In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 03-3851 & 03-3853

ZURICH AMERICAN INSURANCE COMPANY,

Petitioner-Appellee/Cross-Appellant,

v.

WATTS INDUSTRIES, INC.,

Respondent-Appellant/Cross-Appellee,

and

JAMES JONES COMPANY,

Respondent/Cross-Appellee.

____________

Appeals from the United States District Court for

the Northern District of Illinois, Eastern Division.

No. 01 C 7673—Elaine E. Bucklo, Judge.

____________

ARGUED MAY 3, 2005—DECIDED AUGUST 2, 2005

____________

Before FLAUM, Chief Judge, and KANNE and SYKES,

Circuit Judges.

KANNE, Circuit Judge. Zurich American Insurance

Company insured Watts Industries, Inc., and James Jones

Company under a program consisting of both primary liability policies and deductible agreements. Only the deduct-
2 Nos. 03-3851 & 03-3853

ible agreements contained arbitration clauses. Watts and

Jones successfully sued Zurich in California state court for

defense costs in two lawsuits filed against them by other

parties. Thereafter, the parties contested application of the

deductible agreements, and Zurich petitioned the district

court to compel arbitration. The district court granted the

petition with respect to Watts, and denied it with respect to

Jones. Both Watts and Zurich appeal; for the reasons stated

herein, we affirm the order compelling arbitration as to

Watts and exempting Jones from arbitration. We remand to

the district court for clarification of precisely which deductible agreements give rise to an arbitrable dispute.

I. History

We begin with a brief introduction of the parties and a

recap of the long and tortured history of this case. Zurich is

an insurer incorporated under New York law, with its home

office in New York City and its main administrative office

in Schaumburg, Illinois. Watts is a manufacturer of valves

and other waterworks parts that are used in municipal

water systems. Watts is incorporated under Delaware law,

with its principal place of business in Massachusetts. Jones

is another manufacturer of valves used in public water

systems, with both its incorporation and principal place of

business in California. Jones was a wholly owned subsidiary of Watts from 1987 until it was sold in September

1996.

Zurich issued six primary liability insurance policies to

Watts, in effect for successive one-year periods between

June 30, 1991, and June 30, 1997. The policies provided

coverage for both Watts and its subsidiary, Jones. The insurance contracts do not contain arbitration clauses. Watts

entered into separate deductible agreements with Zurich
Nos. 03-3851 & 03-3853 3

1 Signed deductible agreements exist only for the 1991-92, 1992-

93, and 1996-97 policy periods, but the parties agree that written

deductible agreements were in effect for all six policy periods.

during these same six years.1 Each deductible agreement

contains a broad arbitration clause. For example, the 1991-

92 agreement requires arbitration of “any dispute [that]

arise[s] between the Company and the Insured with reference to the interpretation of [the] Agreement or their rights

with respect to any transaction involved[.]” (Zurich’s App.

at 337.) Each agreement provides for arbitration in

Schaumburg, Illinois. Jones did not sign any of the deductible agreements.

Watts and Jones were sued for fraud by third parties in

two cases in the California state courts in 1997 and 1998.

The cases were titled Los Angeles Department of Water and

Power, et al. ex rel. Armenta v. James Jones Co., et al.,

Los Angeles County Superior Court, Case No. BC 173487

(“Armenta”), and Rothschild v. James Jones Co., San Diego

County Superior Court, Case No. 726930 (“Rothschild”).

Both claims were tendered to Zurich, but Zurich denied its

duty to defend and indemnify Watts and Jones.

In February 2001, Watts filed suit against Zurich in the

Los Angeles Superior Court seeking defense and indemnity

for the Armenta and Rothschild actions under the primary

liability policies. Watts asserted claims for breach of contract and bad faith. Jones filed a similar coverage suit

against Zurich in June 2001, and the two actions were

consolidated. The California court conducted a mandatory

settlement conference in August 2001. Zurich raised the

deductible agreements as a defense to entering a settlement

agreement during this conference, claiming that even if

Zurich were liable under the policies, Watts would be

responsible for fully reimbursing Zurich under the deductible agreements. In an order issued August 3, 2001, the
4 Nos. 03-3851 & 03-3853

court gave the parties 60 days to attempt to resolve the

issues discussed during settlement.

