Court Opinion

ID: 50626
Source: CourtListenerOpinion
Date Created: 2010-04-26 00:54:53+00
Date Added: 2024-06-11T09:02:33.579927
License: Public Domain

United States Court of Appeals
                                                                                                 Fifth Circuit
                                                                                               F I L E D
               IN THE UNITED STATES COURT OF APPEALS                                             June 28, 2007
                       FOR THE FIFTH CIRCUIT
                                                                                           Charles R. Fulbruge III
                                                                                                   Clerk

                                              No. 05-11118

HCC AVIATION INSURANCE GROUP, INC;
UNIVERSAL LOSS MANAGEMENT INC

                                                           Petitioners - Appellants
v.

EMPLOYERS REINSURANCE CORPORATION

                                                           Respondent - Appellee

                           Appeal from the United States District Court
                            for the Northern District of Texas, Dallas
                                        No. 3:05-CV-744

Before KING, GARZA, and PRADO, Circuit Judges.
KING, Circuit Judge:*
        Petitioners-appellants HCC Aviation Insurance Group, Inc. and Universal Loss
Management Inc. appeal the district court’s vacatur of an arbitration award in their favor.
For the reasons that follow, we REVERSE.
                   I. FACTUAL AND PROCEDURAL BACKGROUND
        A 1996 airplane crash in West Virginia spawned a series of lawsuits that give rise to
this appeal. David Board operated a flight-instruction school in West Virginia. One of
Board’s students was injured in an airplane crash during a training flight on July 16, 1996.

        *
          Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and
is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                                              No. 05-11118

The injured student pilot sued Board in West Virginia state court for his personal injuries.
Board was insured under a commercial general liability policy through Ranger Insurance
Company (“Ranger”). Board filed a claim with Ranger, seeking both indemnification and
defense in the action against him.
        Prior to Board’s filing of a claim, Ranger and petitioner-appellant HCC Aviation
Insurance Group, Inc. (“HCC Aviation”) had entered into a Management Agreement, dated
July 1, 1992, whereby HCC Aviation would underwrite and service the West Virginia
aviation policies issued in Ranger’s name.1 HCC Aviation’s subsidiary, petitioner-appellant
Universal Loss Management, Inc. (“Universal”),2 was HCC Aviation’s claims-handling
facility and processed the claims on the Ranger policies that HCC Aviation underwrote.
        Universal processed the claim that Board had submitted under his policy with Ranger
and denied it pursuant to an exclusion in Board’s policy. But a West Virginia state court
later determined that Board’s claim was covered under his policy and that Ranger therefore
should have indemnified and defended him. Board and the student pilot then filed a separate
action against Ranger for insurance bad faith for failing to defend and indemnify Board.
This bad-faith action was settled for $4.3 million.
        Ranger’s reinsurer, respondent-appellee Employers Reinsurance Corporation
(“Employers Reinsurance”), funded the settlement payout. Ranger’s reinsurance coverage
with Employers Reinsurance was detailed in a General Aviation, Agricultural Aviation and
Airport Liability Quota Share Reinsurance Agreement (“Reinsurance Agreement”) dated
October 1, 1994. Article 13 of the Reinsurance Agreement, titled “Extra-Contractual

        1
          The parties to the Management Agreement were actually Ranger and Signal Aviation Underwriters,
Inc. (“Signal”). HCC Aviation is Signal’s successor in interest. For the sake of convenience, we refer to HCC
Aviation throughout this opinion even where it was Signal that acted.
        2
          The subsidiary was actually Underwriter’s Adjustment Bureau, Inc. (“UAB”). Universal is UAB’s
successor in interest. Again, for the sake of convenience, we refer to Universal throughout this opinion even
where it was UAB that acted.

