UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CASSANDRA DIANNE JACKSON,

Plaintiff-Appellee,

v.

BUILDERS TRANSPORT, INCORPORATED,

a Virginia corporation, No. 95-2983

Defendant-Appellant,

and

HARVEY L. DONAHUE,

Defendant.

Appeal from the United States District Court

for the Northern District of West Virginia, at Clarksburg.

Irene M. Keeley, District Judge.

(CA-92-13)

Argued: July 8, 1996

Decided: August 2, 1996

Before WILKINSON, Chief Judge, HAMILTON, Circuit Judge,

and JOSEPH F. ANDERSON, JR., United States District Judge for

the District of South Carolina, sitting by designation.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Alan M. Gelb, FISCHBEIN, BADILLO, WAGNER,

HARDING, New York, New York, for Appellant. Barry M. Hill,
GOMPERS, MCCARTHY, HILL & MCCLURE, Weirton, West Virginia, for Appellee. ON BRIEF: Pamela Phillips, FISCHBEIN,

BADILLO, WAGNER, HARDING, New York, New York; John E.

Busch, BUSCH & TALBOTT, Elkins, West Virginia, for Appellant.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

Cassandra Dianne Jackson (Jackson) brought this action against

Builders Transport, Inc. (BTI), a long-distance trucking company, and

Harvey L. Donahue (Donahue), a truck driver employed by BTI.

Jackson sought damages for personal injuries resulting from an accident that occurred as she was riding in a BTI truck being driven by

Donahue. BTI appeals from a $500,000 judgment entered in favor of

Jackson. We affirm.

I.

In 1991, while on a driving trip for BTI, Donahue met Jackson at

a truck stop in Houston, Texas. Although BTI had a written policy

prohibiting drivers from carrying passengers, Donahue allowed Jackson to ride with him for several weeks. On November 22, 1991, as

he was driving along a mountain road near Elkins, West Virginia,

Donahue lost control of the truck, causing the truck to plummet down

the side of a mountain. The accident rendered Jackson a quadriplegic.1

At the time of the accident, BTI was self-insured for bodily injury

and property damage liability up to $500,000. For liability in excess

of $500,000, BTI had an insurance policy issued by Insurance Company of North America (INA) that provided $14,500,000 of coverage

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1 Jackson has regained some use of her arms.

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over the self-insured limit of $500,000. Before the accident occurred,

the Interstate Commerce Commission (ICC) had authorized BTI to

self-insure the first $500,000 of its bodily injury and property damage

liability under 49 U.S.C. § 10927.2 BTI also received permission from

the West Virginia Public Service Commission (PSC) to satisfy West

Virginia's financial responsibility requirements through self-insurance.3

Jackson brought this action in United States District Court for the

Northern District of West Virginia,4 alleging that the accident

occurred while Donahue was acting within the scope of his employment with BTI and that the accident resulted from Donahue's negligence. Jackson demanded judgment against Donahue and BTI in an

amount in excess of $5,000,000. BTI moved for summary judgment,

arguing that it was not vicariously liable to Jackson for Donahue's

negligence because Donahue violated BTI's rules in allowing Jackson

to ride with him. The district court denied the motion.

At the hearing on BTI's summary judgment motion, a question

arose regarding whether BTI's self-insurance constituted coverage for

Donahue even if BTI was not vicariously liable for Donahue's negligence. BTI asserted that its self-insurance did not constitute such coverage. Because the West Virginia Supreme Court of Appeals had

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2 Under 49 U.S.C. § 10927, motor carriers must file with the ICC a certificate of insurance, proof of qualifications as a self-insurer, or some

other form of security in order to obtain a permit to provide interstate

transportation services. See 49 U.S.C. §§ 10923, 10927; 49 C.F.R.

§§ 1043.1 to .5. The ICC required BTI to have a minimum of $750,000

of liability coverage. See Jackson v. Donahue , 457 S.E.2d 524, 531 (W.

Va. 1995).

3 West Virginia law requires all owners of motor vehicles to maintain

"proof of financial responsibility," i.e. , liability insurance in the minimum amounts of $20,000 for injury to one person and $40,000 for injury

to more than one person arising out of one accident. See W. Va. Code

§§ 17D-2A-3, 17D-4-2. At the time BTI obtained permission to selfinsure, the West Virginia PSC required motor carriers to obtain liability

insurance in the minimum amounts of $50,000 for injury to one person

and $100,000 for injury to more than one person arising out of one accident. See Jackson, 457 S.E.2d at 531.

4 Jurisdiction was based on diversity of citizenship. See 28 U.S.C.

§ 1332.

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never addressed the question of whether, under West Virginia law, a

self-insured employer owes insurance coverage to its employees

regardless of vicarious liability, the district court indicated that it

would be inclined to certify this question to the West Virginia

Supreme Court of Appeals.

