Notification of a claim or commencement of a suit requiresconsidering what must be done, now. But too much focus on thepresent without considering a claim's entire potential lifespan isshortsighted. The possibility of an appeal should influence aninsurer's decisions at each step of a claim. Defense counsel inmost jurisdictions represent the insured, not the insurer. Thismeans that, at most, a claims person can influence strategy anddecisions. There are a number of considerations for claim handlerswhere an insurer has a duty to defend or is defending under areservation of rights.

Selection of counsel and venue

Two primary considerations are selection ofcounsel suitable for a claim and venue. Counselwith significant state court experience is not necessarily a goodchoice for a federal action, and vice versa. For example, a lawyerwith limited federal court experience might not properly preserveissues for appeal in federal court because of a discrepancy betweenstate and federal rules of evidence. Selection of suitable counselrequires considering experience relevant to the claim. In addition,many law firms have appellate specialists who can assist trialcounsel with motion practice in district court, and handle a caseon appeal. Select the lawyer and law firm you want to handle thecase at the district court and appellate levels.

An insurer should also consider which court it prefers to be in.If a claimant commences a state court action, consider removal tofederal court. This might be advantageous where the relevantfederal circuit court of appeal has favorably ruled on a state-lawissue, but the state Supreme Court or court of appeals has notruled on the issue. A state court is not bound by a federal courtdecision on state law, whereas a federal district court wouldlikely follow the federal appellate ruling, and the federal circuitcourt of appeal would likely follow its own guidance on a state-lawissue. Consult with defense counsel on the best venue for thecase.

District Court and potential grounds forappeal

The goal in district court should be to obtain a favorabledecision, but also to ensure that the matter is litigated in a waythat (1) in the event of a district court win, forecloses theadversary from having a basis to appeal, and (2) in the event ofdistrict court loss, preserves issues for appeal. There are variouspotential grounds for appeal and ways to preserve issues forappeal, including dispositive motions, motions inlimine,* jury instructions, and post-trial motions.

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Before counsel files a dispositive motion, the insurer shouldask if all relevant legal issues and arguments appropriate for themotion have been made. Appellate courts will generally consideronly those arguments made to and considered by the district court.And insurers want to ensure that motions are based on properapplication of the law in order to minimize the chances of reversalon appeal.

Evidentiary matters are more difficult to preserve for appeal.For instance, motions in limine can be used toexclude evidence at trial. To preserve an appeal regardingadmission of evidence, however, counsel should also object to theadmission of the evidence the first time it is introduced. Claimhandlers should discuss with counsel evidentiary issues and howthey will be addressed.

Other important areas for preserving issues for appeal andavoiding reversal on are jury instructions and special verdictforms, which should be accurate when submitted and reflect the lawin light of the issues and facts. One phrase in a jury instructionmight make the difference between a favorable or unfavorablejudgment. Even if a party prevails, it wants to ensure that thecourt used proper jury instructions to minimize the chances ofreversal on appeal. A lengthy trial can be undone with an improperword or phrase in jury instructions. Counsel should object if thecourt provides improper jury instructions or special verdictforms.

Counsel should also be diligent about preserving potentialgrounds for appeal after trial. This can be done through certainpost-trial motions after verdict, such as a motion for a newtrial.

Post-Judgment considerations

Duties regarding appeal. An insurer must alsoconsider its duties to an insured post-judgment and whether it isobligated to defend an insured on appeal or appeal on the insured'sbehalf. The general rule is that an insurer may not withdraw froman insured's defense until its duty to defend all arguably coveredclaims has been extinguished through final judgment, which extendsthrough the appellate process.

Conversely, an insurer is not necessarily obligated to appeal anadverse judgment on the insured's behalf. A duty to appeal dependson the policy language, but policies are often silent on whether aninsurer has a duty to appeal on the insured's behalf. The majorityrule is that absent policy language to the contrary, an insurer'sduty to defend includes a duty to appeal an adverse judgmentagainst the insured if there are reasonable grounds to believe thatthe insured's interest would be furthered by appeal.

Moreover, courts have held that the duty to defend “precludes aninsurer from interpleading its policy limits and walking away fromthe defense of its insured, at either the trial or appellatelevel.”

Under the reasonable-grounds test, an insurer must conduct anadequate investigation to determine if reasonable grounds exist foran appeal. When considering whether there are reasonable groundsfor appeal, the insurer should assess (1) objections and motions atthe district court level, (2) the district court's rulings, (3)jury instructions given, and (4) applicable law on appealableissues. The insurer should give great weight to defense counsel'sopinion when considering whether reasonable grounds exist.

Excess insurance policies generally follow form to underlyingpolicies and do not contain a duty to defend, with a possibleexception where underlying limits have been exhausted. Thus, anexcess insurer generally does not have a duty to appeal for aninsured. But in some states, it may bring a subrogation claimagainst a primary insurer where the primary insurer fails to appealand the excess insurer assumes the insured's defense.

Immediate post-judgment issues

Motions. Before pursuing an appeal, aninsurer should first consider whether there are grounds for a sortof appeal without filing an appeal. For instance, a party may movethe district court to amend a judgment. [Fed. R. Civ. P. 59(e)].Such a motion can be used to establish a manifest error of law, toaccount for a change in law, or to present newly discoveredevidence.

