County of McHenry v. Insur Co West

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 04-4223
COUNTY OF MCHENRY,
Plaintiff-Appellant,
v.
INSURANCE COMPANY OF THE WEST,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 04 C 2078—Matthew F. Kennelly, Judge.
____________
ARGUED DECEMBER 9, 2005—DECIDED FEBRUARY 24, 2006
____________
Before FLAUM, Chief Judge, and RIPPLE and WILLIAMS,
Circuit Judges.
FLAUM, Chief Judge. The County of McHenry, Illinois
(“County”) purchased an insurance policy from the Insur-
ance Company of the West (“ICW”). ICW settled a
$5 million claim on behalf of the County under the policy,
but reserved the right to seek reimbursement from the
County if it was determined that the policy did not cover
the claim. ICW then sought to invoke the policy’s arbitra-
tion clause and resolve the issues of coverage and reim-
bursement before an arbitrator. In response, the County
filed suit, seeking a declaration that ICW cannot require
the County to arbitrate. The district court granted ICW’s
motion to dismiss the suit for failure to state a claim under
2 No. 04-4223
Federal Rule of Civil Procedure 12(b)(6). The County
appeals. For the following reasons, we affirm the order of
the district court.
I. Background
ICW issued an insurance policy to the County, which
includes an excess public entity coverage (“the policy”). The
policy pays on claims made against the County, after the
County’s self-insurance has been exhausted. The policy
contains an arbitration provision, which states in relevant
part:
N. ARBITRATION
In the event that a dispute arises between the Insured
and the Company under this agreement or concerning
when a claim or suit should be settled or the amount of
such settlement, such dispute shall be subject to
arbitration and both parties shall be bound by the
findings and decision of the arbitrator or arbitrators.
The Company shall have the right, but not the duty, to
determine when a claim or suit should be settled and
may proceed to settle the claim or suit within its Limit
of Liability. The insured and/or the company are
entitled to require the other party to submit the dispute
to arbitration.
(Emphasis added.)
In August 1999, Indeck Pleasant-Valley, Inc. (“Indeck”)
sued the County for denying a special use permit to con-
struct and operate an electrical generation facility (“the
Indeck claim”). Indeck sought declaratory and injunctive
relief and $25 million in damages. The County instructed
its broker, Marsh & McLennon, to place ICW on notice and
ask ICW to protect the County’s rights in the Indeck suit.
ICW took the position that, due to an exclusion in the
No. 04-4223 3
policy, it did not have a duty to defend or indemnify the
County for the Indeck claim.
Between March and October 2002, ICW filed two suits in
districtcourt, each seeking a declaration that ICW had no
duty to defend or indemnify. At the time ICW filed these
suits, it had not made any payment for the Indeck claim.
Although not relevant to this appeal, the County was
successful in having both suits dismissed for lack of subject
matter jurisdiction, under Federal Rule of Civil Procedure
12(b)(1). On November 21, 2002, ICW paid its $5 million
indemnity limit on the Indeck claim and obtained a release
of all damages claims asserted by Indeck against the
County.
In August 2003, ICW formally demanded arbitration of
the coverage issues and appointed an arbitrator. The
County rejected ICW’s arbitration demands, but selected
and appointed John Brechin as an arbitrator, in the event
the County was forced to arbitrate. ICW maintains that the
County never provided contact information for Brechin,
even after ICW requested the information multiple times.
ICW then appointed a second member (not Brechin) to the
three-member arbitration panel and directed the two
existing members to appoint a third member.
ICW, over the County’s objections, directed the arbitra-
tion to begin, leading to the present suit. The County sued
for declaratory judgment in March 2004, arguing that the
arbitration agreement in the policy does not apply to the
Indeck claim or, alternatively, that ICW had waived its
right to demand arbitration by previously filing suits
related to coverage of the Indeck claim (“waiver argument”).
ICW moved to stay pursuant to 9 U.S.C. § 3 and to dismiss
pursuant to Rule 12(b)(6). ICW argued that the arbitra-
tors—not the district court—are to determine whether the
parties’ disputes are subject to the policy’s arbitration
clause and that all disputes between the parties are subject
to arbitration. The County responded to the Rule 12(b)(6)
4 No. 04-4223
motion by arguing: 1) that the issues ICW sought to
arbitrate were not covered by the arbitration agreement;
and 2) that Illinois law does not allow an insurer to seek
reimbursement from an insured. The County did not
include its waiver argument in its response to ICW’s motion
to dismiss.