Although BTI disputed whether its self-insurance provided coverage for Donahue's negligence, INA acknowledged that the insurance

policy it issued to BTI provided coverage for Donahue's negligence,

but only for damages in excess of $500,000 and then only to the policy limits. Accordingly, after the summary judgment hearing, INA

negotiated a settlement agreement with Jackson. Although BTI was

not a party to the settlement agreement, it is apparent that the settlement agreement was negotiated as part of an effort among all the parties and the district court to isolate questions that would be certified

to the West Virginia Supreme Court of Appeals. The district court

entered an order summarizing the settlement agreement as follows:

A settlement has been reached between the plaintiff and

[INA] for payment of $2 million on behalf of the defendant[s]. This $2 million is a settlement for the amount of the

plaintiff's claim against the defendants which exceeds

$500,000.00. Defendant BTI is self-insured for the first

$500,000.00 of the plaintiff's claim, and the plaintiff's entitlement to this first $500,000.00 is an issue yet to be

resolved. In essence the settlement represents a compromise

of the amount of the plaintiff's damages at $2.5 million,

with the $2 million in excess of BTI's self-insurance being

paid now, and with the plaintiff's entitlement to the first

$500,000.00 to be determined as an issue of law in the

future. The $2 million settlement will release [INA] and

defendant Donahue completely from liability to the plaintiff,

and it will release defendant BTI from liability in excess of

its $500,000.00 of self-insurance.

(J.A. 333-34). With Donahue and INA thus removed from the case,

attorneys for BTI and Jackson, along with the district court, devised

two questions to be certified to the West Virginia Supreme Court of

Appeals:

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1. Under West Virginia law, does a foreign commercial

trucking company which has been granted authority to selfinsure its automobile liability exposure in West Virginia

owe coverage to an employee irrespective of vicarious liability?

If the answer to question 1 is yes, then:

2. Where there is up to $500,000 in self-insurance available, is the extent of the company's coverage obligation limited to the dollar amounts [i.e., $20,000] provided for in [W.

Va. Code § 17D-4-2]?

Jackson, 457 S.E.2d at 526-27.

The West Virginia Supreme Court of Appeals answered the first

question in the affirmative, holding in effect that BTI must provide

insurance coverage for Donahue for this accident. See id. at 530. The

court then answered the second certified question in the negative,

holding that the extent of BTI's coverage obligation was not limited

to $20,000. Id. at 532.

After the West Virginia Supreme Court of Appeals rendered its

decision, Jackson filed a motion in the district court for entry of judgment in the amount of $500,000 against BTI. BTI moved to dismiss

the case, or in the alternative, for a determination that BTI's liability

to Jackson was limited to $20,000, rather than $500,000. The district

court denied BTI's motion to dismiss and granted Jackson's motion

to enter judgment in the amount of $500,000 against BTI, rejecting

BTI's argument that the judgment amount should be limited to

$20,000. BTI appeals, arguing that the district court erred in entering

judgment in the amount of $500,000.5

II.

At the outset, we note that by agreeing to submit the second certified question to the West Virginia Supreme Court of Appeals, BTI

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5 BTI does not appeal the denial of its motion to dismiss.

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agreed to allow that court to determine, as a matter of West Virginia

law, the amount of insurance coverage it was required to provide for

Donahue's negligence. By answering the second certified question in

the negative, the West Virginia Supreme Court of Appeals signified

that BTI, as an insurer, was obligated to provide $500,000 of insurance coverage for Donahue's negligence. Because federal courts sitting in diversity must apply state law on state law matters, see Erie

R. Co. v. Tompkins, 304 U.S. 64, 77 (1938), we are bound to enforce

the West Virginia Supreme Court of Appeals' decision.

BTI argues that we are not bound by the decision of the West Virginia Supreme Court of Appeals because that court did not base its

decision on West Virginia law, but rather on an erroneous application

of federal law. More specifically, BTI posits that the West Virginia

Supreme Court of Appeals based its decision on an erroneous application of federal preemption principles, and that because federal courts

are not bound by state court determinations regarding federal preemption, see Grantham v. Avondale Indus., 964 F.2d 471, 473-74 (5th Cir.

1992), this court is free to disregard the West Virginia Supreme Court

of Appeals' answer to the second certified question. To evaluate this

argument, it is necessary to review the reasoning used by the West

Virginia Supreme Court of Appeals in answering the second certified

question.

The second certified question simply asked whether the extent of

BTI's insurance obligation was limited to the dollar amount, i.e.