In a letter to Watts dated August 31, 2001, Zurich

indicated that it would address the applicability of the deductible agreements “in due course, as required.” Watts

responded with a letter on September 6, 2001, (“the September 6 letter”) stating that there was “no need for any further

delay” in resolving the issues of the deductibles and setting

out four points regarding the application of the deductible

agreements. First, Watts stated that the deductible agreements do not apply to Jones. Second, Watts claimed that

“[b]ecause [Zurich] repudiated [the insurance] policies and

agreements by wrongfully refusing to fund the defense of its

insureds, Zurich [was] foreclosed from relying upon the

deductible agreements.” Third, Watts asserted that because

Zurich failed to mention the deductible agreements until 31⁄2

years after Watts tendered the Armenta and Rothschild

actions, it “waived any rights it may have had to seek to

enforce those agreements.” Finally, Watts claimed that even

if the deductible agreements could be invoked, “Zurich

would remain liable for providing Jones with a full defense

in the underlying cases and would remain liable to fund

Watts’ defense once Watts satisfied the $500,000

deductible . . . set forth in each deductible agreement[.]”

Watts then proposed a resolution whereby Zurich would pay

the full amount of defense costs for Armenta and

Rothschild.

On September 21, 2001, Zurich responded to the

September 6 letter with a demand for arbitration against

both Watts and Jones, which Watts and Jones rejected. On

October 4, 2001, Zurich filed a petition to compel arbitration

in federal court in Illinois and asked the California superior

court to stay the California coverage action. The superior

court refused to do so, and on November 27, 2001, granted

Watts’s motion for summary judgment. Zurich was held to

have a duty to defend the Armenta action and any arbitra-
Nos. 03-3851 & 03-3853 5

2 The court actually denied the order with respect to Armenta,

holding that it lacked jurisdiction over issues already decided by

the California court under the Rooker-Feldman doctrine, and denied the order with respect to Jones. Zurich Am. Ins. Co. v. Sup.

Ct. for the State of Cal., 200 F. Supp. 2d 929, 934 (N.D. Ill. 2002).

The temporary restraining order, therefore, enjoined only further

California proceedings concerning Watts and Zurich except for

those related to the duty to defend in Armenta. Id.

ble disputes under the deductible agreements were deemed

severable from the claims and issues in the California

coverage action.

Back to the Illinois proceedings. Zurich initially asked for

arbitration of everything—the duty to defend both Watts

and Jones and application of the deductible agreements

with respect to both companies—in its October 2001 motion

to compel arbitration. On May 1, 2002, Zurich filed a motion

for a temporary restraining order in the district court

seeking to restrain the California court from enforcing its

November 2001 duty to defend order, which the district

court granted.2

 On September 9, 2002, the district court

ruled on Zurich’s petition to compel arbitration in the order

that gives rise to this appeal. At that point, Zurich had

made a partial payment to Watts and Jones (more than $4

million, according to Zurich’s memorandum in support of its

petition) for claimed defense costs. The district court’s

initial order stated that Jones was not subject to arbitration, that the duty to defend in the Armenta action was not

arbitrable, and that Zurich had not waived its right to

arbitrate under the deductible agreements. The district

court granted the petition to compel arbitration as follows:

(1) as to Armenta, whether Zurich’s breach of the duty

to defend found by the California court constituted a

repudiation by Zurich of the deductible agreement;

(2) as to Rothschild, whether the provision of the 1991-

1992 deductible agreement stating that Zurich “as-
6 Nos. 03-3851 & 03-3853

sumes responsibility for the investigation, defense and

settlement obligations under this Agreement as respects the policies . . .” creates a duty to defend under

the deductible agreement, and if so whether it was

breached; and

(3) with respect to Rothschild, what the obligations of

the parties are with respect to payment and reimbursement of defense costs above the $500,000 deductible.

Then, on September 30, 2002, this court reversed the

injunction staying coverage litigation in the California

courts. See Zurich Am Ins. Co. v. Sup. Ct. for the State of

Cal., 326 F.3d 816, 827-28 (7th Cir. 2002). The district court

vacated its September 9, 2002, order pending the Seventh

Circuit opinion concerning the injunction, which was issued

on April 17, 2003. On September 25, 2003, the district court

reinstated its September 9 order, “amended only to reflect

the fact that the duty to defend in Armenta is arbitrable to

the same extent [the court] previously found the duty to

defend in Rothschild arbitrable under the deductible

agreement.”