On October 25, 2004, the district court granted ICW’s
Rule 12(b)(6) motion and dismissed the suit. According to
the district court, the central issues were whether the
question of arbitrability should be made by an arbitrator,
and alternately, whether the parties’ disputes are within
the policy’s arbitration provision. The district court found
that the court, not an arbitrator, should determine the issue
of arbitrability. Next, the district court explained that “in
the context of the arbitration provision, it is clear that the
use of the term ‘under this agreement’ was meant to cover
disputes arising under any part of the insurance policy,”
including disputes over coverage and reimbursement.
Finally, the district court refused to consider whether the
policy or Illinois law allow ICW to seek reimbursement,
finding that to be a merits issue that must be resolved by
the arbitrators.
The County filed a motion under Federal Rule of Civil
Procedure 59(e) to amend or alter the judgment. The
County argued—as it did in its complaint but not in
response to ICW’s motion to dismiss—that ICW had waived
the issue of arbitrability by bringing two suits on the Indeck
claim. The district court denied the County’s motion. The
district court found that although the County raised the
waiver issue in its initial complaint, it should have made
the waiver argument in response to ICW’s motion to
dismiss, and it was too late to raise the issue in a Rule 59(e)
motion. The County appeals.
No. 04-4223 5
II. Discussion
“When a district court grants a motion to dismiss under
Rule 12(b)(6), our review is de novo.” Stachowski v. Town of
Cicero, 425 F.3d 1075, 1078 (7th Cir. 2005).
We construe the complaint “in the light most favorable
to the plaintiff, taking as true all well-pleaded factual
allegations and making all possible inferences from
those allegations in his or her favor.” We shall affirm
the dismissal only if it “ ‘appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim
which would entitle him to relief.’ ”
Barnes v. Briley, 420 F.3d 673, 677 (7th Cir. 2005) (internal
citations omitted).
The County raises two main issues on appeal. First, the
County argues that the district court erred by dismissing its
complaint without considering its waiver argument, which
was included in the County’s complaint but not its response
to ICW’s motion to dismiss. Second, the County asserts that
even if ICW did not waive its right to compel arbitration,
the policy’s arbitration clause does not cover the parties’
dispute over the Indeck claim.
A. Waiver
According to the County, dismissal at the pleadings stage
was improper because the district court failed to consider
its alternative grounds for declaratory relief, i.e., its waiver
argument. The County maintains that ICW waived its right
to demand arbitration related to the Indeck claim by filing
two coverage suits that addressed the same coverage issues
ICW seeks to arbitrate—the application of the condemna-
tion exclusion and ICW’s duties under the policy regarding
the Indeck claim. The County included the waiver argument
in its complaint, but not in its response to ICW’s motion to
dismiss.
6 No. 04-4223
ICW’s sole argument is that the County forfeited its
waiver argument by failing to include the argument in its
response to ICW’s motion to dismiss.
The County disagrees. According to the County, the
district court erred by failing to consider whether the
complaint stated a claim under any possible theory, includ-
ing the waiver theory, even if that theory was not presented
in response to a motion to dismiss. Additionally, the County
implies, in a footnote of its brief, that the district court also
erred by denying the County’s Rule 59(e) motion to alter or
amend the judgment and refusing to consider the merits of
the County’s waiver argument. The County therefore urges
this Court to consider the waiver argument, even if we
conclude it was not properly raised below. As a last resort,
the County asks the Court to exercise its discretion to
consider new arguments and find that ICW has waived its
right to demand arbitration of the Indeck claim.
Although this case presents a close question, we agree
with ICW that the County has forfeited its waiver argu-
ment, and we decline to exercise our discretion to consider
that argument now. The County raised two claims in its
complaint: 1) that it was entitled to a declaration that ICW
does not have a right to arbitrate coverage or reimburse-
ment issues; and 2) that it was entitled to a permanent
injunction prohibiting ICW from prosecuting any arbitra-
tion proceeding against the County. The declaratory
judgment request was based on the County’s arguments
that the arbitration clause did not cover the parties’ dispute
and that the County had waived its right to arbitrate. The
County discussed the waiver argument in several para-
graphs of its complaint.1 However, the argument was not
1
Paragraph 7 of the County’s complaint states that “[t]he County
seeks a declaratory judgment that the arbitration agreement in
(continued...)
No. 04-4223 7
presented as a separate count or supported by any legal
analysis or authority.
Under these circumstances, we cannot say that the
district court erred by granting ICW’s motion to dismiss.