                                                     2
                                              No. 05-11118

Obligations,” provided coverage for wrongful denial of claims under Ranger’s policies.3 It
was pursuant to Article 13 of the Reinsurance Agreement that Employers Reinsurance
funded the settlement of the bad-faith action against Ranger for Universal’s wrongful denial
of Board’s claim.
        In an effort to recover its payout of the $4.3 million settlement, Employers
Reinsurance brought an action in West Virginia state court in 2001 against HCC Aviation
and Universal alleging that it was their negligence that caused Ranger’s wrongful denial of
Board’s claim. Ranger was also a plaintiff in this action. Employers Reinsurance and
Ranger asserted two pertinent claims.4 First, they alleged that HCC Aviation and Universal’s
conduct in denying Board’s claim constituted a breach of the Management Agreement
between Ranger and HCC Aviation. Although Employers Reinsurance was not a party to
the Management Agreement, it asserted the claim for breach of this agreement as Ranger’s
subrogee. Second, they alleged that under the Reinsurance Agreement, HCC Aviation and
Universal owed Employers Reinsurance “an implied duty of the utmost good faith” and that
their conduct in denying Board’s claim violated this duty.
        HCC Aviation and Universal moved to dismiss Employers Reinsurance’s suit in the
West Virginia state court for failure to state a claim upon which relief can be granted. With
respect to Ranger’s claims, HCC Aviation and Universal argued that the complaint specified
that the claims belonged to Employers Reinsurance, not Ranger, and that there was no basis
for Ranger to recover. With respect to Employers Reinsurance’s claims, HCC Aviation and

        3
            Article 13 provides: “This Agreement shall include losses in respect of Extra-Contractual
Obligations . . . paid by the Company for . . . damages . . . arising out of the conduct of the Company in the
investigation, trial or settlement of any claim or failure to pay or delaying in payment any benefits under any
policy.” “Company” was defined as “[Ranger] and/or any affiliate, subsidiary or substitute and/or any other
policy issuing company for [HCC Aviation] but only in respect of business underwritten by [HCC Aviation]
(Manager).”
        4
           The suit also contained legal-malpractice claims against Ranger’s counsel for permitting a default
judgment to be obtained against Ranger in the bad-faith-insurance action. The malpractice claims are not
pertinent to this appeal.

                                                      3
                                       No. 05-11118

Universal contended, inter alia, that they were insured parties under the Reinsurance
Agreement, even though Universal was not a signatory to the agreement. They argued that
Employers Reinsurance agreed to provide coverage in Article 13 of the Reinsurance
Agreement for HCC Aviation’s claims-handling facility. Consequently, they asserted,
Employers Reinsurance could not recover from them because an insurer has no legal right
to reimbursement from its own insured or from any person whose risk-producing conduct
was borne by the insurer in the insurance contract.
       In an order dated July 29, 2002, the West Virginia trial court dismissed certain claims
and permitted others to proceed. The court dismissed all of Ranger’s claims against both
HCC Aviation and Universal. As to Employers Reinsurance’s claim for breach of the
Management Agreement, the court dismissed the claim against Universal because Universal
was not a party to the Management Agreement, but the court permitted the claim against
HCC Aviation to proceed:
                     The claim of [Employers Reinsurance] for Breach of
              Management Agreement may be maintained against HCC
              [Aviation], but not against [Universal], as [Universal] was the
              agent of HCC [Aviation], but not a party to the agreement.
              HCC [Aviation] will be responsible for acts that [Universal]
              committed while acting within the scope of its authority for
              HCC [Aviation].
As to Employers Reinsurance’s claim for breach of the duty of good faith under the
Reinsurance Agreement, the court denied the motion to dismiss vis-à-vis both HCC Aviation
and Universal:
                     This Court is frank to say that it is not conversant with
              the concept of “utmost good faith.” The Plaintiff, [Employers
              Reinsurance], does make a good case for the application of
              “utmost good faith” as it applies to a reinsured and agents of a
              reinsured, and the concomitant duty to the reinsurer.
                      The Court cannot accept the proposition that [Universal]
              is a party under the [Reinsurance] Agreement just because it is
              an agent of HCC [Aviation].