A party may also move for relief where there has been a clericalerror. [Fed. R. Civ. P. 60(a)]. Or a party may move for relief froma judgment based on (1) mistake, (2) newly discovered evidence, (3)misrepresentation by an opposing party, or (4) a void judgment,where the court lacks subject matter jurisdiction. [Fed. R. Civ. P.60(b)].

Stay of execution. If an adverse judgmentis entered against an insured, the prevailing party will want toexecute on the judgment to be paid right away with either theinsured's own assets or insurance limits. Insurers should be awarethat the time for which a prevailing party must wait beforeexecuting on the judgment depends on the jurisdiction. For example,in federal court there is an automatic 14-day stay during which aparty may not execute on the judgment. [Fed. R. Civ. P. 62(a)].State courts may differ.

Similarly, insurers must be cognizant that filing an appeal doesnot automatically stay execution on the judgment. Rather, courtsgenerally require an appellant to execute a supersedeas bond orprovide other security before granting a stay. Fed. R. Civ. P.62(d). The takeaway is that once an adverse judgment is entered, aninsurer must be prepared to respond quickly to defense counsel'srequests and protect the insured's assets by preventing executionon the judgment.

Appellate considerations

If there are no grounds for filing a post-judgment motion and,an insurer has a duty to appeal on its insured's behalf becausethere are reasonable grounds to believe that the insured's interestwould be furthered by appeal, then the question is the strategy forappeal.

Determine the issues. The primary focus onappeal is determining the appealable issues and properly framingthem. Claim handlers should discuss with defense counsel how tonarrow an appeal to only the most important issues in order toincrease the chances of success by not distracting the appellatecourt with weaker arguments.

Standard of review. The applicablestandard of review might influence which issues to appeal and howto frame them. A standard of review is the level of deference anappellate court affords the district court's ruling. Theprobability of success might depend on what standard applies.

De Novo. Rulings on questions of law aresubject to de novo review (Latin for “over again”). The appellatecourt will review, without deference, the district court'sinterpretation and application of the law. Such standard makes thechance of reversal greater than a deferentialstandard of review. A de novo standard applies where the districtcourt granted a motion to dismiss or a summary judgment motion.

Clearly erroneous. In contrast, a clearlyerroneous review is significantly deferential. Such standardapplies to a district court's findings of facts, which aredifficult to reverse. Under this standard, the appellate court mustaccept the district court's findings unless it is left with the“definite and firm conviction that a mistake has beencommitted.”

Chances of success. Besides consideringstandards of review to determine the likelihood of success, it ishelpful to consider statistics regarding success on appeal in orderto have realistic expectations and as an additional considerationfor potential settlement discussions. Reversal rates differdepending on the jurisdiction, but in general, it is far likelierthat the non-appealing party will prevail. For example, thereversal rate in 2012-2013 for civil cases in federal court was11.2 percent. (U.S. Courts, Administrative Office Table B-5)

Cost of appeal. Claim handlers should alsobe aware of an appeal's cost. Appeals are not cheap, particularlyif the insurer must post a supersedeas bond. Thus, claim handlersshould be aware of the amount of money required to stay executionon the judgment. In addition, a prevailing party may be entitled topost-judgment interest, which will be at a higher rate than what iscommercially reasonable and will accrue throughout the appeal.Claim handlers must also factor in attorney fees and costs forfiling documents, briefing, and oral argument. Attorney fees mightequal the trial defense cost.

Counsel. Another important considerationis whether to use trial counsel for the appeal. If liabilityexposure is high or bad precedent might be set, paying an appellatespecialist might be warranted if the district court lawyer lacksappellate experience. Appellate specialists are often used to writeappellate briefs. A hybrid approach is to use the lawyer from thedistrict court, but also pay an appellate lawyer to help formulatearguments and provide guidance on appellate proceduralrequirements. It might also be advisable to consult an appellatespecialist during motion practice in district court.

Additional considerations. Anotherconsideration is the desirability of the precedent that will becreated on appeal. An unfavorable state district court judgment hasno precedential value. Thus, if there are bad facts that couldcreate unfavorable precedent, the insurer might choose not toappeal, if it does not have to, or might seriously pursuesettlement. Moreover, if the insurer has the option of appealing,consider whether filing an appeal might favorably affect settlementdiscussions.

The appellate process

Requirements. Once the decision to appealis made, there are specific steps counsel must ensure are taken.Most important is to ensure that a notice of appealis timely filed. Courts require strictcompliance with the deadline for filing an appeal, which can beshort.

Appellate brief. The primary way partieson appeal make their arguments is through briefs. Each court hasits own formatting requirements, which counsel must follow.Formatting non-compliance reflects poorly on a party.

It is also necessary at the briefing stage to frame the issuesand prioritize them. Judges expect the most important issues tocome first, not last. And it is important to identify the correctstandard of review for each issue. If the standard of review isfavorable to you, counsel should emphasize it. Repeatedly.

Oral argument. Oral argument might beoptional. Consider whether counsel should request it. There mightbe nuances that paper cannot convey. But preparing and appearingfor oral argument is an investment of time and money; determine ifit is worth it.

The possibility of an appeal should influence each stage of aclaim. By keeping the appellate stage in mind, claim handlers canselect defense counsel suitable for the claim, confirm with counselthat a district court win is not erased on appeal, and on theflipside, increase the chances that a district court's error isreversed.

*In limine — A motion made at the start of a trialrequesting that certain evidence not be introduced intrial.