Federal Rule of Civil Procedure 8(a)(2) requires that a
pleading contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.” This rule
simply “specifies the conditions of the formal adequacy of a
pleading.” Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d
1039, 1041 (7th Cir. 1999). “It does not specify the condi-
tions of its substantive adequacy, that is, its legal merit.”
Id. “[W]hen presented with a motion to dismiss, the non-
moving party must proffer some legal basis to support his
cause of action.” Stransky v. Cummins Engine Co., 51 F.3d
1329, 1335 (7th Cir. 1995). Although the district court is
required to consider whether a plaintiff could prevail under
any legal theory or set of facts, Sidney S. Arst Co. v.
Pipefitters Welfare Educ. Fund, 25 F.3d 417, 421 (7th Cir.
2004), it “will not invent legal arguments for litigants,”
Stransky, 51 F.3d at 1335, and is “not obliged to accept as
true legal conclusions or unsupported conclusions of fact,”
Hickey v. O’Bannon, 287 F.3d 656, 658 (7th Cir. 2002).
The County was on notice that ICW sought to dismiss its
entire complaint. ICW stated in its motion to dismiss:
(...continued)
the Policy does not apply to, and thus [does] not require the
County to arbitrate these issues, or alternatively, has been waived
by ICW and is otherwise unenforceable.” See also Complaint ¶ 35
(“even if [ICW] has such a right initially, it had waived its right by
prosecuting ICW I and ICW II”); ¶ 39 (“ICW had also waived its
right to arbitrate them”); ¶ 58 (“Even if ICW had a right to
arbitrate coverage, such right was waived or otherwise lost by
ICW’s action, including twice filing suit and seeking a judicial
determination of [coverage issues.]”).
8 No. 04-4223
As the County’s entire action is predicated upon the
erroneous notion that the question of arbitrability is left
to the sole discretion of the court, as opposed to the
arbitrator, the County can plead no set of facts which
would entitle it to relief under the complaint.
The County was aware that ICW viewed the issue of who is
to decide arbitration as the pivotal issue on its motion to
dismiss, and the issue that needed resolution before the
district court should consider whether the parties’ dispute
is covered by the arbitration clause. The County should
have argued that the district court must decide the question
of waiver before considering whether the issue of
arbitrability is one for the arbitrator or the court. In this
case, the issues of waiver and arbitrability are linked in
such a way that the County should not have sat back and
waited for the arbitrability issue to be decided on a Rule
12(b)(6) motion before presenting the waiver argument, and
legal support for it, Stransky, 51 F.3d at 1335, to the
district court. See also McLeod v. Arrow Marine Transport,
Inc., 258 F.3d 608, 614 (7th Cir. 2001) (court “not obliged to
accept as true conclusory statements of law”); Northern Ind.
Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449,
452 (7th Cir. 1998) (court not required “to assign any
weight to unsupported conclusions of law”); Reed v. City of
Chi., 77 F.3d 1049, 1051 (7th Cir. 1996) (court “not com-
pelled to accept . . . conclusory allegations concerning the
legal effect of facts set out in the complaint”). The district
court did not err by not addressing the waiver argument
when considering ICW’s motion to dismiss.
Nor did the district court err by refusing to consider the
waiver argument when the County included it in a Rule
59(e) motion to alter or amend the judgment. See FED. R.
CIV. P. 59(e). “A court may grant a Rule 59(e) motion to
alter or amend the judgment if the movant presents newly
discovered evidence that was not available at the time of
trial or if the movant points to evidence in the record that
No. 04-4223 9
clearly establishes a manifest error of law or fact.” Matter
of Prince, 85 F.3d 314, 324 (7th Cir. 1996). But a Rule 59(e)
motion “is not appropriately used to advance arguments or
theories that could and should have been made before the
district court rendered a judgment.” LB Credit Corp. v.
Resolution Trust Corp., 49 F.3d 1263 (7th Cir. 1995).
Under this standard, the district court properly denied
the County’s Rule 59(e) motion. There is no evidence in the
record to establish a manifest error of law or fact. In
deciding a motion to dismiss, the district court is required
to consider whether “it appears beyond doubt that the
plaintiff cannot prove any set of facts entitling it to re-
lief” under any legal theory. Cleveland v. Rotman, 297 F.3d
569, 571 (7th Cir. 2002). In this case, the district court
decided the motion based on a record that contained no
legal support or analysis from the County demonstrating
how ICW’s actions prior to demanding arbitration waived
ICW’s contractual right to arbitrate. Under these circum-
stances, it was not manifest error for the district court to
grant ICW’s motion. See Kirksey, 168 F.3d at 1041 (“Our
system of justice is adversarial, and our judges are busy
people. If they are given plausible reasons for dismissing a
complaint, they are not going to do the plaintiff’s research
and try to discover whether there might be something to
say against the defendants’ reasoning.”).