The parties agree that the second issue slated for arbitration by the district court, concerning a duty to defend the

Rothschild case arising out of the deductible agreement,

was erroneously ordered by the district court. Neither

Watts nor Zurich has ever contended that any deductible

agreement imposed a duty to defend on Zurich. Also, because the California Court of Appeal affirmed the superior

court’s summary judgment order finding that Zurich was

bound to pay for Watts’s and Jones’s defense, and the

California Supreme Court declined to review that decision,

the issue of whether Zurich has a duty to defend is moot.

See Watts Indus., Inc. v. Zurich Am. Ins. Co., 121 Cal. App.

4th 1029, 1035 (Cal. Ct. App. 2004). We are left with an

order exempting Jones from arbitration, and compelling

arbitration of the following issues: (1) whether Zurich repu-
Nos. 03-3851 & 03-3853 7

3 It appears that the district court erroneously ordered arbitration of the deductible agreement issue with respect to Rothschild.

According to the briefs and the September 6 letter, the dispute is

actually related to Armenta.

diated the deductible agreement by breaching the duty to

defend Armenta, and (2) what obligations the parties have

with respect to the deductible agreements.3

II. Analysis

Both Watts and Zurich appeal the revised order. Watts

contends that there are no arbitrable disputes under the

deductible agreements at all, claiming that there was (and

is) no ripe dispute between the parties under the deductible

agreements and that it did not anticipatorily repudiate the

deductible agreements in the September 6 letter. Zurich, for

its part, argues that Jones should be forced to arbitrate

despite the fact that it was not a signatory to the deductible

agreements.

Under the Federal Arbitration Act, arbitration may be

compelled if the following three elements are shown: a

written agreement to arbitrate, a dispute within the scope

of the arbitration agreement, and a refusal to arbitrate. See

9 U.S.C. § 4; see also Kiefer Specialty Flooring, Inc. v.

Tarkett, Inc., 174 F.3d 907, 909-10 (7th Cir. 1999). We

review de novo a district court’s order compelling arbitration. Kiefer, 174 F.3d at 909.

A. Zurich’s Appeal

We address Zurich’s appeal first, which deals with the

relatively simple issue of whether Jones can be compelled

to arbitrate under the deductible agreements. Jones did not

sign the agreements containing arbitration clauses and
8 Nos. 03-3851 & 03-3853

states that it never agreed to arbitrate anything. Zurich

argues that Jones is bound to arbitrate issues respecting

the deductible agreements despite the fact that it did not

sign them, asserting that (1) Watts, as Jones’s parent company, bound Jones to the agreements, and (2) Jones has

invoked the benefits of the insurance policies, and thus may

not avoid the obligation of arbitration contained in the

agreements associated with the insurance policies.

The language of the 1994-95, 1995-96, and 1996-97 deductible agreements indicates that “[Watts] and each named

insured stated in the Policy(ies) shall be jointly and severally responsible for the obligations under [the agreements].”

(Watts’s App. at 150, 176, 189.) Jones was, of course, a

“named insured” in the primary liability policies. But

“[a]rbitration is contractual by nature—‘a party cannot be

required to submit to arbitration any dispute which he has

not agreed so to submit.’ ” Thomson-CSF, S.A. v. Am.

Arbitration Ass’n, 64 F.3d 773, 776 (7th Cir. 1995) (quoting

United Steelworkers of Am. v. Warrior & Gulf Navigation

Co., 363 U.S. 574, 582 (1960)). That said, there are five

doctrines through which a non-signatory can be bound by

arbitration agreements entered into by others: (1) assumption; (2) agency; (3) estoppel; (4) veil piercing; and (5) incorporation by reference. Fyrnetics (H.K.) Ltd. v. Quantum

Group, Inc., 293 F.3d 1023, 1029 (7th Cir. 2002); accord Am.

Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d

349, 352 (2d Cir. 1999).

