García-Rubiera v. Fortuño
| Decision Date | 02 December 2011 |
| Docket Number | No. 10–2507.,10–2507. |
| Citation | 665 F.3d 261 |
| Parties | Gladys GARCÍA–RUBIERA; Domingo A. Corporan–Suárez; Adalberto Rodríguez; Lourdes Matos; José R. Maldonado; José Pérez–Canabal; Manuel Molina–Godínez; David Castro; Adalberto Avilés; Jorge Plard; Laura Plard–Ocasio; Ginova Toro–Morales; Noemí Valentín–Marrero, Plaintiffs, Appellants, v. Luis G. FORTUÑO, Governor; Juan Carlos Puig–Morales, Treasury Secretary, Defendants, Appellees, Juan Antonio Flores–Galarza; Sila María Calderón, Defendants. |
| Court | U.S. Court of Appeals — First Circuit |
OPINION TEXT STARTS HERE
A.J. Amadeo Murga, for appellants.
Miguel A. Rangel–Rosas, with whom Angel E. Rotger–Sabat, and Maymí, Rivera & Rotger, P.S.C., were on brief, for appellees.
Before LYNCH, Chief Judge, TORRUELLA and THOMPSON, Circuit Judges.
At stake in this case are the due process rights of privately-insured motor vehicle owners in Puerto Rico to over $100 million in insurance payments, which have been collected by the Commonwealth, and are owed back as reimbursement to these vehicle owners, but which have not been repaid and have been used instead for the Commonwealth's general budget.
Puerto Rico law requires all motor vehicle owners to pay for compulsory, state-issued automobile insurance when they purchase or renew their vehicle registrations, even if they have obtained equivalent private insurance, with limited exceptions. P.R. Laws Ann. tit. 26, § 8051 et seq. As a result, many vehicle owners who have already paid for private insurance must pay again for the same coverage through the Commonwealth. By law, these privately-insured vehicle owners (“insureds”) who pay twice for insurance coverage are entitled to reimbursements of the duplicate, state payments. Id. § 8055(n). For two years after the date of payment, insureds may seek reimbursement from their private insurers. However, a great deal of the money owed to insureds is not returned during this two-year period. Although there is no doubt that insureds have a property interest in the duplicate payments, no statute or regulation provides notice to insureds of how to obtain reimbursement during this two-year period from their respective insurers, and apparently only some insurers provide their insureds with notice of how to obtain reimbursements.
By statute, every two years the Commonwealth transfers to itself the large pool of unreimbursed duplicate payments that have accumulated to the private insurers. Act No. 230 of Sept. 11, 2002, § 2 (). The Commonwealth holds this money in trust for the insureds for another five years, during which insureds can seek reimbursement directly from Puerto Rico's Treasury Department. Id. At the end of the five year period “these funds ... become property of the Commonwealth of Puerto Rico and ... pass to the General Fund of the Commonwealth Treasury.” Id. However, the governing statute does not itself set up a procedure for reimbursement or tell insureds where or how to find such procedures. The statute only requires Puerto Rico's Secretary of the Treasury to issue a procedure for reimbursement.
The Secretary of the Treasury has established such a procedure, but has failed to give insureds notice of the contents of that procedure or where to find it. In fact, insureds will not find it unless they go in person to the proper office of government and make an “appropriate request” for a copy of the regulation.
In addition to receiving no notice about the Commonwealth's procedures for reimbursement, insureds receive no individual notice that their duplicate payments have been transferred from their private insurers to the Commonwealth, or that they may apply directly to the Secretary of the Treasury for reimbursement after this transfer. They also receive no individual notice that their duplicate payments will escheat to the Commonwealth after five years, and so be permanently lost to them.
A class of insureds owed reimbursement challenged the Commonwealth's compulsory insurance scheme in both Puerto Rico's courts and federal court. In this federal suit, the insureds claim, inter alia, that the compulsory insurance scheme violates the fundamental requirements of procedural due process. The Puerto Rico suit, which has been stayed in favor of this suit, makes the additional claim that the Commonwealth has breached its fiduciary duties as trustee of the duplicate premiums on behalf of insureds.
We agree that the Commonwealth of Puerto Rico has violated the notice requirements of the Due Process Clause and direct entry of a declaratory judgment and injunctive relief to that effect. We reject plaintiffs' remaining federal claims. The question of whether the Commonwealth has violated its fiduciary duties to plaintiffs under Puerto Rico trust law remains before the Puerto Rico courts.