In another case, Lekas v. Briley, 405 F.3d 602, 615 n.8
(7th Cir. 2005), we suggested in dicta that where a defen-
dant in its motion to dismiss does not challenge one of
plaintiff’s claims and the district court dismisses the
unchallenged claim in error, a Rule 59(e) motion may be an
appropriate vehicle for correcting that error. In Lekas,
however, the plaintiff had a least made “passing reference”
to the overlooked claim in his response to the motion to
dismiss. Id. In this case, the County makes no reference to
the waiver argument in its response. It is reasonable that
the district court did not scour the complaint for the
10 No. 04-4223
argument, do its own investigation to determine if the
argument had any legal merit, and then deny summary
judgment on that ground.
The County asserts that even if it did not properly raise
the waiver issue below, it should be able to present it on
appeal. The County relies on a line of cases, including
Highsmith v. Chrysler Credit Corp., 18 F.3d 434 (7th Cir.
1994), in which we have held that “when reviewing Rule
12(b)(6) motions, we will consider new factual allegations
raised for the first time on appeal provided they are
consistent with the complaint.” Id. at 439; see also Veazey
v. Communications & Cable of Chi., Inc., 194 F.3d 850, 853
(7th Cir. 1999) (allowing plaintiff to present facts not
asserted in opposition to defendant’s motion to dismiss
under Rule 12(b)(6)).
That exception does not apply here. Although we may
consider factual allegations raised for the first time on
appeal, we ordinarily will not address new issues raised for
the first time on appeal. See Kyle v. Morton High Sch., 144
F.3d 448, 454 (7th Cir. 1998) (“In reviewing a motion to
dismiss for failure to state a claim, we will allow a plaintiff
to make additional factual allegations for the first time on
appeal, but we will not entertain new issues.” (internal
citation omitted)); Dawson v. Gen. Motors Corp., 977 F.2d
369, 373 n.* (7th Cir. 1992) (“GM has filed a motion to
strike the plaintiffs’ brief on the basis of these ‘new facts’ as
well as new arguments allegedly not made in the district
court. . . . Most of the arguments asserted to be new are
merely permissible variations on issues that were clearly
raised below. . . . The one true issue that the plaintiffs
appear not to have raised below is the issue of misrepresen-
tation, which we treat as waived.”).
The County is attempting to assert both facts and issues
that were not raised in its response to ICW’s motion to
dismiss. The new facts include the two previous suits filed
by ICW and the length of time ICW took to demand arbitra-
tion. The new issue is whether ICW’s actions resulted in a
No. 04-4223 11
waiver of ICW’s legal right to demand arbitration of the
Indeck claim. Neither the facts nor the issue flow naturally
out of those raised in the County’s response to the motion
to dismiss, which concerned only interpretation of the
insurance contract.
According to the County, we should give special impor-
tance to the fact that the County raised the waiver argu-
ment in its original complaint, but ICW did not address the
argument in its motion to dismiss. The County cites Stewart
v. RCA Corp., 790 F.2d 624, 631 (7th Cir. 1986), in support
of this position. Stewart, however, is inapposite. In that
case, the Court held that a plaintiff should have been
allowed to amend his complaint, even though a motion to
dismiss on the original complaint was pending, because the
issue the plaintiff sought to clarify was not one that the
defendant addressed in its motion to dismiss, and therefore
the plaintiff was not required to raise the issue in its
response to the motion to dismiss. Id. at 631-32. In this
case, the County did not attempt to amend its complaint
while the motion to dismiss was pending, in order to clarify
the waiver argument. Instead, the County ignored the
waiver argument in its responsive brief and did not raise it
again until its Rule 59(e) motion. Under these circum-
stances, we see no reason to give special weight to the fact
that the County put the waiver argument (without legal
citation or analysis) in its original complaint.
Finally, the County argues that the Panel has discretion
to consider an argument raised for the first time on appeal
and that it should exercise that discretion here. “In the rare
case in which failure to present a ground to the district
court has caused no one—not the district judge, not us, not
the appellee—any harm of which the law ought to take
note, we have the power and the right to permit it to be
raised for the first time to us.” Amcast Indus. Corp. v.