$20,000, provided for in W. Va. Code § 17D-4-2. To answer this

question, the West Virginia Supreme Court of Appeals began its analysis by recognizing that W. Va. Code § 17D-4-2 required liability

insurance in the minimum amount of $20,000 for personal injuries to

one person and that a regulation of the PSC applicable to motor carriers required liability insurance in the minimum amount of $50,000 for

personal injuries to one person. Jackson, 457 S.E.2d at 531. The court

went on to reject the contention that these amounts constituted caps

on the extent of BTI's liability. Id. at 532. In reaching this conclusion,

the court was influenced by the fact that "in granting self-insurer status to BTI, the Public Service Commission weighed substantially"

BTI's compliance with the federal minimum requirement of

$750,000. Id. at 531. Indeed, the PSC piggybacked on to the federal

requirements by requiring BTI to provide the PSC with "`any and all

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supplementary information that it provides to the ICC on the same

time basis.'" Id. The court was further influenced by the fact that in

pursuit of permission to self-insure, BTI informed the PSC that the

ICC had authorized BTI to self-insure and that BTI"`will self-insure

its bodily injury and property damage liability to a level of

$500,000.'" Id. The court concluded:

Obviously, BTI was operating in interstate commerce

during the period in question and could not have done so

without complying with the federal requirements. It was

self-insured in other states, in addition to West Virginia.

Accordingly, we hold that a foreign commercial trucking

corporation operating in interstate commerce pursuant to a

federal regulatory scheme, which provides federal minimum

limits of liability coverage, is not subject to the[liability]

limits set forth in W. Va. Code, 17D-4-2 [which provides a

$20,000 limit], concerning this State's financial responsibility provisions, even though the corporation was granted

authority to self-insure by the West Virginia Public Service

Commission. Therefore, we answer the second certified

question in the negative.

Id. at 532.

Accordingly, the West Virginia Supreme Court of Appeals concluded that, as a matter of state law, BTI's obligation to provide insurance coverage was not limited to $20,000 because the decision to

grant BTI permission to self-insure under state law was based on the

existence of the federal minimum requirements and the fact that BTI

informed the PSC that the ICC had authorized BTI to self-insure the

first $500,000 of its bodily injury and property damage liability under

49 U.S.C. § 10927.

An unpublished order certifying the case back to the district court

states that the West Virginia Supreme Court of Appeals answered the

second certified question by finding that "federal minimum limits of

liability coverage imposed on foreign commercial trucking corporations operating in interstate commerce preempt general state minimum limits of liability coverage set forth in W. Va. Code § 17D-4-2

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. . . ." (J.A. 368). This order was signed by the clerk of the West Virginia Supreme Court of Appeals.

Seizing on the word "preempt" in the order certifying the case back

to the district court, BTI argues that the West Virginia Supreme Court

of Appeals based its answer to the second certified question on federal preemption tenets rather than on West Virginia law. Our review

of the West Virginia Supreme Court of Appeals' decision, however,

convinces us that the court did not base its decision on federal preemption. At no point did the court use the words"preempt" or "preemption," cite cases concerning federal preemption, or in any way

discuss federal preemption tenets. Instead, the court emphasized the

factors relied on by the West Virginia PSC in allowing BTI to selfinsure, including the crucial factor that BTI had complied with the

ICC requirements to self-insure. Considering that the PSC "weighed

substantially" BTI's compliance with the higher ICC requirements for

self-insurance, even to the point of ordering BTI to file copies of any

documents it filed with the ICC to the PSC, the court reasoned that

the PSC did not intend for BTI's obligation to provide coverage to be

limited by the West Virginia statutory or regulatory minimum

requirements. As the court stated, "In essence, the PSC granted BTI,

as a self-insured entity, permission to carry bodily injury liability

insurance in the amount of $14,500,000 (with its excess liability carrier) and $500,000 in primary self-insurance for total coverage in the

amount of $15,000,000." Jackson, 457 S.E.2d at 526 n.3.

Viewed in the context of the court's emphasis in its published opinion on the factors relied on by the PSC in allowing BTI to self-insure,

the lone reference to the word "preempt" in the unpublished order certifying the case back to the district court is of no import. The clerk's

use of the word "preempt" did not imply that the federal minimum

requirements preempt state minimum requirements as a matter of federal law because the West Virginia Supreme Court of Appeals clearly

did not rely on preemption in answering the certified questions.

Rather, properly understood, the clerk's use of the word "preempt"

was a shorthand way of stating that the federal minimum requirements, coupled with the ICC's authorization for BTI to self-insure the

first $500,000 of its bodily injury and property damage liability, provided the cap on BTI's liability under West Virginia law.

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Because the West Virginia Supreme Court of Appeals based its

answer to the second certified question on West Virginia law, we are

bound to enforce that court's decision. See Erie , 304 U.S. at 77.

Accordingly, we affirm the district court's entry of judgment in the

amount of $500,000 in favor of Jackson.

AFFIRMED

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