In 1995, Puerto Rico passed Law 253, which requires all motor vehicles traveling on public roads to obtain liability insurance. P.R. Laws Ann. tit. 26, § 8051 et seq. Pursuant to Law 253, the owners of such vehicles are required to purchase either the Commonwealth's liability insurance plan or an equivalent private insurance plan. Thus, at the time they acquire and each subsequent year when they renew their vehicle registrations, vehicle owners must either pay premiums (of $99 for private and $148 for commercial vehicles) to the Commonwealth, id. § 8053(a), or opt-out of the Commonwealth's insurance plan by using the appropriate procedures to present proof of private insurance, id. § 8061(a).
Law 253 also created the Asociación de Suscripción Conjunta del Seguro de Responsabilidad Obligatorio (“JUA”) to administer the Commonwealth's insurance plan. Id. § 8055. Composed of and operated by Puerto Rico's largest private insurance companies, JUA insures vehicle owners who buy the Commonwealth's insurance product. Id. § 8055(b). Periodically, the Commonwealth remits to JUA the insurance premiums paid in by vehicle owners, which JUA then uses or distributes among its member companies. Id. § 8055(c), (e), amended by Act 201 of Dec. 29, 2009, art. 4.
The Commonwealth insurance option provides only minimal coverage to vehicle owners (initially $3,000, but later increased to $4,000, worth of coverage for property damage to other vehicles); thus, many drivers obtain private liability insurance for more complete coverage. Id. § 8052(j), amended by Act 201 of Dec. 29, 2009, art. 2. Under Law 253, drivers who obtain private insurance with coverage “similar to or greater than that of the compulsory liability insurance” are not required to pay for state insurance on top of their private insurance, and may opt out of the state insurance option. Id. § 8061.
Puerto Rico's Insurance Commissioner has enacted varying procedures over the years designed to help these privately- insured vehicle owners avoid paying for both private and state insurance, but, in fact, a substantial percentage of privately-insured vehicle owners have not utilized these procedures successfully and so have been required to pay the state premium on top of their private insurance.1 In 2000, for example, only one-third of privately-insured vehicle owners successfully avoided paying the state premium, and the remaining two-thirds had to pay for both private and state insurance.
By law, when an insured pays twice, he or she is entitled to a reimbursement of the state premium fee. The Insurance Commissioner has promulgated regulations to this effect which direct private insurers to first reimburse their insureds who pay twice, and then seek their own reimbursement from JUA. However, the Commissioner's regulations do not establish a uniform procedure for reimbursement or instruct insureds on precisely how to obtain reimbursement, but merely indicate that the insurance companies may establish their own internal reimbursement procedures.
These internal procedures for reimbursement vary from one insurer to the next. Significantly, the Insurance Commissioner's regulations instruct insurers to reimburse insureds where “the insured provides evidence that the payment was made [to the Commonwealth],” Amendment to Regulation No. 5737, art. 5(a) (Sept. 14, 2000), but do not further delineate what constitutes this evidence of payment, and do not require insurers to notify their insureds of the proper procedures for proving payment or for obtaining reimbursements in general. As a consequence, many insureds (in some years, a majority of insureds) do not receive their reimbursements from their insurers and their duplicate payments simply remain in the custody of JUA.
The sums JUA has accumulated from this state of affairs are truly enormous. By 2000, just three years after Law 253 went into effect, see Act 253 of Dec. 27, 1995, § 16, JUA had accumulated $72 million worth of duplicate premiums which had not been reimbursed, a figure representing 42% of the total amount that should have been reimbursed by insurers to their insureds. Of this $72 million, $24 million was owed to insureds who had made duplicate payments that year, but the remaining $42 million represented a backlog of unreimbursed payments from the previous two years. By 2001, this sum had grown to almost $92 million.
By law, JUA is required to keep all duplicate premium payments separate from other funds in a special “Reserve” account. Each year, JUA calculates how much money to place in this Reserve account by estimating what percentage of the total number of premium payments received will be “claimed” as duplicate payments by vehicle owners who are privately insured but who end up paying twice. Typically, JUA estimates that 13% to 15% of the total number of premium payments received each year are in fact duplicate payments made by privately-insured vehicle owners.
In most years, fewer insureds claim reimbursements than expected. JUA thus designates some portion of the Reserve account as “excess,” or money that will...
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