument to the contrary is so facially dubious that
discussion of that position is hardly warranted. Moreover, our
review of the denial of a motion for permissive intervention is
less stringent than the standard for reviewing a denial of a
motion for intervention. Brody, 957 F.2d at 1115. “We are
more reluctant to intrude into the highly discretionary decision
of whether to grant permissive intervention.” Id. In fact, one
court of appeals has noted that a denial of a motion for
permissive intervention “has virtually never been reversed.”
Catanzano by Cantanzano v. Wing, 103 F.3d 223, 234 (2d Cir.

                                23
1996).7

       Nevertheless, Appellants claim that their personal injury
actions against PMP have a common issue of law and fact with
PMP in the declaratory judgment action, i.e., they and PMP “all
seek a determination of whether an asbestos claimant in a suit
against PMP may recover on that claim, through the Liberty
Mutual Policies.” Appellants’ Br. at 30. We disagree.

       As noted above, this argument warrants little discussion
or analysis. The declaratory judgment action turns on the
interpretation of the contracts of insurance between PMP and
Liberty Mutual. It has nothing to do with whether PMP caused
asbestos-related bodily injuries to Appellants or anyone else.
Similarly, the personal injury suits against PMP have nothing
to do with interpreting PMP’s insurance policies with Liberty
Mutual. Where a proposed intervenor has only a contingent
financial interest in a declaratory judgment action to establish
insurance coverage, he/she can not accurately claim that there
are common questions of law or fact between the coverage
dispute and actions to determine liability for injuries PMP may
have caused. See Pacific Indemnity, 76 F.R.D. at 660.

       C. Appellants Are Not Indispensable Parties
           Under State Law or Fed.R.Civ.P. 19.

       7
        Our citation to this comment does not mean that we
vouch for its statistical accuracy. Rather, we have included this
quotation from Wing in order to emphasize the formidable
nature of Appellants’ burden under Rule 24(b).

                               24
       Appellants also claim that the district court did not give
sufficient consideration to their contention that state law
governs their intervention or that they are entitled to intervene
under Fed.R.Civ.P. 19.

           (1). The Erie Doctrine and State Law.

       In Vale Chem. Co. v. Hartford Accident and Indemn.
Co., 516 A.2d 684 (Pa. 1986), the Pennsylvania Supreme Court,
interpreting the Pennsylvania Declaratory Judgment Act, 42
P.S. § 7540(a), held that where claims are asserted against an
insured, those asserting the claims are indispensable parties in
a declaratory judgment action to determine coverage between
the insured and the insurer. Because third-party claimants had
not been joined as indispensable parties, the Pennsylvania
Supreme Court found that the district court lacked subject
matter jurisdiction over the declaratory judgment action.

       Appellants appear to suggest that Erie R. Co. v.
Tompkins, 304 U.S. 64 (1938), required the district court to
apply the interpretation of the Pennsylvania Declaratory
Judgment Act established in Vale in deciding their right to
intervene under Rule 24(a). They also claim that under Erie
and Vale, they have a sufficient interest to intervene as a matter
of right. Otherwise, they argue, we would create the
implausible situation where their interests would be sufficient
for them to be considered indispensable parties if Liberty
Mutual had instituted a declaratory judgment action in
Pennsylvania state court, but that these same interests would not
suffice for intervention in a federal court declaratory judgment
action. Not surprisingly, they offer no authority for their claim.

                               25
       Under Erie, “federal courts sitting in diversity apply state
substantive law and federal procedural law.” Gasperini v.
Center for Humanities, Inc., 518 U.S. 415, 427 (1996).
Admittedly, “[c]lassification of a law as ‘substantive’ or
‘procedural’ for Erie purposes is sometimes a challenging
endeavor.” Id.

       Guaranty Trust Co. v. York, 326 U.S. 99 (1945),
       an early interpretation of Erie, propounded an
       "outcome-determination" test: "[D]oes it
       significantly affect the result of a litigation for a
       federal court to disregard a law of a State that
       would be controlling in an action upon the same
       claim by the same parties in a State court?" 326
       U.S., at 109. Ordering application of a state
       statute of limitations to an equity proceeding in
       federal court, the Court said in GuarantyTrust:
       "[W]here a federal court is exercising jurisdiction
       solely because of the diversity of citizenship of
       the parties, the outcome of the litigation in the
       federal court should be substantially the same, so
       far as legal rules determine the outcome of a
       litigation, as it would be if tried in a State court."
       Ibid.; see also Ragan v. Merchants Transfer &
       Warehouse Co., 337 U.S. 530, 533 (1949) (when
       local law that creates the cause of action qualifies
       it, "federal court must follow suit," for "a different
       measure of the cause of action in one court than in
       the other [would transgress] the principle of Erie
       "). A later pathmarking case, qualifying Guaranty
       Trust, explained that the "outcome-determination"

                                26
      test must not be applied mechanically to sweep in
      all manner of variations; instead, its application
      must be guided by "the twin aims of the Erie rule:
      discouragement of forum-shopping and avoidance
      of inequitable administration of the laws." Hanna
      v. Plumer, 380 U.S. 460, 468 (1965).

Gasperini, 518 U.S. at 427-28.

