DeMario et al v. Lamadrid-Maldonado et al

Filing 312

OPINION AND ORDER: For the reasons set forth in this Opinion and Order, Plaintiffs' Motion for Summary Judgment at Docket No. 163 is DENIED IN PART and GRANTED IN PART; ACE's Motion for Summary Judgment at Docket No. 249 is < b>GRANTED IN PART and DENIED IN PART. Plaintiffs' claims against ACE in its capacity as PREPA's insurer are DISMISSED WITH PREJUDICE. Plaintiffs' claims against ACE for their emotional damages and mental anguish are DI SMISSED WITH PREJUDICE. However, Plaintiffs' claims for reimbursement of funeral and medical costs against ACE in its capacity as insurer of the Commonwealth of Puerto Rico remain pending. Signed by Judge Raul M. Arias-Marxuach on 1/18/2023.(mrr)

Case 3:16-cv-02897-RAM Document 312 Filed 01/18/23 Page 1 of 25

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

DINO DEMARIO, et al.
Plaintiffs
v.

CIVIL NO. 16-2897(RAM)

ANTHONY LAMADRID-MALDONADO, et al.
Defendants
OPINION AND ORDER
RAÚL M. ARIAS-MARXUACH, District Judge
This matter comes before the Court on Dino DeMario and Cheryl
Steele (collectively “Plaintiffs”) and co-defendant ACE Insurance
Company’s (“ACE”) cross-motions for summary judgment (Docket Nos.
163

and

249,

respectively).

Having

reviewed

the

parties’

submissions (Docket Nos. 163, 164, 208, 215, 240, 243, 249, 262,
270) and the record as a whole, the Court DENIES IN PART and GRANTS
IN

PART

Plaintiffs’

Motion

for

Summary

Judgment

requesting

declaratory judgment at Docket No. 163, as well as GRANTS IN PART
and DENIES IN PART ACE’s Motion for Summary Judgment at Docket No.
249.
I. BACKGROUND
Dino DeMario and Cheryl Steele (collectively "Plaintiffs")
are the parents of the late Nicholas DeMario. (Docket No. 99 ¶¶ 34). On November 1, 2015, Nicholas DeMario was assisting his friends

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2

with pushing their vehicle, a Mazda Protege with license plate
number 1KG-492, which had suffered a mechanical breakdown on a
road in the Municipality. Id. ¶ 16. Anthony Lamadrid-Maldonado
(“Lamadrid”) was driving a Mitsubishi Eclipse with license plate
number

GLG-871

in

the

same

direction.

Id.

¶

17.

Lamadrid’s

Mitsubishi hit the rear end of the Mazda and Nicholas DeMario was
pronounced dead at the scene. Id.
On October 31, 2016, Plaintiffs filed a lawsuit against
Lamadrid,

the

Municipality,

the

Puerto

Rico

Electric

Power

Authority (“PREPA”), the Puerto Rico Highway and Transportation
Authority (“PRHTA”), and unnamed insurance companies, seeking
emotional damages as well as medical and funeral expenses caused
by the loss of their son. (Docket No. 1). Plaintiffs subsequently
filed three (3) amended complaints incorporating as co-defendants
various insurance companies, including Triple-S. (Docket Nos. 2 ¶
10;

61

¶¶

11-12;

99

¶

13).

Specifically,

in

the

operative

complaint, i.e., Plaintiffs’ Third Amended Complaint, they allege
that ACE was the liability insurer of co-defendants PREPA and the
Commonwealth of Puerto Rico, and as such is “jointly and severally
liable for the damages caused to the plaintiffs” by its insured.
(Docket No. 99 ¶¶ 12, 36). Plaintiffs assert their emotional
damages exceed ten million dollars ($10,000,000.00), whereas the
medical and funeral expenses incurred amount to more than fifteen
thousand dollars ($15,000.00). Id. ¶¶ 41, 43.

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3

Plaintiffs subsequently filed a Motion for Summary Judgment
seeking declaratory relief. (Docket No. 163). Namely, Plaintiffs
request that the Court declare that: (a) both PREPA and the
Commonwealth of Puerto Rico are named insureds under the insurance
policy issued by ACE (the “Policy”); (b) the Policy provides
coverages for direct actions; (c) the Policy will drop down in the
event of the reduction or exhaustion of the underlying limit, such
as aggregate limit of the underlying insurance provided by MAPFRE
to the Commonwealth of Puerto Rico; and (d) that in the event of
such a drop down, the amount of damages need not exceed $1,000,000.
Id. at 20-21. ACE filed an opposition, to which Plaintiffs replied,
ACE sur-replied, and Plaintiffs replied again. (Docket Nos. 208,
215, 240, and 243).
On its part, ACE filed a separate Motion for Summary Judgment.
(Docket No. 249). ACE seeks declaratory judgment holding that its
obligation to pay, if any, is contingent on the insured paying an
out of pocket $1,000,000 self-insured retention as well as a
$1,000,000 deductible, and that the Policy does not drop down due
to the insured’s inability to pay. Id. at 10-13. ACE also requests
dismissal of Plaintiffs’ claims against it as the insurer of the
Commonwealth of Puerto Rico and of Plaintiffs’ claims for emotional
trauma and mental anguish. Id. at 16. In particular, it avers
dismissal as to the latter claims is proper because they are not

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Civil No. 16-2897 (RAM)
covered

by

the

4

Policy.