                                              4
                                          No. 05-11118

                       The Court finds that [Employers Reinsurance] is entitled
                to present a case for equitable subrogation as to [Universal]. . . .
                      The Court also finds that [Employers Reinsurance’s]
                claim against [Universal] for “Negligent Claims Handling”
                should not be dismissed.
       On December 2, 2002, the West Virginia trial court issued an order staying the
proceedings for binding arbitration pursuant to arbitration clauses in both the Reinsurance
Agreement and the Management Agreement. The court ordered “[a]ll the legal and equitable
claims remaining between the parties as ordered, adjudged, and decreed by [the] Court’s
Order dated July 29, 2002, [to] be stayed and submitted to one arbitration panel for binding
arbitration.”
       The parties exchanged correspondence prior to arbitration concerning the scope and
terms of the arbitration. Employer Reinsurance’s May 28, 2003, letter to HCC Aviation and
Universal’s counsel described the scope of the arbitration as follows:
                All legal and equitable claims remaining between the parties set
                forth in the West Virginia Court’s Order dated July 29, 2002
                will be subject to binding arbitration. These issues include
                whether HCC [Aviation]/[Universal] was negligent in their
                claims handling of the [Board claim], whether the Management
                Agreement was breached, and whether HCC
                [Aviation]/[Universal] breached its duty of utmost good faith to
                [Employers Reinsurance], the reinsurer.
       All      three    entities—Employers          Reinsurance,      HCC      Aviation,   and
Universal—participated in the arbitration proceedings in Dallas, Texas. HCC Aviation and
Universal argued to the arbitration panel that, inter alia, Employers Reinsurance could not
seek reimbursement from them because their conduct was insured under Article 13 of the
Reinsurance Agreement. Employers Reinsurance maintained that the West Virginia court
had already ruled that coverage was unavailable under Article 13 and that the panel was
bound by this determination as the law of the case.
       The arbitration panel denied Employers Reinsurance’s claims in a Final Award dated
April 8, 2005. The panel concluded that “[i]t was the original intent of the [p]arties to

                                                 5
                                                 No. 05-11118

include the claims handling facilities of [HCC Aviation],” i.e., Universal, “under the extra-
contractual obligations (ECO) coverage provided under ARTICLE 13 of the . . .
REINSURANCE AGREEMENT.” Consequently, Employers Reinsurance was obligated
to fund the settlement of the bad-faith action and could not recover against HCC Aviation
and Universal.
        HCC Aviation and Universal filed a petition to confirm the arbitration award in the
Northern District of Texas, and Employers Reinsurance filed a motion to vacate the award.
The district court vacated the arbitration award, concluding that the arbitration panel exceed
its authority by reaching the issue of coverage under Article 13 for Universal’s conduct. The
district court reasoned that “[b]y necessary implication, the [West Virginia court’s] July 29,
2002 Order holds that coverage under Article 13 is unavailable to [Universal],” and that “[i]n
light of the trial court’s implicit conclusion, the indemnification argument should not have
been revisited by the arbitration panel.” The district court also concluded that in their pre-
arbitration correspondence, “the parties agreed” that “[Universal’s] indemnification argument
under Article 13 . . . would not be revisited in arbitration.” Consequently, the district court
vacated the arbitration award and remanded the case “to the arbitration panel to consider
those issues properly before it pursuant to the [West Virginia] Court’s July 29, 2002 [order]
and the parties’ correspondence.” HCC Aviation and Universal now appeal the district
court’s vacatur of the arbitration award.5

        5
            We asked the parties to address in their briefs the question “[w]hether the order from which appeal
is taken, vacating the arbitration award and denying petition to confirm arbitration, is a final decision which
is immediately appealable under the Federal Arbitration Act, 9 U.S.C. § 16(a)(3) or otherwise.” Section
16(a)(3) permits an appeal to be taken from “a final decision with respect to an arbitration that is subject to
this title.” Both sides assert that the order in this case is immediately appealable, even though the district court
vacated and remanded the case to the same arbitration panel. We agree. See 9 U.S.C. § 16(a)(1) (“An appeal
may be taken from . . . an order . . . (D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award . . . .”); Atl. Aviation, Inc. v. EBM Group, Inc., 11 F.3d 1276,
1280 (5th Cir. 1994) (“The FAA does not distinguish between orders vacating arbitration awards without
directing a rehearing and those orders which vacate awards and direct a rehearing of the arbitration dispute;
both are appealable.” (citing 9 U.S.C. § 16(a)(1)(E))); V.I. Hous. Auth. v. Coastal Gen. Constr. Servs. Corp.,
27 F.3d 911, 913-14 (3d Cir. 1994) (concluding that FAA permits appeal of order vacating arbitration award
and remanding to same arbitration panel where remand is not for clarification but for “re-evaluation of the

