Opinion ID: 629186
Heading Depth: 2
Heading Rank: 3

Heading: Clear Error and Manifest Injustice

Text: 14 Liberty does not contest the correctness of the prior panel's decision that Arkansas Transportation Commission Rule 13.1 applies to its insurance of Head, or that Rule 13.1 operates to void the application to States of any policy defense Liberty may have against Head. See Liberty I, 940 F.2d at 1181-82; Special Rules Governing Carriers before the Arkansas State Highway Commission, Rule 13.1 (1984) (Arkansas Transportation Commission Rule 13.1). Instead, it argues that its Arkansas endorsement, in conjunction with Rule 13.1, limits its liability to $25,000. Liberty is mistaken. Rule 13.1 states, in pertinent part: 15 In consideration of the premium stated in the policy to which this endorsement is attached, the company hereby waives a description of the motor vehicles to be insured hereunder, and agrees to pay final judgment for personal injury, including death, resulting therefrom ... caused by any and all motor vehicles operated by the assured whether ... it be an additional, substitute or emergency vehicle operated under any certificate, license, or permit by any order or rules of the Arkansas Transportation Commission within the limits of the schedule hereinafter set out, and further agrees that upon its failure to pay such final judgment, such judgment creditor may maintain an action in any court of competent jurisdiction to compel such payment. Nothing contained in the policy or any endorsement thereon, nor violation of any of the provisions, by the assured, shall relieve the company from the liability hereunder or from the payment of such judgment. 16 The liability of the company shall be the damage sustained to persons or property within the limits of the schedule set out below, except that the insured may file a policy with the limits of the liability greater than the minimum as set out in the schedule. 17 Arkansas Transportation Commission Rule 13.1 (emphasis added). 18 The rule shifts the risk of an insured's misconduct vis-a-vis an insurer away from the injured third party and leaves that risk between the insured and the insurer. The net effect of the rule is to put the risk of a judgment-proof insured violating a condition of the insurance policy on the insurer, rather than on the injured third party. This rule is eminently reasonable, for the insurer can screen its insureds for poor risks, both as to accidents and as to compliance with policy duties, and can adjust its rates accordingly. This risk assessment and risk spreading is the heart of the insurance business. In contrast, injured third parties have no control over the circumstances of their encounter with the insured. 19 Liberty's Arkansas endorsement reads, in pertinent part: 20 The certification of the policy, as proof of financial responsibility under the provisions of any State motor carrier law or regulations promulgated by any State Commission having jurisdiction with respect thereto, amends the policy to provide insurance for automobile bodily injury and property damage liability in accordance with the provisions of such law or regulations to the extent of the coverage and limits of liability required thereby; provided only that the insured agrees to reimburse the company for any payment made by the company which it would not have been obligated to make under the terms of this policy except by reason of the obligation assumed in making such certification. 21 Appellee's Addendum, p. 8 (emphasis added). 22 Construing this endorsement in its statutory context, and in view of Rule 13.1's objective to assure recovery to injured third parties, the prior panel's interpretation of both the rule and the endorsement as providing minimums and not maximums is correct. 23 Since the prior panel opinion was correct, we need not consider whether it was manifestly unjust to hold Liberty liable up to its $1,000,000 policy limit when Rule 13.1 operated to void a policy defense. However, were we to reach the question, our prior discussion of the risk-shifting purpose of Rule 13.1 coupled with Arkansas's canons of insurance contract interpretation and the split among the states as to whether policy or statutory minimum limits of liability apply in similar cases, all preclude finding the result unjust. See Nichols v. Anderson, 837 F.2d 1372, 1375 (5th Cir.1988) (states split on what limits apply in somewhat similar situations). Therefore, nearly ten years after Randall States' death, we affirm the district court's order that Liberty pay States damages of $377,796.65.