Id.

Plaintiffs

filed

a

response

in

opposition and ACE filed a reply. (Docket Nos. 270).
Lastly, on January 18, 2023, the Court issued an Opinion and
Order dismissing Plaintiffs’ claims against PREPA, ACE’s insured.
(Docket No. 311).
II. LEGAL STANDARD
Summary judgment is proper under Fed. R. Civ. P. 56(a) if a
movant shows “no genuine dispute as to any material fact” and that
they are “entitled to judgment as a matter of law.” A genuine
dispute exists “if the evidence about the fact is such that a
reasonable jury could resolve the point in favor of the non-moving
party.” Alicea v. Wilkie, 2020 WL 1547064, at *2 (D.P.R. 2020)
(quotation omitted). A fact is material if “it is relevant to the
resolution of a controlling legal issue raised by the motion for
summary judgment.” Bautista Cayman Asset Co. v. Terra II MC & P,
Inc., 2020 WL 118592, at *6 (D.P.R. 2020) (quotation omitted).
The party moving for summary judgment “bears the initial
burden of showing that no genuine issue of material fact exists.”
Feliciano-Munoz v. Rebarber-Ocasio, 2020 WL 4592144, at *6 (1st
Cir. 2020) (citation omitted). Whereas the non-movant may “defeat
a summary judgment motion by demonstrating, through submissions of
evidentiary quality, that a trialworthy issue persists.” Robinson
v. Town of Marshfield, 950 F.3d 21, 24 (1st Cir. 2020) (quotation
omitted). However, it “cannot merely ‘rely on an absence of

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Civil No. 16-2897 (RAM)

5

competent evidence, but must affirmatively point to specific facts
that

demonstrate

the

existence

of

an

authentic

dispute.’”

Feliciano-Munoz, 2020 WL 4592144, at *6 (quoting McCarthy v. Nw.
Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995)). Solely relying
on “conclusory allegations, improbable inferences, and unsupported
speculation” is insufficient to defeat summary judgment. River
Farm Realty Tr. v. Farm Family Cas. Ins. Co., 943 F.3d 27, 41 (1st
Cir. 2019) (quotation omitted).
Local Rule 56 also governs summary judgment. See L. CV. R.
56. Per this Rule, a nonmoving party must “admit, deny or qualify
the facts supporting the motion for summary judgment by reference
to each numbered paragraph of the moving party’s statement of
material facts.” Id. The First Circuit has stated that adequately
supported facts “shall be deemed admitted unless controverted in
the

manner

prescribed

by

the

local

rule.”

Advanced

Flexible

Circuits, Inc. v. GE Sensing & Inspection Techs. GmbH, 781 F.3d
510, 520 (1st Cir. 2015) (quotation omitted). Hence, “litigants
ignore Local Rule 56 at their peril.” Calderón Amézquita v. Vices,
2019 WL 3928703, at *1 (D.P.R. 2019) (citation omitted).
III. FINDINGS OF FACT
After

analyzing

Plaintiffs’

Statement

of

Material

Facts

(Docket No. 164), ACE’s Reply Statement of Material Facts (Docket
No. 208-1), ACE’s Statement of Material Facts (Docket No. 249-1),
and Plaintiffs’ Opposing Statement of Material Facts (Docket No.

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Civil No. 16-2897 (RAM)
262-1),

and

only

crediting

6
material

facts

that

are

properly

supported by a record citation and uncontroverted, the Court makes
the following findings of facts:1
1.

ACE

Insurance

Company

(“ACE”)

issued

a

Commercial

Umbrella Liability, Policy Number 47PR701540, to the Puerto
Rico Electric Power Authority (“PREPA”) (subsequently, the
“Policy”). In consideration of PREPA paying a renewal premium
totaling $1,624,014.00, ACE

renewed

the

Policy

for the

period from July 30, 2015 through July 30, 2016. (Docket Nos.
164 ¶ 2; 249-1 ¶ 1; 87-1 at 1-4).
2.