                                                         6
                                         No. 05-11118

                                      II. DISCUSSION
A. Standard of Review
        When reviewing a district court’s vacatur of an arbitration award, we review the
district court’s factual findings for clear error and its legal conclusions de novo. Hughes
Training Inc. v. Cook, 254 F.3d 588, 592 (5th Cir. 2001). The district court’s order in this
case was based entirely on legal conclusions; our review of the district court’s order is
therefore de novo.
        Our review of the arbitration award itself, however, is “exceedingly deferential,” just
as “[a] district court’s review of an arbitration award is extraordinarily narrow.” Kersogien
v. Ocean Energy, Inc., 390 F.3d 346, 352 (5th Cir. 2004). “We must sustain an arbitration
award even if we disagree with the arbitrator[s’] interpretation of the underlying contract as
long as the arbitrator[s’] decision ‘draws its essence’ from the contract.” Executone Info.
Sys., Inc. v. Davis, 26 F.3d 1314, 1320 (5th Cir. 1994) (internal quotation marks omitted)
(quoting Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1218
(5th Cir. 1990)). “In other words, we must affirm the arbitrator[s’] decision if it is rationally
inferable from the letter or the purpose of the underlying agreement.” Id. (quoting
Anderman/Smith, 918 F.2d at 1218).
        The district court vacated the arbitration award in this case on the ground that the
arbitration panel exceeded its authority. The Federal Arbitration Act (“FAA”) does provide
for vacatur “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). But “[i]n
deciding whether the arbitrat[ion] [panel] exceeded its authority, we resolve all doubts in
favor of arbitration.” Executone Info. Sys., 26 F.3d at 1320 (citing Valentine Sugars, Inc. v.
Donau Corp., 981 F.2d 210, 213 (5th Cir. 1993)).

entire controversy”).

                                               7
                                              No. 05-11118

B. Analysis
        Employers Reinsurance asserts that the arbitration panel exceeded its authority when
it decided that the parties to the Reinsurance Agreement intended Article 13’s insurance
coverage to extend to Universal.6 Employers Reinsurance argues that the West Virginia
court’s orders and the parties pre-arbitration correspondence reflect that this issue was not
submitted to the arbitration panel because the court had already decided it. It maintains that
HCC Aviation and Universal argued to the West Virginia court in their motion to dismiss
that Employers Reinsurance could not recover from Universal because Article 13 legally
precluded its recovery under the principle that an insurer may not subrogate against its own
insured. But, Employers Reinsurance posits, the West Virginia court implicitly ruled that
Universal was not entitled to coverage under Article 13 when it ruled that Universal was not
a party to the Reinsurance Agreement and permitted Employers Reinsurance’s claim to
proceed. Employers Reinsurance contends that this implicit conclusion was binding on the
arbitration panel and that by re-addressing the issue and determining that Article 13 provided
insurance coverage to Universal, the panel exceeded its authority.
        We begin our analysis by examining the West Virginia court’s orders and the parties’
pre-arbitration correspondence. The July 29, 2002, order granted in part and denied in part
HCC Aviation and Universal’s motion to dismiss for failure to state a claim.                              The
significance of this order is that it defined the universe of claims that were permitted to
proceed. The court dismissed several claims, including all of Ranger’s claims as well as
Employers Reinsurance’s claim against Universal for breach of the Management Agreement,
but the court permitted the other claims to proceed. The claims that remained after this order
were Employers Reinsurance’s claim against HCC Aviation for breach of the Management
Agreement and its claims against both HCC Aviation and Universal for breach of the duty
of good faith arising from the Reinsurance Agreement.

        6
         Employers Reinsurance does not contend here, as it did before the district court, that the arbitration
panel manifestly disregarded the law.

                                                      8
                                              No. 05-11118

        In the December 2, 2002, order, the court submitted those remaining claims to binding
arbitration.7 Likewise, the parties’ pre-arbitration correspondence indicated that the scope
of issues to be arbitrated consisted of the claims that remained after the July 29, 2002, order.8
Nothing in the language of the December 2, 2002, order or in the parties’ pre-arbitration
correspondence indicates that the scope of arbitration was anything less than the entirety of
the remaining claims. Nothing in the documents indicates that the panel could not fully
arbitrate the claims that were submitted to it, including the threshold question of whether
Universal was entitled to invoke Article 13’s coverage. Employers Reinsurance subtly
attempts to insert such language in the December 2, 2002, order by asserting that the court
submitted only those “issues” remaining between the parties; but the order clearly submitted
the remaining “claims,” not merely the remaining “issues.” Moreover, although Employers
Reinsurance’s May 28, 2003, letter to counsel for HCC Aviation and Universal enumerated
a list of issues to be arbitrated, which did not include the question of Universal’s entitlement
to coverage under Article 13, this list was clearly non-exclusive.9 And although subsequent
correspondence between the parties indicated that HCC Aviation and Universal could not
arbitrate counterclaims against Employers Reinsurance under Article 13 because the
counterclaims were not raised in the West Virginia court (and therefore were not part of the
remaining claims), the subsequent correspondence did not indicate that the question whether
Universal was entitled to the benefit of Article 13 could not be arbitrated.