Detrex Corp., 2 F.3d 746, 749 (7th Cir. 1993). Without
12 No. 04-4223
addressing whether our consideration of the waiver issue
would cause any harm, we decline to exercise our discretion
in this case. The County, represented by able legal counsel,
should have exercised care in responding to the motion to
dismiss and raised all the arguments it had against the
motion. It is only logical that the County would argue that
ICW had waived the right to arbitrate, when ICW moved to
dismiss based on the fact that the insurance policy required
arbitration. Because we find that ICW cannot raise its
waiver argument for the first time on appeal, we need not
address whether ICW waived its right to demand arbitra-
tion.
B. Arbitration
We now reach the primary issue of this appeal: whether
the district court erred by finding that the policy’s arbitra-
tion clause applied to the parties’ dispute over the Indeck
claim. This dispute concerns whether the term “agreement”
contained in the arbitration provision relates to the policy
as a whole or only to the arbitration provision. The arbitra-
tion provision states:
In the event that a dispute arise between the Insured
and the Company under this agreement or concerning
when a claim or suit should be settled or the amount of
such settlement, such dispute shall be subject to
arbitration and both parties shall be bound by the
findings and decision of the arbitrator or arbitrators.
(Emphasis added.)
The insurance contract does not define “agreement” or
“policy.” The contract is comprised of several provisions:
1) “Common Policy Conditions”; 2) two “coverage parts”
(Excess Public Entity Liability and Commercial Auto); and
3) several endorsements. The parties both refer to the
excess public entity liability coverage as the “policy.” This
No. 04-4223 13
coverage contains seven sections: “Insuring Agreement”;
“Defense and Settlement”; “Supplementary Payments”;
“Company’s Limit of Liability”; “Exclusions”; “Definitions”;
and “Conditions.” The “Conditions” section consists of the
parties’ agreements with respect to premiums, inspection
and audit, changes, cancellations, appeals, arbitration, and
acceptance. Condition “N” is the arbitration provision.
According to the County, the district court erred by
construing the policy terms “agreement” and “policy” to be
synonymous. The County maintains that the plain meaning
of “agreement” is a reference to the terms of the arbitration
provision itself, not to the Policy in its entirety. Thus, the
arbitration agreement does not extend to all disputes under
the policy, but only to disputes under the arbitration
provision, regarding whether a claim should be settled, and
regarding the amount of settlement. Finally, the County
points to several places within the insurance contract where
the terms “agreement” and “policy” are used in distinct,
non-interchangeable ways.
ICW argues in response that the term “agreement” refers
to the insurance policy as a whole. ICW also maintains that
if the policy is ambiguous, any doubts as to its scope should
be decided in favor of arbitrability. ICW emphasizes that
there is presumption of arbitrability: “[O]nce it is clear that
the parties have a contract that provides for arbitration of
some issues between them, any doubts concerning the scope
of the arbitration clause are resolved in favor of arbitra-
tion.” Miller v. Flume, 139 F.3d 1130, 1136 (7th Cir. 1998).
Additionally, ICW points to several rules of contract
interpretation to support its reading of the insurance
contract. According to ICW, the County’s interpretation
would force the Court to add language to the arbitration
clause; that is, “this agreement” in the arbitration clause
would become “this arbitration agreement.” Moreover, ICW
argues that construing the insurance contract to be com-
14 No. 04-4223
posed of dozens of separate “agreements” conflicts with the
plain and ordinary meaning of “agreement.” ICW explains:
Condition N of the policy does not identify itself as a
separate “agreement,” but merely as a condition of the
coverage conferred under the policy’s central Insuring
Agreement. Nor is there any indication of the parties’
separate negotiation, assent or consideration for this
Condition, only the parties’ agreement to the policy as
a whole.
Finally, ICW argues that the County’s interpretation is
unnecessarily restrictive:
[T]he County’s interpretation of the terms “this agree-
ment” would render the operative words in the arbitra-
tion provision to be virtually without meaning. The
arbitration clause provides that the following classes of
disputes must be arbitrated: (a) “when a claim should
be settled,” (b) “the amount of such settlement,” and (c)
“a dispute aris[ing] between the Insured and the
Company under this Agreement.” If, as the County
argues, “a dispute aris[ing] between the Insured and
the Company under this agreement” refers only to
disputes arising under the arbitration provision itself,
then only the mechanics and procedures of the arbitra-
tion itself would be arbitrable under the part of the
arbitration clause, and not any substantive disputes as
to coverage. Thus, while disputes concerning “when a
claim or suit should be settled” and “the amount of such
settlement” could be arbitrated, no dispute arising
under the policy could be arbitrated, except for the
arbitration procedures themselves. This is an incredibly
strained interpretation of the contract language and
would produce a truly anomalous result: an arbitration
clause contained in an insurance policy which autho-
rizes no arbitration for any coverage disputes arising
under the policy.