Pursuant to its Endorsement R, the “extended named insured”
under the Policy is:
PUERTO RICO ELECTRICAL POWER AUTHORITY AND/OR
PREPA NETWORKS LLC, AND/OR PREPA HOLDINGS, LLC
&/OR CONSOLIDATED TELECOMMUNICATIONS OF PR LLC
&/OR INTERAMERICAN ENERGY SERVICES, LLC AND/OR
COMMONWEALTH OF PUERTO RICO, SECRETARY OF THE
TREASURY, C/O PUBLIC INSURANCE BUREAU ANY
SUBSIDIARY, NEWLY ACQUIRED OR CONTROLLED
CORPORATION AND/OR COMPANY AS MAY NOW BE
CONSTITUTED OR HEREAFTER FORMED, AND OVER
WHICH THE NAMED INSURED MAINTAINS OWNERSHIP OR
MAJORITY INTEREST.
(Docket No. 164 ¶ 7) (emphasis added).

3.

On its part, the Special Conditions Endorsement specifies
that ACE’s wording of “broad form named insured” under the
Policy is “PR Electric Power Authority and/or PREPA Networks

1

References to a Finding of Fact shall be cited as follows: (Fact ¶ _).

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Civil No. 16-2897 (RAM)
LLC,

and/or

7

PREPA

Telecommunication

of

Holdings,
PR

LLC

LLC,
&/or

&/or

Consolidated

Interamerican

Energy

Service, LLC and/or Commonwealth of Puerto Rico, Secretary
of the Treasury, c/o Public Insurance Bureau.” Id. ¶ 8.
4.

This endorsement clarifies that the inclusion of more than
one entity as a named insured does not affect their right
with respect to any claim against them, and that:
This policy shall insure each corporation,
person or organization, firm or entity in the
same manner as though a separate policy had
been issued to each; but nothing herein
contained shall operate to increase the
company’s liability as set forth elsewhere in
this policy beyond the amount or amounts for
which the company would have been liable if
any one person or interest had been named as
insured, unless such named insured acquired
separate primary limits under another policy
when limits will be applied separately and not
jointly for each insured.
Id. ¶ 9 (emphasis added).

5.

Throughout the policy, the words “you” and “your” refer to
the named insured. (Docket No. 249-1 ¶ 11).

6.

The Policy issued by ACE to PREPA is subject to limits of up
to $10,000,000 for each “incident;” a $10,000,000 policy
aggregate; and a “retained limit” or “underlying insurance”
of $1,000,000 for each incident.
a

$1,000,000

deductible

per

Furthermore, the Policy has
occurrence

with

an

annual

aggregate of $2,000,000.00. (Docket Nos. 164 ¶ 3; 249-1 ¶ 2;
87-1 at 1-4, 63-64).

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Civil No. 16-2897 (RAM)
7. The

Policy

defines

8
“incident”

as

“[a]n

occurrence

or

accident, including the continuous or repeated exposure to
substantially the same general harmful conditions when the
term is used in reference to ‘bodily injury’: [sic] and/or
‘property damage.’” (Docket No. 249-1 ¶ 12).
8.

“Retained Limits” are defined thereunder as meaning either:
a.
The total limits of insurance available
for injury or damage arising out of an
“incident”
covered
by
the
“underlying
insurance”; or
b.
The limit shown as the “Retained Limit”
on the Declarations for injury or damage
arising out of and (sic) “incident” not
covered,
except
for
the
exhaustion
of
underlying aggregate limits of insurance, by
the “underlying insurance,” but covered in
this policy.
(Docket Nos. 164 ¶ 13; 87-1 at 30).

9.

The Policy defines “underlying insurance” as “any insurance
policies available to any insured (whether primary, excess,
excess contingent, or otherwise) including but not limited
to, the policies listed and described in the Schedule of
Underlying Insurance and any renewal, replacement and any
Extended Reporting Period(s) of those policies.” (Docket Nos.
164 ¶ 10; 87-1 at 31-32).

10. The Renewal Certificate contains a Schedule of Underlying
Insurance that notes a Self Insured Retention (“SIR”) of

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Civil No. 16-2897 (RAM)

9

$1,000,000 for the General Aggregate and Each occurrence.
(Docket No. 164 ¶ 4).
11. As per Endorsement E of the Policy, titled “Deductible
Liability Insurance,” coverage for Bodily Injury Liability
and Property Damage Liability under the Policy is subject to
a

$1,000,000

aggregate

of

deductible

per

$2,000,000.00.

occurrence

with

Furthermore,

an

the

annual

following

limitation applies to this coverage:
[Ace’s] obligation under the Bodily Injury
Liability and Property Damage Liability
Coverages to pay damages on your behalf
applies only to the amount of damages in
excess to any deductible amounts stated in the
Schedule above as applicable to such coverages
and which are in excess of the “Self Insurance
Retention” stated in the declarations.
(Docket

Nos.

249-1

¶

3;

87-1

at

63-64)

(emphasis

in

original).
12. Per “SECTION VI – DEFINITIONS” of the Policy:
4. “Bodily injury” means:
a. Bodily injury sickness or disease
sustained by a person, including death
resulting from any form of these at
any time
b. Mental anguish sustained by someone
who has suffered a covered “bodily
injury” defined in paragraph 4.a. of
this section.
(Docket Nos. 164 ¶ 10; 249-1 ¶ 13; 87-1 at 28) (emphasis
added).