        7
           The order provided: “All the legal and equitable claims remaining between the parties as ordered,
adjudged, and decreed by this Court’s Order dated July 29, 2002, shall be stayed and submitted to one
arbitration panel for binding arbitration.”
        8
          Employers Reinsurance’s May 28, 2003, letter to counsel for HCC Aviation and Universal described
the scope of arbitration as follows: “All legal and equitable claims remaining between the parties set forth in
the West Virginia Court’s Order dated July 29, 2002 will be subject to binding arbitration.”
        9
           The letter provided: “These issues [to be arbitrated] include whether HCC [Aviation]/[Universal]
was negligent in their claims handling of the [Board] matter, whether the Management Agreement was
breached, and whether HCC [Aviation]/[Universal] breached its duty of good faith to [Employers Reinsurance],
the reinsurer.” At one point in its brief, Employers Reinsurance attempts to alter the non-exclusive effect of
this sentence by substituting the word “were” for the word “include.”

                                                      9
                                       No. 05-11118

       Furthermore, contrary to Employers Reinsurance’s proposed interpretation, we do not
read the July 29, 2002, order as conclusively determining that Universal was not entitled to
the benefit of Article 13. Instead, we read the order much more narrowly. The court simply
determined that Universal was not a party to the Reinsurance Agreement and that Employers
Reinsurance’s claim therefore did not violate any rule barring an insurer from subrogating
against a party to its own insurance contract. It was clear that Universal was not a signatory
to the Reinsurance Agreement and was not mentioned by name anywhere in the agreement.
But Employers Reinsurance had admitted that Universal was an agent of HCC Aviation,
which was named in and was a signatory to the agreement. What the court determined in the
order was that Universal’s agency relationship with HCC Aviation did not necessarily make
Universal a party to the agreement: “The Court cannot accept the proposition that [Universal]
is a party under the [Reinsurance] Agreement just because it is an agent of HCC [Aviation].”
       The court did not, however, go on to opine about whether Universal (even as a non-
party to the Reinsurance Agreement) could invoke the benefit of Article 13 on some other
basis. HCC Aviation and Universal argued to the West Virginia court that Employers
Reinsurance could not both use the Reinsurance Agreement as the basis for alleging that
Universal owed it a duty of good faith and at the same time deny Universal the benefit of
Article 13 of the same agreement. Despite its conclusion that Universal was not a party to
the Reinsurance Agreement, the court permitted the claim against Universal for a breach of
a duty arising from that agreement to proceed. The court expressed no opinion about
whether Universal, as a non-party, could use a provision of that agreement, namely Article
13, as a defense to the claim. Instead, the court simply observed that Universal was not a
party to the agreement, it permitted Employers Reinsurance “to present a case for equitable
subrogation as to Universal,” and it declined to dismiss Employers Reinsurance’s claim
against Universal for negligent claims handling.
       Even if our reading of the court’s order is incorrect and the court did conclude that
Universal was not entitled to invoke the benefit of Article 13, the arbitrators still did not

                                             10
                                               No. 05-11118

exceed their authority. The court’s order granting in part and denying in part the motion to
dismiss for failure to state a claim was interlocutory. The court could have reconsidered its
prior resolution of legal issues at any point in the litigation before issuing a final judgment.
See W. VA. R. CIV. P. 54(b) (“[A]ny order . . . which adjudicates fewer than all the
claims . . . is subject to revision at any time before the entry of judgment adjudicating all the
claims and the rights and liabilities of all the parties.”). There is no basis for concluding that
the arbitration panel could not also have done so once the court referred the claims in their
entirety to it.10 This is especially true given that the arbitration panel was able to consider
the scope of Article 13’s coverage on a more complete record than that which was available
to the West Virginia court at the motion-to-dismiss stage. The arbitration panel heard
evidence regarding the parties’ intent in drafting the Reinsurance Agreement, which the West
Virginia court could not have considered without converting the motion to dismiss into a
motion for summary judgment.11 See W. VA. R. CIV. P. 12(b).