No. 04-4223 15
After reviewing the parties arguments, we conclude that
the district court properly found the parties’ dispute over
the Indeck claim to be subject to arbitration. The County is
unable to support its argument that the plain meaning of
“agreement” in the arbitration provisions refers only to the
arbitration provision itself. Instead, we find that the term
“agreement,” as used in the insurance contract, is ambigu-
ous.
Contrary to the County’s argument, looking at how the
term “agreement” is used in other places within the insur-
ance contract does clear up this ambiguity, and it certainly
does not lead us to the conclusion that the arbitration
provision is itself an “agreement.” The County points to
these two examples from the insurance contract: Paragraph
B (“Changes”) of the “Common Policy Conditions” states
that “[t]his policy contains all the agreements between you
and us concerning the insurance afforded.” Paragraph O of
the “Conditions” section (which is a subpart of the public
entity liability coverage) states that “[i]t is understood and
agreed that this policy embodies all agreements between
the Company and the Insured relating to this insurance.”
At most, these examples show that the parties intended the
insurance contract to be integrated and supercede any
previous “agreements”—such as oral or written assurances
made during negotiation of the contract. Cf. Vigortone AG
Prods., Inc. v. PM AG Prods., Inc., 316 F.3d 641, 644 (7th
Cir. 2002) (“[A]n integration clause prevents a party to a
contract from basing a claim of breach of contract on
agreements or understandings, whether oral or written,
that the parties had reached during the negotiations that
eventuated in the signing of a contract but that they had
not written into the contract itself.”); Much v. Pac. Mut. Life
Ins. Co., 266 F.3d 637, 640 (7th Cir. 2001) (considering an
integration clause stating, “This contract supercedes all
previous contracts and agreements between [CICI] and
16 No. 04-4223
[Pacific Mutual] made for the procurement of insurance
products”).
Additionally, the County maintains that because the term
“policy” refers to the insurance contract as a whole, the
term “agreement” cannot also refer to the insurance
contract as a whole. This is debatable. Even if “agreement”
didn’t refer to the insurance contract as a whole, it could
refer to some other, smaller section of the insurance
contract—not just to the arbitration provision itself. We
agree with ICW that there is no indication that the arbitra-
tion provision (Condition N of the public entity liability
coverage) is a separate “agreement” between the parties.
Nor is there any indication that the arbitration provision
was negotiated or considered separately from the rest of the
insurance contract.
We are also persuaded by ICW’s argument that the
County’s reading of “agreement” narrows the arbitration
provision beyond what would be a logical result. Under the
County’s reading of the insurance contract, only the arbitra-
tion procedures themselves, in addition to whether to settle
and in what amount, would be arbitrable issues. No
disputes arising under the policy concerning coverage or
defense would be arbitrable. Although this result may be
what the parties intended, it certainly is not clear from the
plain language of the arbitration provision.
As this Court has stated, “[w]hether an issue is subject to
arbitration is a simple matter of contract interpretation. If
the contract is ambiguous, ‘doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration.’ ”
Welborn Clinic v. MedQuist, Inc., 301 F.3d 634, 639 (7th
Cir. 2002) (internal citation omitted); see also id. (“[A] court
should compel arbitration ‘unless it may be said with
positive assurance that the arbitration clause is not suscep-
tible of an interpretation that covers the asserted dis-
pute . . . .’ ” (internal citation omitted)); Cont’l Cas. Co. v.
No. 04-4223 17
Am. Nat. Ins. Co., 417 F.3d 727, 731 (7th Cir. 2005) (“[A]s
a matter of federal law, any doubts concerning the scope
of arbitrable issues should be resolved in favor of arbitra-
tion . . . .” (internal citation omitted)). In this case, there is
certainly doubt regarding the scope of the arbitration
clause. It is subject to several reasonable interpretations, of
which the County’s is not the most reasonable. Thus, we
agree with the district court that the parties’ dispute over
the Indeck claim is subject to arbitration.
III. Conclusion
For the foregoing reasons, we AFFIRM the district court’s
order dismissing the County’s complaint.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-24-06