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10

13. On the other hand, the Policy distinguishes “personal injury”
as an injury not including bodily injury arising out of one
or more of the following offenses: false arrest, detention
or imprisonment, malicious prosecution, wrongful eviction
from, wrongful entry into or invasion of private occupancy
of a room, dwelling or premises that a person occupies by or
on behalf of its owner, landlord or lessor; oral or written
publication of material that slanders or libels a person or
organization

or

disparages

a

person’s

or

organization’s

goods, products or services; or oral or written publication
of material that violates a person’s right of privacy.
(Docket No. 249 ¶ 14).
14. In its relevant part, the Insuring Agreement in Endorsement
X, titled “SIR Endorsement”, provides states that
a. We will pay those sums that the insured
becomes legally obligated to pay as damages
because of “bodily injury” (other than “bodily
injury”
arising
out
of
“personal
and
advertising injury”) or “property damage” to
which this insurance applies, and which are in
excess of the “Self Insured Retention” stated
in the Declarations.
b. This insurance applies to “bodily injury”
and “property damage” only if: (1) The “bodily
injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage
territory”; (2)
The “bodily injury” or
“property damage” occurs during the policy
period; […]
[…]

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11

e. Damages because of “bodily injury” include
damages claimed by any person or organization
for care, loss of services or death resulting
at any time from the “bodily injury”.
No other obligation or liability to pay sums
or perform acts or services is covered unless
explicitly provided for under ALLOCATED
LOSS
ADJUSTMENT EXPENSES - COVERAGES A AND B below,
but we shall have the right and opportunity to
assume from the insured the defense and
control of any claim or “suit”, including any
appeal from a judgment, seeking payment of
damages covered under this policy that we
believe
to
exceed
the
“Self
Insured
Retention”. In such case, the insured shall
cooperate fully. The amount we will pay for
damages are in excess of the “Self Insured
Retention” is limited as described in Section
III - Limits of Insurance.
(Docket Nos. 164 ¶ 5; 249-1, ¶ 4) (emphasis added).
15. SECTION III – LIMITS OF INSURANCE of Endorsement X the Policy
states:

“[t]he

LIMITS

OF

INSURANCE

as

shown

in

the

Declarations shall apply in excess of the “Self Insured
Retention” showed in the Declarations. You agree to assume
payment of the “Self Insured Retention”.” (Docket Nos. 164
¶ 6; 249-1 ¶ 5).
16. SECTION IV – CONDITIONS of Endorsement X establishes that:
In the event of bankruptcy or insolvency of
any insured, or the inability, failure, or
refusal to pay the “Self Insured Retention” by
any insured, we will not be liable under the
policy to any greater extent than we would
have been liable had the insured not become
bankrupt or insolvent or had such inability,
failure or refusal not occurred, and this
policy will not apply as a replacement for the
“Self Insured Retention”. You will continue to

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Civil No. 16-2897 (RAM)

12

be responsible for the full amount of the
“Self Insured Retention” before the limits of
insurance under this policy apply. In no case
will we be required to pay the “Self Insured
Retention” or any portion thereof.
(Docket No. 249-1 ¶ 6).
17. As an additional condition, Endorsement X requires:
The “Self Insured Retention” under this policy
must be satisfied by actual payments by you.
The “Self Insured Retention” shall not be
satisfied by payments by the insured of any
deductible of any other policy or payments
made on behalf of the insured by any other
insurer, person or entity. The “Self Insured
Retention” under this policy shall not be
satisfied
by
any
insurance
coverage
whatsoever. In the event that “bodily injury”,
“property
damage”
and/or
“personal
and
advertising injury” covered by this policy is
also covered by any other insurance, even if
such other insurance is provided by us, the
insured must make actual payments of the “Self
Insured Retention” under this policy without
regard to whether the insured must pay other
“Self Insured Retentions” under any other
policy even if such other policy is issued by
us and even if the damages claimed are deemed
to have been caused by one “occurrence”.
Id. ¶ 7.
18. Per Endorsement M, titled the “No Drop Down Endorsement”
ACE’s liability “shall not be increased by the refusal or
inability of the insured to pay its Self-Insured Retention
(or retained limit) or by the refusal or inability of the
insured

to

pay,

whether

by

the

Reason

of

Insolvency,

Bankruptcy or otherwise.” (Docket No. 87-1 at 72).
19. In

the

event

of

insolvency,

Endorsement

V,

titled

the

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Civil No. 16-2897 (RAM)