Zurich does not argue that Jones has shown an intent to

assume obligations under the deductible agreements or that

the agreements are incorporated by reference to the

insurance policies. Rather than explicitly arguing that

principles of agency or veil piercing are applicable, Zurich

alludes vaguely to the fact that Jones was a wholly owned
Nos. 03-3851 & 03-3853 9

4 Again, Jones was sold in September 1996, so it was not a subsidiary of Watts for the entire time period relevant to this case.

subsidiary of Watts,4 and thus should not be permitted to

avoid arbitration. The district court correctly found that the

relationship between Watts and Jones is insufficient for

Jones to be bound by Watts’s signature on any type of

agency or alter ego theory. As the court’s September 9,

2002, order noted, “a mere parent-subsidiary relationship

‘does not create the relation of principal and agent or alter

ego between the two.’ ” (Quoting Caligiuri v. First Colony

Life Ins. Co., 742 N.E.2d 750, 756 (Ill. App. Ct. 2000)). A

corporate relationship is generally not enough to bind a

nonsignatory to an arbitration agreement. Thomson-CSF,

64 F.3d at 777.

Zurich’s remaining argument, that Jones “cannot take

policy benefits without being bound . . . to the associated

deductible agreements and the duty to arbitrate issues respecting those agreements[,]” is based on an estoppel

theory. A nonsignatory party is estopped from avoiding arbitration if it knowingly seeks the benefits of the contract

containing the arbitration clause. See Thomson-CSF, 64

F.3d at 778; see also Indus. Elecs. Corp. of Wis. v. iPower

Distribution Group, 215 F.3d 677, 680 (7th Cir. 2000)

(stating in dicta that a third-party beneficiary of a contract

would be bound by its arbitration provision).

But caselaw consistently requires a direct benefit under

the contract containing an arbitration clause before a reluctant party can be forced into arbitration. See Thomson-CSF,

64 F.3d at 779 (holding that although the unwilling party

received a benefit, the benefit did not derive directly from

the agreement containing the arbitration clause and thus

arbitration could not be compelled); accord Am. Bureau of

Shipping, 170 F.3d at 353 (ordering arbitration because the

nonsignatory received the direct benefits of a lower insur-
10 Nos. 03-3851 & 03-3853

ance rate and the ability to sail under the French flag as a

result of an agreement containing an arbitration provision).

Jones has not sought to enforce any rights it has under the

deductible agreements, and in fact there would be no

benefits to Jones under those agreements. Even assuming

that Jones has benefitted from the deductible agreements

by paying lower insurance premiums based on the deductibles, this benefit is too attenuated and indirect to force

arbitration under an estoppel theory. We conclude that

there are no grounds for compelling Jones to arbitrate, and

we will affirm the district court’s decision with respect to

this issue.

B. Watts’s Appeal

We now turn to Watts’s appeal. The district court’s decision compelling arbitration was based solely on the September 6 letter which, in the court’s view, showed a dispute

within the scope of the deductible agreements because

Watts had “anticipatorily repudiated” the agreements.

Watts contends that this letter was a settlement communication, and that the court’s consideration of it to Watts’s

disadvantage was a violation of Federal Rule of Evidence

408. Watts also argues that there was not—and is not—a

dispute ripe for arbitration under the deductible agreements.

The rules of evidence provide:

Evidence of (1) furnishing or offering or promising to

furnish, or (2) accepting or offering or promising to

accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as

to either validity or amount, is not admissible to prove

liability for or invalidity of the claim or its amount.

Evidence of conduct or statements made in compromise

negotiations is likewise not admissible.
Nos. 03-3851 & 03-3853 11

5 Zurich argues that because Watts demanded full payment for

its defense in Rothschild and Armenta rather than proposing a

“compromise,” the September 6 letter is not a settlement communication subject to Rule 408.

Fed. R. Evid. 408. The primary policy reason for excluding

settlement communications is that the law favors out-ofcourt settlements, and allowing offers of compromise to be

used as admissions of liability might chill voluntary efforts

at dispute resolution. See, e.g., Perzinski v. Chevron Chem.

Co., 503 F.2d 654, 658 (7th Cir. 1974).

We assume for the purposes of this analysis that Watts’s

September 6 letter is in fact a settlement communication

subject to Rule 408.5

 By its terms, the rule forbids admission of evidence only when it is offered to prove “liability for

or invalidity of the claim or its amount.” See Advisory

Committee’s Note, Fed. R. Evid. 408. The district court has

broad discretion to admit evidence for a purpose other than

proving liability; we review the district court’s decision to do

so for abuse of discretion and reverse only if there is

manifest error. See Belton v. Fibreboard Corp., 724 F.2d

500, 505 (5th Cir. 1984); see also Starter Corp. v. Converse,

Inc., 170 F.3d 286, 293 (2d Cir. 1999).