        10
            Employers Reinsurance relies on John Morrell & Co. v. Local Union 304A of the United Food &
Commercial Workers, AFL-CIO & CLC (Morrell I), 708 F. Supp. 273 (D.S.D. 1989), aff’d, 913 F.2d 544
(8th Cir. 1990) (Morrell II), for the proposition that an arbitration panel must respect a court’s prior ruling
on a particular claim and is precluded from ruling differently. But Employers Reinsurance’s characterization
of Morrell I’s holding is specious at best. True, the Morrell I court vacated an arbitration award on the ground
that the arbitrator exceeded the scope of his authority. 708 F. Supp. at 278. But the reason the court did so
was not because the arbitrator’s decision was contrary to the court’s prior ruling but rather because the
arbitrator decided an issue that the parties had not submitted to him. See id. at 275-77; see also Morrell II,
913 F.2d at 549-50 (“The district court vacated the award because it held that the arbitrator had exceeded his
authority by deciding the issue of the legality of sympathy strikes since Morrell had not consented to arbitrate
that issue.”). As we have stated, we believe that the question whether Universal was entitled to the benefit of
Article 13 was submitted to the arbitration panel.
        11
           Employers Reinsurance’s contention that the West Virginia court actually converted the motion to
dismiss into a motion for summary judgment by considering the terms of the Reinsurance Agreement at the
motion-to-dismiss stage is baseless. Under West Virginia law, a trial court’s receipt of evidence outside the
pleadings when considering a motion to dismiss requires conversion of the motion into one for summary
judgment. See Shaffer v. Charleston Area Med. Ctr., 485 S.E.2d 12, 17 (W. Va. 1997); W. VA. R. CIV. P.
12(b). But contrary to Employers Reinsurance’s argument, the Reinsurance Agreement was not a matter
outside the pleadings. Employers Reinsurance had attached a copy of the Reinsurance Agreement to its
amended complaint as Exhibit B, and under West Virginia law, “[a] copy of any written instrument which is
an exhibit to a pleading is a part thereof for all purposes.” W. VA. R. CIV. P. 10(c).

                                                      11
                                       No. 05-11118

       Lastly, as we noted, the FAA embodies a “strong presumption in favor of
arbitrability.” Kersogien, 390 F.3d at 355 (quoting Waverly Mineral Prods. Co. v. United
Steel Workers of Am., AFL-CIO, Local No. 8290, 633 F.2d 682, 684 (5th Cir. 1980)). “The
[FAA] establishes that, as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is
the construction of the contract language itself or any allegation of waiver, delay or a like
defense to arbitrability.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24-25 (1983); see also Kersogien, 390 F.3d at 355. Because, at the very least, there are
significant doubts about whether either the West Virginia court’s orders or the parties’ pre-
arbitration correspondence placed the issue of Universal’s coverage under Article 13 outside
the arbitrators’ realm, the district court should have resolved these doubts in favor of
arbitrability and confirmed the arbitration award.
                                    III. CONCLUSION
       For the reasons stated, the district court’s order granting Employers Reinsurance’s
motion to vacate the arbitration award and denying HCC Aviation and Universal’s motion
to confirm the award is REVERSED and the case REMANDED for entry of an order
confirming the arbitration award.

                                             12
                                        No. 05-11118

GARZA, Circuit Judge, specially concurring:
       This case turns on whether the July 29, 2002 order of the West Virginia state court
decided that Universal could not rely on the coverage of the Reinsurance
Agreement))namely Article 13. Although the order states that Universal is not a party to
the Reinsurance Agreement, it is not clear what legal conclusion was intended to be drawn
from that fact.
       What is clear is that the state court allowed Employer’s Reinsurance to pursue its
claim against Universal for “negligent claims processing.” It is equally clear that Employer’s
Reinsurance brought this claim against Universal pursuant to the Reinsurance Agreement,
as Count VII of the Amended Complaint filed before the state court. By doing so, the state
court did not preclude the possibility that Universal was subject to liabilities under the
Reinsurance Agreement. Therefore, the arbitration panel was free to decide that the state
court did not preclude the possibility that Universal was subject to the coverage of the
Reinsurance Agreement))including Article 13. See Kergosien v. Ocean Energy, Inc., 390
F.3d 346, 355 (5th Cir. 2004) (“[I]n deciding whether the arbitrator exceeded his jurisdiction,
‘any doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration.’”) (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 24-25 (1983)).

                                              13