13

“Insolvency Clause,” clarifies:
Notwithstanding any of the terms of this
policy which might be construed otherwise,
this policy shall drop down only in the event
of reduction or exhaustion of the underlying
limit and shall not drop down for any other
reason, including, but not limited to,
uncollectibility [sic] (in whole or in part)
of any underlying limits. The risk of
uncollectibility [sic] of such Underlying
Limits (in whole or in part) whether because
of financial impairment or insolvency of an
underlying circumstances insured or assumed by
the insurer.
(Docket No. 249-1 ¶ 9).
20. With

regards

to

how

ACE’s

policy

interacts

with

insurance policies, the Policy provides:
If other valid and collectible Insurance is
available to the insured for a loss we cover
under this policy, this policy is in excess of
and will not contribute to the other insurance
except if the other insurance is written as
excess insurance over the insurance provided
by this policy. When both this insurance and
the other insurance apply to a loss on the
same
basis,
whether
primary,
excess,
contingent, or any other basis, then we will
share with that other insurance by the
following method:
a. If all of the other insurance permits
contribution by equal shares, we will follow
this method also. Under this approach, each
insurer contributes equal amounts until it has
paid its applicable limit of insurance or none
of the loss remains, whichever comes first.
b. If any of the other insurance does not
permit contribution by equal shares, we will
contribute by limits. Under this method, each
insurer’s share is based on the ratio of its
applicable limit of insurance to the total

other

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Civil No. 16-2897 (RAM)
applicable
insurers.

14

limits

of

insurance

of

all

(Docket Nos. 87-1 at 22; 249-1 ¶ 10)
21. On July 2, 2017, PREPA filed a petition under Title III of
PROMESA

with

the

United

States

District

Court

for

the

District of Puerto Rico (Bankruptcy Case No. 17 BK 4780LTS). (Docket No. 249-1 ¶ 15).
22. Although

the

Court

issued

an

order

staying

proceedings

against PREPA, on April 24, 2018, PREPA and Plaintiffs agreed
to a “Stipulation Modifying the Automatic Stay between the
Puerto Rico Electric Power Authority, Dino Dimario and Cheryl
Steele” (the “Stipulation”). (Docket No. 249-1 ¶¶ 18-19).
23. Pursuant to the clear terms of the Stipulation:
The Title III Stay was modified solely to the
limited extent necessary to enable the
Prepetition Action to proceed to judgement
before the District Court; provided, however,
the Title III Stay shall continue to apply in
all other respects to the Prepetition Action,
including, but not limited to, the execution
and enforcement of any judgement, injunction,
any claims for money damages, and provisional
remedies against PREPA, if any, or any other
Title III Debtor.
It is expressly understood by the Requesting
Parties that nothing contained in this
Stipulation shall: (a) require PREPA or any
other Title III Debtor to satisfy or pay any
monies allegedly owed to the Requesting
Parties regarding the claims asserted in the
Prepetition Action; or (b) constitute a
determination of any type of liability or
monetary claim of any kind as to any other
Title III Debtor.

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Civil No. 16-2897 (RAM)

15

(Docket No. 249-1 ¶¶ 20-21; 249-2).
IV. APPLICABLE LAW
A. Declaratory Judgment
The Declaratory Judgment Act (“DJA”) provides that:
In a case of actual controversy within its
jurisdiction ... any court of the United
States, upon the filing of an appropriate
pleading, may declare the rights and other
legal relations of any interested party
seeking such declaration, whether or not
further relief is or could be sought. Any such
declaration shall have the force and effect of
a final judgment or decree and shall be
reviewable as such.
28 U.S.C. § 2201.
It is an enabling act conferring “discretion on the Courts
rather than an absolute right upon the litigant.” Prime Venture
Corp. v. Fennix Glob. Holdings, Inc., 2020 WL 3244333, at *2
(D.P.R. 2020) (quoting DeNovelis v. Shalala, 124 F.3d 298, 313
(1st Cir. 1997)). The Supreme Court has held that “case of actual
controversy” refers to “the type of ‘Cases’ and ‘Controversies’
that are justiciable under Article III” of the Constitution.
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). Thus,
the declaration “must fall within ‘the type of relief that Article
III allows courts to give—‘decree[s] of a conclusive character’
adjudicating adverse parties' actual rights and interests.’” WM
Cap. Partners 53, LLC v. Barreras Inc., 373 F. Supp. 3d 350, 360
(D.P.R. 2019) (quoting In re: Financial Oversight & Mgmt. Bd. For

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Civil No. 16-2897 (RAM)

16

P.R., 916 F.3d 98, 111 (1st Cir. 2019)). Declaratory judgment is
favored

when

the

judgment:

(1)

serves

a

useful

purpose

in

clarifying and settling the legal relations in issue, and (2) will
terminate and provide relief from the uncertainty, insecurity, and
controversy giving rise to the proceeding. See Cadillac Unif. &
Linen Supply, Inc. v. Cent. Gen. de Trabajadores, 2020 WL 4289389,
at *6 (D.P.R. 2020), report and recommendation adopted sub nom.
Cadillac

Uniforms

&

Linen

Supply,

Inc.

v.

Cent.

