Court Opinion

ID: 8974160
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:49:28.558707+00
Date Added: 2024-06-11T17:10:31.282028
License: Public Domain

NYGAARD, Circuit Judge,
dissenting.
I respectfully dissent from the majority’s holding that the stay order is an appealable final order, at least with respect to Terra Nova’s duty to defend. In my view, the order fails to satisfy the first prong of the Cohen test; namely that the order conclusively determine the disputed question. I do not believe that the stay order moots the duty to defend the underlying state court action. No matter what the outcome is in *1229state court, the district court will have to decide whether Terra Nova had a duty to defend.
The stay at issue is sufficiently distinguishable from that found in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Moses H. Cone dealt with the appealability of a stay pursuant to the doctrine of Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). In Colorado River, the Supreme Court held that in “exceptional circumstances”, a district court may stay an action solely because of the pendency of similar litigation in state court. However, the stay of the question of whether Terra Nova has a duty to defend is not the equivalent of a stay issued pursuant to Colorado River. The relief sought in the declaratory judgment action, i.e. a declaration that Terra Nova does not have a duty to defend 900 Bar, has no relationship at all to the verdict on the state court claims. Pennsylvania law clearly states that the duty to defend the insured is an obligation separate and apart from the insurer’s duty to provide coverage. See Erie Ins. Exch. v. Trans-america Ins., 516 Pa. 574, 533 A.2d 1363, 1368 (1987). The duty to defend arises “ ‘whenever the complaint filed by the injured party may potentially come within the coverage of the policy.’ ” Erie Ins. Exchange v. Transamerica Ins., 533 A.2d at 1368 (quoting Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 188 A.2d 320 (1963) (emphasis in original)). Thus, the ultimate outcome of the state court action has no bearing on whether Terra Nova has a duty to defend.
With this in mind, I believe that Moses H. Cone is limited to situations involving a stay issued pursuant to the Colorado River doctrine. See Schall v. Joyce, 885 F.2d 101, 104-05 (3d Cir.1989) (“Moses H. Cone thus stands for the proposition that a non-tentative, final decision to stay federal litigation ‘under Colorado River, abstention, or a closely similar doctrine’ is immediately appealable under section 1291 where ‘the object of the stay is to require all or an essential part of the federal suit to be litigated in a state forum.’ ”) (quoting Moses H. Cone, 460 U.S. at 10 n. 11, 103 S.Ct. at 934 n. 11). A Colorado River stay “ ‘necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case’ because a district court may enter such an order only if it has full confidence that the parallel state proceeding will ‘be an adequate vehicle for the complete and prompt resolution of the issues between the parties.”' Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 108 S.Ct. 1133, 1137, 99 L.Ed.2d 296 (1988) (quoting Moses H. Cone, 460 U.S. at 28, 103 S.Ct. at 943). Because the duty to defend is separate from the duty to provide coverage, the concerns expressed in Moses H. Cone are not involved in the instant case, since the stay order “cannot be expected to settle the matter for all time.” Gulfstream Aerospace Corp., 108 S.Ct. at 1137. Thus, the stay does not conclusively determine the disputed question of whether Terra Nova has a duty to defend.1

. Since I believe that the holding in Moses H. Cone is limited to stays issued pursuant to Colorado River, it is also questionable whether the stay order satisfies the third prong of the Cohen test: whether the order is "effectively unreviewable” on appeal from a final judgment. Moses H. Cone held that a Colorado River stay satisfied the third part of the Cohen test because once the state court had decided the issues in litigation, the federal court must give that determination res judicata effect. Moses H. Cone, 460 U.S. at 12, 103 S.Ct. at 935. As I have already noted, under Pennsylvania law the issue of whether Terra Nova has a duty to defend is not dependent on the ultimate outcome of the pending state court action. Furthermore, I believe that the fact that Terra Nova entered an appearance on behalf of 900 Bar under a reservation of rights does not preclude Terra Nova from recovering the cost of providing a defense at the conclusion of the state court proceedings.