Evidence coming out of settlement negotiations is obviously admissible to show bias or prejudice of a witness. See

Advisory Committee’s Note, Fed. R. Evid. 408. It has also

been admitted by courts for additional purposes other than

establishing liability, including for purposes of rebuttal, for

purposes of impeachment, to show knowledge and intent, to

show a continuing course of reckless conduct, and to prove

estoppel. Bankcard Am., Inc. v. Universal Bancard Sys.,

Inc., 203 F.3d 477, 484 (7th Cir. 2000) (collecting authority).

In deciding whether Rule 408 should be applied to exclude

evidence, courts must consider the spirit and purpose of the

rule and decide whether the need for the settlement
12 Nos. 03-3851 & 03-3853

evidence outweighs the potentially chilling effect on future

settlement negotiations. Id.; Starter, 170 F.3d at 293. The

balance is especially likely to tip in favor of admitting evidence when the settlement communications at issue arise

out of a dispute distinct from the one for which the evidence

is being offered. See Towerridge, Inc. v. T.A.O., Inc., 111

F.3d 758, 770 (10th Cir. 1997) (“Rule 408 does not require

the exclusion of evidence regarding the settlement of a

claim different from the one litigated, though admission of

such evidence may nonetheless implicate the same concerns

of prejudice and deterrence of settlements which underlie

Rule 408[.]”) (citations omitted); Broadcort Capital Corp. v.

Summa Med. Corp., 972 F.2d 1183, 1194 (10th Cir. 1992)

(“Rule 408 did not bar this evidence because it related to

settlement discussions that involved a different claim than

the one at issue in the current trial.”); Vulcan Hart Corp. v.

NLRB, 718 F.2d 269, 277 (8th Cir. 1983) (“Rule 408 excludes evidence of settlement offers only if such evidence is

offered to prove liability for or invalidity of the claim under

negotiation.”); cf. Starter, 170 F.3d at 294 (holding that

evidence of agreement to settle trademark case was properly admitted in subsequent dispute between parties in

which one asserted a claim for estoppel).

In this case, the September 6 letter was written, by

Watts’s own admission, in an effort to settle the California

coverage action out of court. Of course the two actions are

not totally unrelated. Zurich did, after all, raise the deductible agreements as a defense to its duty to defend Watts

in Armenta and Rothschild. Still, the California action—based on the primary liability insurance policies—is

distinct from the Illinois petition to compel arbitration

under the deductible agreements. Notwithstanding Watts’s

protestation that “[h]ad [it] known that settlement efforts

would be used by the court as proof of the need for an arbitration, [it] would not have engaged in settlement efforts[,]”

we do not believe that the policy behind Rule 408 is
Nos. 03-3851 & 03-3853 13

6 Zurich’s letter dated August 31, 2001, stated that Zurich would

address the applicability of the deductible agreements “in due

course, as required.” Watts’s response in its September 6 letter

was that “the time to resolve [the deductible agreement] issues is

now.”

thwarted by admission of this evidence in the instant case.

Watts could have negotiated settlement of the California

coverage action without bringing the deductible agreements

into the mix.6

 The district court did not abuse its discretion

by admitting the September 6 letter, related to settlement

of the action in California state court, for the purpose of

determining whether there was an arbitrable dispute under

the deductible agreements.

Having found that the September 6 letter was properly

admitted in evidence, we return to a de novo analysis of

whether arbitration was properly compelled. In the letter,

Watts asserted its position that Zurich could not enforce the

deductible agreements against Watts because Zurich had

breached its duty to defend Watts under the primary

liability policies. Watts also claimed that Zurich had waived

its right to enforce the agreements. Finally, Watts wrote

that even if the deductible agreements were applicable,

Watts could be liable for no more than $500,000 for its own

defense. Contrary to the district court’s finding, Watts argues, this language did not constitute anticipatory repudiation, because Watts did not definitively state that unless its

demand was met, it would not perform under the deductible

agreement. See 9 Corbin on Contracts, Ch. 54, § 973 (2005).