Gen.

de

Trabajadores, 2020 WL 4289365, at *1 (D.P.R. 2020) (quotation
omitted). It seeks to limit avoidable losses and the unnecessary
accrual of damages and to provide a party threatened with liability
an early adjudication without waiting until an adversary begins an
action after the damage has accrued. Id. (quotation omitted).
B. Interpreting Insurance Policies under Puerto Rico Law
The Insurance Code of Puerto Rico (the “Insurance Code”)
governs insurance contracts, known as policies, in Puerto Rico.
See P.R. Laws Ann. tit. 26, §§ 1101-1137. Under said Insurance
Code, insurance contracts are to be “construed according to the
entirety of its terms and conditions as set forth in the policy,
and as amplified, extended, or modified by any lawful rider,
endorsement, or application attached to and made a part of the
policy.”

Id.

§

1125.

Generally,

“insurance

contracts

are

considered contracts of adhesion that are liberally interpreted in
favor of the insured.” Metlife Capital Corp. v. Westchester Fire

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Civil No. 16-2897 (RAM)

17

Ins. Co., 224 F. Supp. 2d 374, 382 (D.P.R. 2002) (citing Quiñones
Lopez v. Manzano Pozas, 141 D.P.R. 139, 155 (1996); Rosario v.
Atl. Southern Ins. Co., 95 D.P.R. 759 (1968)).
When the Insurance Code fails to provide the “interpretative
approach” required for a particular controversy, courts look to
the Puerto Rico Civil Code for a supplemental source of law guiding
contract interpretation. See Marina Aguila v. Den Caribbean, Inc.,
490 F. Supp. 2d 244, 248 n. 5 (D.P.R. 2007). The Puerto Rico Civil
Code dictates that “[if] terms of a contract are clear and leave
no doubt as to the intentions of the contracting parties, the
literal sense of its stipulations shall be observed.” P.R. Laws
Ann. tit. 31, § 3471. In such cases, “the court should confine
itself to a literal application of the unambiguous terms of the
contract.” Gonzalez v. John Hancock Mut. Life Ins. Co., 927 F.2d
659, 660 (1st Cir. 1991) (internal quotations and edits omitted).
“Under Puerto Rican law, an agreement is ‘clear’ when it can ‘be
understood in one sense alone, without leaving any room for doubt,
controversies

or

difference

of

interpretation[.]’”

Executive

Leasing Corp. v. Banco Popular de Puerto Rico, 48 F.3d 66, 69 (1st
Cir.

1995)(quotation

omitted);

see

also

Heirs

of

Ramírez

v.

Superior Court, 81 P.R.R. 347, 351 (1959). In terms of insurance
contracts in particular, the District of Puerto Rico has held that
although ambiguities arising from an insurance policy should “be
resolved in the manner least favorable to the insurer […] this

Case 3:16-cv-02897-RAM Document 312 Filed 01/18/23 Page 18 of 25
Civil No. 16-2897 (RAM)

18

praxis does not compel or require courts to interpret a clear,
unambiguous clause that favors the insurer in a manner that would
benefit the insured.” Metlife Capital Corp., 224 F. Supp. 2d at
382 (emphasis added).
It is worth noting that “[a]mbiguity does not exist simply
because the parties disagree about the proper interpretation of a
policy provision.” Hoffman Garcia v. Metrohealth, Inc., 246 F.
Supp. 3d 527, 530 (D.P.R. 2017). Instead, it “may be found where
the policy's language is susceptible to more than one rational
interpretation.” Id. (quoting Clark School for Creative Learning,
Inc. v. Philadelphia Indem. Ins. Co., 734 F.3d 51, 55 (1st Cir.
2013)). Moreover, whether an insurance policy's terms, conditions,
and exclusions are clear and unambiguous is a matter of law for
courts to determine. See Marina Aguila, 490 F. Supp. 2d at 249
(quoting Littlefield v. Acadia Ins. Co., 392 F.3d 1, 10 (1st Cir.
2004)).
C. Puerto Rico’s Direct-Action Statute
Section 2003 of the Insurance Code, known as Puerto Rico’s
“direct action statute” regulates lawsuits against an insurer,
providing in part:
Any individual sustaining damages and losses
shall have, at his option, a direct action
against the insurer under the terms and
limitations of the policy, which action he may
exercise against the insurer only or against
the insurer and the insured jointly. The
direct action against the insurer may only be

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Civil No. 16-2897 (RAM)

