Zimmerman v. International Companies & Consulting, Inc., s. 95-30290

• Decision Date: 13 March 1997
• Docket Number: 95-30568,Nos. 95-30290,s. 95-30290
• Citation: 107 F.3d 344
• Parties: Herman Joseph ZIMMERMAN, Jr., Plaintiff-Appellee, v. INTERNATIONAL COMPANIES & CONSULTING, INC., Defendant-Appellee, v. SPHERE DRAKE INSURANCE GROUP, PLC., Defendant-Appellant. Frank MORALES, Plaintiff-Appellee, v. INT'L COMPANIES, INC., Defendant-Appellee, v. SPHERE DRAKE INSURANCE GROUP, PLC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 344

107 F.3d 344

1997 A.M.C. 1812

Herman Joseph ZIMMERMAN, Jr., Plaintiff-Appellee, v. INTERNATIONAL COMPANIES & CONSULTING, INC., Defendant-Appellee, v. SPHERE DRAKE INSURANCE GROUP, PLC., Defendant-Appellant.

Frank MORALES, Plaintiff-Appellee, v. INT'L COMPANIES, INC., Defendant-Appellee, v. SPHERE DRAKE INSURANCE GROUP, PLC., Defendant-Appellant.

Nos. 95-30290, 95-30568.

United States Court of Appeals, Fifth Circuit.

March 13, 1997.

Campbell E. Wallace, New Orleans, LA, for Herman Joseph Zimmerman, Jr., plaintiff-appellee.

Campbell E. Wallace, New Orleans, LA, Ralph E. Kraft, Preis & Kraft, Lafayette, LA, Frederick Douglas Gatz, Jr., Preis, Kraft & Roy, Lafayette, LA, for International Companies & Consulting, Inc.

John H. Clegg, Daniel L. Daboval, Douglas L. Grundmeyer, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, LA, for Sphere Drake Ins. Group P.L.C.

Lawrence S. Kullman, Lewis & Kullman, New Orleans, LA, for Louisiana Trial Lawyers Association, amicus curiae.

Appeal from the United States District Court for the Western District of Louisiana.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JONES, REYNALDO G. GARZA and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

In these cases consolidated for argument on appeal, the question is whether a protection and indemnity insurer's contractual right to have coverage disputes with its insured submitted to arbitration also entitles the insurer to a court order staying an injured worker's suit against the insurer under Louisiana's direct action statute during arbitration. In the Matter of Talbott Big Foot, Inc., 887 F.2d 611 (5th Cir.1989) answered this question in the negative. The answer is still "no".

In each of these cases, a worker suffered injury in an accident aboard his employer's vessel and filed a direct action for damages in a Louisiana federal court against the employer's protection and indemnity insurer, Sphere Drake Insurance Group, PLC ("Sphere Drake"). The policy that Sphere Drake issued to the employer, International Companies & Consulting, Inc. ("ICCI"), provided in its arbitration clause that any coverage dispute between insurer and insured was subject to arbitration in London according to English law. In each case, Sphere Drake denied coverage and moved the district court to stay the worker's direct action pending arbitration. The district court in each case denied the motion to stay, and Sphere Drake appealed from the decisions. We consolidated the appeals and now affirm both district court judgments.

I. Denial of Motion to Stay Arbitration

The district courts correctly followed the applicable Louisiana law as interpreted by In the Matter of Talbott Big Foot, Inc., 887 F.2d 611 (5th Cir.1989). In Big Foot this court recognized that when the Louisiana direct action statute, La. R.S. 22:655, is applicable and authorizes a direct suit against a tortfeasor's insurer, the statute is read into and becomes a part of the insurance policy by law, even though the policy does not contain the language required by the statute, or contains language prohibited by the statute. See also, Grubbs v. Gulf Int'l Marine, Inc., 625 So.2d 495, 498 (La.1993); Quinlan v. Liberty Bank & Trust Co., 575 So.2d 336, 352 (La.1990) (on reh'g), and authorities cited therein. Accordingly, as Big Foot noted, the Louisiana courts have held that terms and conditions of a policy that have the effect of defeating the purpose of the direct action statute, such as "no action" clauses, are annulled or superseded by the statute. Id., 887 F.2d at 613 (citing authorities). By the same token, this court in Big Foot held a policy clause that requires a personal injury claimant to await arbitration of a coverage dispute before litigating a suit against the insurer would have the same effect and must therefore meet the same fate of annulment or supersession. Id.

The district courts also correctly followed the steps of Big Foot in interpreting the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. ("FAA"), as not requiring arbitration for parties who have not contractually bound themselves to arbitrate their disputes. The FAA does not require arbitration unless the parties to a dispute have agreed to refer it to arbitration. Big Foot, 887 F.2d at 614 (citing AT & T Technologies v. Communications Workers, 475 U.S. 643, 647-648, 106 S.Ct. 1415, 1417-1418, 89 L.Ed.2d 648 (1986) and other cases). Likewise, the mandatory stay provision of the FAA does not apply to those who are not contractually bound by the arbitration agreement. Id. (citing Coastal (Bermuda) Ltd., v. E.W.Saybolt & Co., Inc., 761 F.2d 198, 203 n. 6 (5th Cir.1985); Nederlandse Erts-Tankersmaatschappij v. Isbrandtsen Co., Inc., 339 F.2d 440, 441 (2d Cir.1964)). Thus, the FAA, the source of the federal policy favoring arbitration, has no application to require direct action plaintiffs to arbitrate or to stay their lawsuits during arbitration. Big Foot, 887 F.2d at 614.

We are not persuaded by Sphere Drake's argument that direct action plaintiffs are deemed to have consented to be bound by the insurance policy's arbitration clause simply because courts have said that such plaintiffs are to be treated as if they were third party beneficiaries of the insurance contract having standing to sue the insurer on the contract. See Federal Deposit Insurance Corporation v. Duffy, 47 F.3d 146, 150 (5th Cir.1995); Shockley v. Sallows, 615 F.2d 233, 238 (5th Cir.1980). Independently of the analogy between the direct action plaintiff and a third party beneficiary, the direct action statute grants a personal injury claimant a right of direct action against the tortfeasor's insurer on the policy regardless of any provision in the policy forbidding an immediate direct action. LA.REV.STAT.ANN. § 22:655. Moreover, the statute does not require the direct action plaintiff to consent to or abide by any policy provision that would contravene the right of the injured party to bring a direct action as provided by the statute. See Big Foot, 887 F.2d at 613 (citing Ruiz v. Clancy, 182 La. 935, 162 So. 734 (1935); Rambin v. Southern Sales Co., Inc., 145 So. 46 (La.App.1932), and other Louisiana cases). Contrary to Sphere Drake's contention, Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1...