AstenJohnson Inc v. Columbia Cslty Co

Opinions of the United
2009 Decisions 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Precedential or Non-Precedential: Precedential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.
 (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

2
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

3
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 third-
party liability policy for this period, which provided
occurrence/aggregate limits of $10,000,000 (“1981 Columbia
Excess Policy”).

4
 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

5
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

6
 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

7
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

8
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?

9
 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.

10
 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.

11
 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

12
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

13
 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,

14
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

15
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

16
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,1 and no such evidence was
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

1
See, e.g., Flintkote Co. v. Gen. Accident Assurance Co. of
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).
2
The parties have not briefed, and we express no opinion
with respect to, what, if any, effect this ruling has on Asten’s

17
 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.3 The controlling law is set forth in our opinion in

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.
3
Asten’s briefing before us expressly and unambiguously
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, post-
argument 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
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

that course. See, e.g., Baker v. Corcoran, 220 F.3d 276, 295,
n.16 (4th Cir. 2000).

19
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
***

20
 3
See, e.g., James v. Pennsylvania General Ins.
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

21
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

22
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

23
 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

4
Appellees’ quia timet argument relies primarily on Aetna
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
 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

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.

5
Columbia and American understandably do not argue that
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
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

6
Asten does not contest the District Court’s application of the
doctrine of laches to its “coverage suit against Columbia.”

26
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

27
 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).7 This is undeniably true. Columbia fails
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

7
Columbia also argues that J.H. France was not decided until
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
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

8
American, like Columbia, was not joined in Asten’s 1980
coverage litigation.

29
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

30
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.

***

31
 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

32
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:

9
We reach a different conclusion with respect to Asten’s
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
 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.

34
 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,

35
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.

36