19

exercised in Puerto Rico. The liability of the
insurer shall not exceed that provided for in
the policy, and the court shall determine not
only the liability of the insurer, but also
the amount of the loss. Any action brought
under this section shall be subject to the
conditions of the policy or contract and to
the defenses that may be pleaded by the
insurer to the direct action instituted by the
insured.
P.R. Laws Ann. tit. 26, § 2003(1). This statute “merely permits an
injured party to maintain against the insurer the same claim it
could pursue against the insured.” Torres-Troche v. Municipality
of Yauco, 873 F.2d 499, 502 (1st Cir. 1989) (citing Fraticelli v.
St. Paul Fire & Marine Ins. Co., 375 F.2d 186 (1st Cir. 1967)). In
other words, “the direct action statute

does not confer any

additional rights against the insurer than those already held by
the insured.” In re San Juan Dupont Plaza Hotel Fire Litig., 789
F. Supp. 1212, 1217 (D.P.R. 1992) (emphasis added). Therefore, an
“insurer's

liability

arises

from

and

is

dependent

on

its

contractual obligations to the insured.” Torres-Troche, 873 F.2d
at 502.
V. DISCUSSION
A. Plaintiffs’ Requests for Declaratory Judgment
Plaintiffs request that the Court issue declaratory judgment
on four distinct grounds. The Court shall address each request
below.

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20

i. Both PREPA and the Commonwealth of Puerto Rico are named
insureds under the Policy
The Policy identifies the Commonwealth of Puerto Rico as an
“extended” or “broad form” named insured. (Facts ¶¶ 2-3). ACE
neither contests nor accepts this fact, rather assuming it arguendo
for different defenses in their motions. Per the Policy’s clear
terms, ACE insures the Commonwealth of Puerto Rico “in the same
manner as though a separate policy had been issued to [it].” (Fact
¶ 4). Thus, both PREPA and the Commonwealth of Puerto Rico are
necessarily named insureds under the Policy.
ii. The Court need not determine whether the Policy provides
coverage for direct actions
Pursuant to Section 2003 of Puerto Rico’s Insurance Code,
P.R. Laws Ann. tit. 26, § 2003(1), Puerto Rico is a “direct action”
jurisdiction, that allows “an injured party to maintain against
the insurer the same claim it could pursue against the insured.”
Torres-Troche, 873 F.2d 499, 502 (1st Cir. 1989). Therefore, there
is no legal uncertainty that warrants declaratory judgment for
clarification as to whether the Policy allows for direct actions.
See Cadillac Unif. & Linen Supply, Inc., 2020 WL 4289389, at *6.
iii. The Policy does not drop down in the event of just a
reduction of the underlying limit nor due to payments
made under other insurance policies
Plaintiffs ask that the Court declare that the Policy will
drop down in the event of the reduction or exhaustion of the
underlying

limit,

such

as

aggregate

limit

of

the

underlying

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Civil No. 16-2897 (RAM)

21

insurance provided by MAPFRE to the Commonwealth of Puerto Rico.
The Policy explicitly states that coverage is only provided in
excess of the SIR, not the mere reduction of the SIR. (Fact ¶ 15).
The Policy specifies that the SIR “shall not be satisfied by
payments by the insured of any deductible of any other policy or
payments made on behalf of the insured by any other insurer, person
or entity. The [SIR] under this policy shall not be satisfied by
any insurance coverage whatsoever.” (Fact ¶ 17). Rather, the SIR
“must be satisfied by actual payments by [the insured].” Id. Thus,
contrary to Plaintiffs’ assertions, the Policy does not drop down
due to a reduction in the underlying limit nor due to payments
made by other insurance policies.
iv. The Policy Requires
$1,000,000 SIR

a

$1,000,000

deductible

and

Lastly, Plaintiffs ask the Court to find that in the event of
drop down due to the reduction or exhaustion of the underlying
limit, such as aggregate limit of the underlying insurance, the
amount of damages need not exceed $1,000,000. However, as discussed
above, this described drop down cannot occur. Furthermore, it is
worth noting that coverage under the Policy for bodily injury or
property damage is subject to a $1,000,000 deductible in excess of
the $1,000,000 SIR. (Facts ¶¶ 10-11).

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22

B. ACE’s Liability
As noted above, after the filing of the pending cross-motions
for summary judgment, the Court has since granted PREPA’s own
Motion for Summary Judgment, thereby dismissing with prejudice the
totality of Plaintiffs’ claims against PREPA. (Docket No. 311).
Therefore, Plaintiffs can no longer maintain a viable claim against
ACE in its capacity as PREPA’s insured. See Torres-Troche, 873
F.2d 499, 502 (1st Cir. 1989). See also Reyes-Lopez v. Misener
Marine Const. Co., 854 F.2d 529, 530 n. 2 (1st Cir. 1988) (“Under
‘liability insurance’ policies such as the three policies in this
case,

the

insurer

is

liable

only

if

its

insured

would

be

liable.”) (citing 12 Couch on Ins. § 45:28). However, in addition
to insuring PREPA, the Policy insures the Commonwealth of Puerto
Rico “in the same manner as though a separate policy had been
issued

to

[it].”

(Fact

¶

4).

