1 United States Court of Appeals,

Fifth Circuit.

Nos. 95-30290, 95-30568.

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.

March 13, 1997.

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

q uestion is whether a protection and indemnity insurer's

contractual right to have coverag e 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)2

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 i ts arbitration clause that any coverage dispute

between insurer and insur ed 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 court s 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 B ig Foot this co u rt

recognized that when the Louisiana direct action statute, La. R.S.

22:655, is applicable and authorizes a direct suit ag ainst 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. S ee also, Grubbs v. Gulf Int'l Marine,

Inc., 625 So.2d 495, 498 (La.1993 ); Q uinlan v. Liberty Bank &3

Trust Co., 575 So.2d 336, 352 (La.1990)(on reh'g),and authorities

c ited therein. Accordingly, as Big Foot noted, the Louisiana

c ourts 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. B ig 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

arbit ration agreement. I d. (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 require4

dir ect 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 beneficiari es of the insurance contract having standing to

sue the insurer on the contract. S ee Federal Deposit Insurance

Corporation v. Duffy, 47 F.3d 146, 150 (5th Cir.1995); S hockley 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 s tatute 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. L A .R EV .S TAT .A NN

. § 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. S ee 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 (1995), is

inapposite because in that case the plaintiffs-homeowners sued

Terminix on a written "Termite Protection Plan," containi ng an

arbitration clause, to which they became a party when the plan was5

transferred to them by their vendors. Typically, and in the

present case, the direct action plaintiffs are not parties to the

insurance contract or in privity with the insured. See Big Foot,

887 F.2d at 614 and n. 4.

Accordingly, we find the district court did not err in holding

that Morales and Zimmerman, as direct action plaintiffs, were not

bound by the arbitration clause.

II. Waiver of Non-Coverage Defense as to Morales

In one of these cases, Morales v. ICCI and Sphere Drake,

Morales successfully moved for partial summary judgment declaring

that Sphere Drake had waived its non-coverage defense based on an

alleged misrepresentation by ICCI as to the number of crew members

aboard the vessel. Sphere Drake argues that the district court

erroneously granted Morales' motion for summary judgment striking

the insurer's defense of non-coverage. ICCI argues, however, that

we are without appell ate jurisdiction to review an interlocutory

judgment granting partial summary judgment in a direct action.

Appellate Jurisdiction and Standard of Review

As a general rule, "a partial summary judgment determining

that a certain issue shall be deemed established for the trial of

the case generally is not appealable until after the case has been

t ried." 10 C H ARLES A LAN W RIGHT

, A RTHUR R. M ILLER & M ARY K AY K ANE

, F E DERAL

P RACTICE AND P ROCEDURE § 2715 (2d ed.1983). This circuit follows the

general rule. R esolution Trust Corp. v. U.S. Fidelity and Guaranty

Co., 27 F.3d 122 (5th Cir.1994) (per curiam)(quoting W RIGHT ET AL .).

Here, the issue deemed established for the trial of the case6

is that Sphere Drake waived its defense of non-covera ge by

defending ICCI against Morales' claims f or eight months without

reservation of rights despite factual notice that the crew number

limitation had been violated at the time of the accident. We find

that this determination is not final and separable from the rest of

the issues, all turning on Sphere Drake's liability to its insured

and Morales, so as to be reviewab le on interlocutory appeal.

Sphere Drake also appeals from the denial of its motion for

reconsideration of the district court's ruling that the insurer had

waived its defense of non-coverage. For the same reasons that we

lack jurisdiction to review the grant of partial summary judgment,

we find the denial of the motion for reconsideration unreviewable.

Conclusion

We conclude that both district courts properly denied Sphere

Drake's motions to stay litigation pending arbitration.

Zimmerman's motion to dismiss and Sphere Drak e's motion in

opposition are denied as moot. Accordingly, the district courts'

judgments are AFFIRMED.