      Appellants suggest that, under an               “outcome
determinative” analysis, if Vale is not applied,

      the present situation is likely to cause both unfair
      discrimination against in-state insurance
      companies and to encourage out of state
      insurance companies to choose federal court.
      Indeed, if [Appellants] are not permitted to
      intervene, Liberty Mutual will have been
      permitted to engage in blatant forum shopping.
      Specifically, such a decision will allow Liberty
      Mutual (and other out of state insurance
      companies) to escape litigation against tort
      claimants by filing similar declaratory judgment
      actions in federal court rather than complying
      with Vale requirements in state court. Liberty
      Mutual will gain an unfair advantage in its ability
      to elude tort victims’ claims – an advantage not
      available to resident insurance companies who
      are unable to sue in federal court through
      diversity jurisdiction. Such a result is obviously
      inequitable.

                              27
Appellants’ Br. at 37-38.

        The argument can best be described as a “stretch.”
Liberty Mutual is not engaging in forum shopping. It is entitled
to seek a federal forum based on our jurisdiction. Moreover,
the Erie “outcome-determination” test requires that the
substantive law that would be applied in state court be applied
in a federal court exercising diversity jurisdiction. Vale did not
announce substantive principles of law for Pennsylvania courts
to apply in insurance coverage disputes. Rather, Vale addressed
procedural and jurisdictional issues. Vale stands for the
proposition that an injured claimant is an indispensable party in
a suit to determine insurance coverage under Pennsylvania’s
Declaratory Judgment Act. Without the joinder of the
indispensable party, the state court lacks subject matter
jurisdiction over the declaratory judgment action. However,
since Vale is a procedural and jurisdictional ruling, Erie does
not require the district court to apply Pennsylvania law to
resolve Appellants’ motion to intervene under Fed.R.Civ.P.
24(a).

                 (2). Rule 19 and Rule 24.
      Rule 19, titled “Joinder of Persons Needed for a Just
Adjudication,” provides in relevant part:

       (a). Persons to be Joined if Feasible. A person
       who is subject to service of process and whose
       joinder will not deprive the court of jurisdiction
       over the subject matter of the action shall be
       joined as a party in the action if . . . (2) the person
       claims an interest relating to the subject of the

                                 28
       action and is so situated that the disposition of
       the action in the person’s absence may (I) as a
       practical matter impair or impede the person’s
       ability to protect that interest . . . .

Fed.R.Civ.P. 19(a)(2)(I).     Appellants argue that they are
necessary parties under Fed.R.Civ.P. 19(a)(2)(I), and are
therefore entitled to intervene as of right under Fed.R.Civ.P.
24(a)(2). Admittedly, the advisory committee’s notes to the
1996 amendments to Rule 24 state that if a person should be
joined under Rule 19, he/she should also be entitled to
intervene under Rule 24. The note explains:

       Intervention of right is here seen to be a kind of
       counterpoint to Rule 19(a)(2)(I) on joinder of
       persons needed for a just adjudication: where,
       upon motion of a party in an action, as absentee
       should be joined so that he may protect his
       interest which as a practical matter may be
       substantially impaired by the disposition of the
       action, he ought to have a right to intervene in the
       action on his own motion.

(citing Louisell & Hazard, Pleading and Procedure: State and
Federal 749-50 (1962).        There is, however, a difference
between Rule 19 and Rule 24. Although both Rules speak of
the applicant’s ability to protect an interest, Rule 24 contains an
additional element, i.e., the adequacy of representation. Rule
24(a)(2) provides: “Upon timely application anyone shall be
permitted to intervene in an action . . . when . . . the applicant is
so situated that the disposition of the action may as a practical

                                 29
matter impair or impede the applicant’s ability to protect that
interest, unless the applicant’s interest is adequately
represented by existing parties.” (Emphasis added). Rule 19
does not invite inquiry into the adequacy of representation. It
is therefore illogical to conclude that a party who meets the
joinder requirements of Rule 19(a)(2)(I) automatically qualifies
to intervene as of right under Rule 24(a)(2). That interpretation
would read the “adequacy of representation” requirement out of
Rule 24(a)(2) by creating a backdoor into the litigation through
the less restrictive inquiry of Rule 19(a)(2)(I).

        Furthermore, even assuming arguendo that a necessary
party under Rule 19(a)(2)(I) can intervene as of right under
Rule 24(a)(2), Appellants cannot qualify as necessary parties
under Rule 19(a)(2)(I) because their interest does not “relate[]
to the subject of the action.” “Under Fed.R.Civ.P. 19(a)(2), a
party is only ‘necessary’ if it has a legally protected interest, and
not merely a financial interest, in the action.” Spring-Ford Area
School District v. Genesis Ins. Co., 158 F.Supp.2d 476, 483
(E.D. Pa. 2001) (citations omitted); see also Special Jet
Services, Inc. v. Federal Ins. Co., 83 F.R.D. 596, 599 (W.D.
Pa. 1979) (“The ‘interest’ relating to the subject matter of the
action that makes an absent party a party needed for just
adjudication must be a legally protected interest, not merely a
financial interest or interest of convenience.”) (quoting 3A,
Moore’s Federal Practice ¶ 19.07-1(2). As we explained
earlier, Appellants do not have a legally protectable interest in
the Liberty Mutual UEL policies.

                      IV. CONCLUSION

                                 30
         For all of the above reasons, we will affirm the district
court.

                                31