Thus,

the

Court

must

analyze

Plaintiffs’ claims against ACE in its capacity as insurer of the
Commonwealth of Puerto Rico.
In

its

Motion

for

Summary

Judgment,

ACE

asserts

that

Plaintiffs’ claims against it as the insurer of the Commonwealth
of Puerto Rico should be dismissed because no obligation to pay on
behalf of the Commonwealth will arise. (Docket No. 249 at 15-16).
Moreover, they ask for dismissal of Plaintiffs’ claim for their
emotional trauma and mental anguish as they are not covered under
the Policy. Id. at 16-17. The Court will begin with the latter.

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The Policy provides coverage for both bodily injury liability
and property damage liability. (Fact ¶ 11). In its relevant part,
the Policy defines “bodily injury” as “bodily injury sickness or
disease sustained by a person, including death resulting from any
form of these at any time” as well as the resulting “mental anguish
sustained by someone who has suffered a covered ‘bodily injury’”.
(Fact ¶ 12) (emphasis added). Per this language, the Policy
unambiguously

limits

coverage

for

mental

anguish

to

that

experienced by the same person who endured the covered bodily
injury. Furthermore, a leading treatise on Insurance law explained
that while “[t]he majority view is that humiliation and emotional
distress, mental pain and anguish, spoliation of evidence, or
injury to reputation do not constitute ‘bodily injury.’ […] damages
for emotional injury are recoverable when such damages are the
result of physical injury.” 9 Couch on Ins. 3d § 126:33; see also
Ford v. Mahindra USA, Inc., 546 F. Supp. 3d 509, 514–15 (W.D. La.
2021) (analyzing an analogous clause in an insurance policy and
finding “where an insurance policy requires an injury that is
physical in nature to trigger ‘bodily injury’ coverage, and the
claimant has not suffered a physical harm, mental anguish does not
constitute bodily injury.”).
While the Policy also specifies that “damages because of
‘bodily

injury’

include

damages

claimed

by

any

person

or

organization for care, loss of services or death resulting at any

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Civil No. 16-2897 (RAM)

24

time from the ‘bodily injury’[,]” this does not equate to coverage
for any individual’s mental anguish. (Fact ¶ 14). When faced with
interpreting an identical insurance policy provision in Nationwide
Mut. Fire Ins. Co. v. Creations Own Corp., the United States
District Court for the Middle District of Florida determined that:
[T]o find that “care” or “loss of services”
resulting from bodily injury encompasses [a
father]’s emotional distress [due to his son’s
physical damages] would stretch the Policy
beyond reasonable interpretation. The Policy
expands the definition of bodily injury to
include expenses related to the care of the
injured person or loss of services resulting
from the injury. It does not expand the
definition
of bodily injury to include the
distress that a parent suffers as a result of
watching a child experience pain.
Nationwide Mut. Fire Ins. Co. v. Creations Own Corp., 2012 WL
12895642, at *5 (M.D. Fla. 2012), aff'd sub nom. Nationwide Mut.
Fire Ins. Co. v. Creation's Own Corp., 522 F. App'x 589 (11th Cir.
2013). The Court simply cannot reach a different conclusion here.
Thus, Plaintiffs claims for mental anguish and emotional
trauma caused by their son’s death, not their own bodily injury,
are not covered by the Policy. Plaintiffs’ only remaining claims
are for reimbursement of funeral and medical expenses for their
son in excess of $15,000.00. (Docket No. 99 ¶¶ 41, 43). Although
Plaintiffs’ funeral and medical expenses are unlikely to amount to
the threshold $1,000,000 self-insured retention and/or deductible
required under the Policy, no evidence to that effect has been

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Civil No. 16-2897 (RAM)

25

presented. (Facts ¶¶ 10, 11). Therefore, at this juncture, the
Court cannot dismiss Plaintiffs’ claims seeking reimbursement of
funeral and medical expenses from ACE.
VI.

CONCLUSION

Plaintiffs’ Motion for Summary Judgment at Docket No. 163
requesting Declaratory Judgment pursuant to U.S.C. §§ 2201-2 is
DENIED IN PART and GRANTED IN PART. It is hereby ORDERED and
ADJUDGED that both PREPA and the Commonwealth of Puerto Rico are
named insureds under the Policy.
On the other hand, ACE’s Motion for Summary Judgment at Docket
No. 249 is GRANTED IN PART and DENIED IN PART. Plaintiffs’ claims
against ACE in its capacity as PREPA’s insurer are hereby DISMISSED
WITH PREJUDICE. Furthermore, Plaintiffs’ claims against ACE for
their

emotional

DISMISSED

WITH

damages

and

PREJUDICE.

mental
However,

anguish

are

Plaintiffs’

also

hereby

claims

for

reimbursement of funeral and medical costs against ACE in its
capacity as insurer of the Commonwealth of Puerto Rico remain
pending.
IT IS SO ORDERED.
In San Juan Puerto Rico, this 18th day of January 2023.
S/ RAÚL M. ARIAS-MARXUACH
United States District Judge