National American Ins. Co. v. Scor Reinsurance Co.

• Decision Date: 05 April 2004
• Docket Number: No. 03-6079.,03-6079.
• Parties: NATIONAL AMERICAN INSURANCE COMPANY, Plaintiff-Appellee, v. SCOR REINSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

362 F.3d 1288

NATIONAL AMERICAN INSURANCE COMPANY, Plaintiff-Appellee, v. SCOR REINSURANCE COMPANY, Defendant-Appellant.

No. 03-6079.

United States Court of Appeals, Tenth Circuit.

April 5, 2004.

Susan A. Stone, Sidley Austin, Brown & Wood, Chicago, IL (Joshua G. Urquhart of Sidley, Austin, Brown & Wood, Chicago, IL; Larry Derryberry, Stephen G. Solomon, and George W. Velotta II of Derryberry, Quigley, Solomon & Naifeh, Oklahoma City, OK, with her on the briefs).

R. Patrick Gilmore, Chandler, OK (Clinton D. Russell, Stratton Taylor, and Mark H. Ramsey, Claremore, OK, with him on the brief).

Before TACHA, Chief Circuit Judge, McKAY and TYMKOVICH, Circuit Judges.

McKAY, Circuit Judge.

This appeal involves a dispute between two insurance companies regarding the scope of an arbitration clause. Appellee National American Insurance Company ("NAICO") filed a complaint alleging that Appellant SCOR Reinsurance Company ("SCOR") is liable for losses on two surety bonds, which the parties refer to as the "Geismar" and "Chalmette" bonds (collectively the "Bonds"). Aplt.App., Tab No. 1, at 2. SCOR filed a motion to dismiss and to compel arbitration on the ground that NAICO's allegations fall within the scope of an arbitration clause contained in a reinsurance agreement in which SCOR agreed to reinsure NAICO's surety bond program (the "Treaty"). Id., Tab No. 13, at 1-9. The district court denied SCOR's motion "because Plaintiff's claims are predicated on SCOR's independent commitment to serve as co-surety on the Geismar and Chalmette Bonds, independent of the treaty or treaties (which contains an arbitration clause) and thus are not within the scope of the agreement to arbitrate." Id., Tab No. 25, at 1. SCOR appeals this order.

Background

NAICO is an insurance company licensed to write surety bonds, and SCOR is an insurance company which primarily writes reinsurance. SCOR incurred two legal obligations relevant to this appeal. SCOR's first obligation is memorialized in the Treaty, a reinsurance agreement which covered the Bonds. The Treaty is effective April 1, 1999, and was signed by SCOR on November 2, 1999. Aplt.App., Tab No. 21, Ex. B, at 11. The Treaty contains the following arbitration clause: "Any irreconcilable dispute between the parties to this Agreement will be arbitrated in Chandler, Oklahoma in accordance with the attached Arbitration Clause No. 22-01.1." Id. at Article 20.

SCOR's second obligation is to act as co-surety for the Bonds. This obligation is memorialized in a Hold Harmless and Indemnity Agreement, which was entered into on August 24, 1999. Aplt.App., Tab No. 21, Ex. A at 2. In this Agreement, SCOR "agree[d] to act as a co-surety with NAICO on [the Bonds]." Id. at 1. This obligation was undertaken "as an accommodation to NAICO in specific instances in which the bond obligees' requirements necessitate a Best's Rating higher than NAICO's and/or a treasury underwriting limitation greater than NAICO's...." Id. In consideration for SCOR's obligation to act as co-surety, NAICO agreed to hold SCOR harmless and to indemnify SCOR from any losses relating to the Bonds. Id. On December 4, 2000, a Termination Endorsement was executed in which the parties agreed that SCOR had no liability for losses discovered after April 1, 2000. Id. Ex. E, at 1. In the Termination Endorsement, the parties agreed that "ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED." Id.

On September 20, 2002, NAICO filed its complaint, alleging that SCOR is liable for losses relating to the Bonds. Aplt.App., Tab No. 1. NAICO argues that because its allegations relate to SCOR's co-surety obligation under the Hold Harmless Agreement, not its reinsurance obligation under the Treaty, it is not required to arbitrate. SCOR argues that the two obligations are part of a single transaction and that the Treaty's arbitration provision encompasses the co-surety obligation under the Hold Harmless Agreement.

Discussion

We review a district court's denial of a motion to compel arbitration de novo. Spahr v. Secco, 330 F.3d 1266, 1269 (10th Cir.2003); Avedon Eng'g Inc. v. Seatex, 126 F.3d 1279, 1283 (10th Cir.1997). The Supreme Court has "long recognized and enforced a `liberal federal policy favoring arbitration agreements.'" Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Under this policy, the "`doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.'" Spahr, 330 F.3d at 1269-70 (quoting Moses, 460 U.S. at 24-25, 103 S.Ct. 927). However, "a court may compel arbitration of a particular dispute ... only when satisfied that the `making' of the agreement to arbitrate is not at issue." Id. at 1270.

In this case, NAICO does not dispute that it made a valid and enforceable agreement to arbitrate any disputes arising out of the Treaty. NAICO also does not dispute that the Treaty containing the arbitration clause was effective about five months before the Hold Harmless Agreement. Instead, NAICO argues that the Treaty's arbitration clause is not invoked because its "claims are independent of the Treaty" and arise solely out of SCOR's co-surety obligation found in the Hold Harmless Agreement. Aple. Br. at 6.

Since the parties agree that an agreement to arbitrate disputes exists between them, we first look to the scope of that agreement and then determine whether NAICO's claims fall within its scope. The Treaty's arbitration clause is broad. It requires that "[a]ny irreconcilable dispute between the parties to this Agreement," including SCOR and NAICO, be arbitrated. Aplt.App. Tab No. 21, Ex. B at Article 20. It then provides that the arbitration will be done "in accordance with the attached Arbitration Clause No. 22-01.1," (the "Attached Clause").

NAICO argues that the first sentence of the Attached Clause limits the scope of arbitrable issues by stating that "[a]s a condition precedent to any right of action hereunder, any irreconcilable dispute between the parties to this Agreement" will be arbitrated. Id. at Arbitration Clause 22-01.1. NAICO argues that the word "hereunder" means that only issues arising out of the Treaty are subject to arbitration. We disagree. The Treaty requires that "any irreconcilable dispute" be arbitrated, without any limiting language. The Attached Clause is a procedural clause that addresses how the arbitration takes place, not the scope of arbitrable issues. This is evident from the nature of the Attached Clause, which provides details such as how to initiate arbitration, who may be a member of the board of arbitration, how arbitrators are appointed, when briefs are due, and other purely procedural issues. We agree with the Second Circuit, who reviewed a similar clause and held that "by its terms, the prefatory clause does not limit the scope of the arbitration clause but rather establishes a limitation on when a judicial action may be brought under the Agreement." ACE Capital Re Overseas Ltd. v. Central United Life Ins. Co., 307 F.3d 24, 31 (2d Cir.2002). The Attached Clause here is a procedural clause that addresses how issues are arbitrated and when judicial action may be brought under the Treaty, but it does not manifest an intent to limit the scope of the parties' broad agreement to arbitrate "any irreconcilable dispute."

Even if the Attached Clause was an attempt to limit the scope of issues subject to arbitration, NAICO could at best argue that...