Watts could be right. But Zurich need not show that Watts

anticipatorily repudiated the deductible agreements to

compel arbitration; it need only show a written agreement

to arbitrate, a dispute within the scope of the agreement,

and a refusal by Watts to arbitrate. See Kiefer, 174 F.3d at
14 Nos. 03-3851 & 03-3853

7 Although Watts maintains in its brief that it “never refused to

arbitrate a dispute under the applicable Deductible Agreements[,]”

Watts’s conduct after Zurich’s request for arbitration and position

taken in these proceedings clearly manifest a refusal to arbitrate.

On October 2, 2001, Watts sent a letter to the California court

presiding over the coverage action denying its duty to arbitrate.

(Watts’s App. at 24.)

8 Zurich made a partial payment of $4 million immediately prior

to the district court’s ruling, almost one year after filing the petition to compel arbitration. At this point, Zurich has paid more

than $41 million in defense costs.

909. As the first and third elements are uncontested,7

all that remains is for Zurich to prove “any dispute . . .

between [Zurich] and [Watts] with reference to the interpretation of [the] agreement[.]” (1991-92 Deductible

Agreement, Zurich’s App. at 337.) The district court correctly noted that to show a “dispute,” Zurich “must show

that [Watts] has acted, or has threatened to act, in a

manner inconsistent with [Zurich’s] interpretation of the

contract.” Chi. Typographical Union No. 16 v. Chi. SunTimes, Inc., 860 F.2d 1420, 1426 (7th Cir. 1988). Watts’s

view of the deductible agreements and their applicability as

set forth in its September 6 letter were inconsistent with

Zurich’s interpretation as set forth in its September 21,

2001, letter. (Watts’s App. at 18-22 (stating that Zurich disagreed with each of Watts’s four contentions with respect to

the deductible agreements and demanding arbitration).)

Watts’s statements were a sufficient threat that it would

not perform its deductible obligations—sufficient to show a

“dispute”—and, considering the broad scope of the arbitration clauses at issue, this dispute is clearly within the scope

of the deductible agreements.

There is some discussion in the briefs about the amount

of money Zurich had paid Watts at the time the petition for

arbitration was filed (none)8

 and how this affects the

ripeness of the petition. As Watts points out, it could hardly
Nos. 03-3851 & 03-3853 15

have been obligated to reimburse Zurich under the deductible agreement when it had not received the money for its

defense in the underlying actions in the first place. But,

because of the broad arbitration clause and the fact that the

agreement does not require actual breach as a precondition

for arbitration, the issue is irrelevant. Watts’s threat of

nonperformance under the deductible agreements in the

September 6 letter made the dispute ripe. We will therefore

affirm the district court’s order to arbitrate.

Not surprisingly, the parties also dispute the scope of

the compelled arbitration. Watts says that, assuming any

issues are arbitrable, that arbitration should be limited

to (1) whether Zurich has repudiated the deductible agreements by failing to pay for Watts’s defense under the 1994-

95 and 1995-96 primary liability policies, and (2) the parties’ respective rights and obligations under the deductible

agreements from those two years—the only two corresponding to the policy periods under which payments have been

made. The California court determined that defense costs

were only payable under the policies covering 1994-1996,

not under all six policies as Zurich desired. For its part,

Zurich says that arbitration should occur under all six

deductible agreements.

“Whether or not [a] company [is] bound to arbitrate, as

well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered

into by the parties.” AT&T Techs., Inc. v. Communications

Workers of Am., 475 U.S. 643, 649 (1986) (internal quotation and citation omitted). We have already discussed the

fact that Watts is bound to arbitrate any dispute that

amounts to a differing interpretation than Zurich’s of a

given deductible agreement. The district court did not make

a finding regarding which deductible agreements the

parties dispute. Noting that the court is not to rule on the

potential merits of the underlying claims, see id., we will

remand to the district court to identify precisely which
16 Nos. 03-3851 & 03-3853

agreements the parties’ dispute arises under, and thus

under which agreements their obligations and rights may

be arbitrated.

III. Conclusion

For the foregoing reasons, we AFFIRM the district court’s

order compelling arbitration between Zurich and Watts and

exempting Jones from arbitration. We REMAND for clarification as to which deductible agreements are subject to the

arbitration between Zurich and Watts.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—8-2-05