Opinion ID: 202647
Heading Depth: 4
Heading Rank: 1

Heading: The Earned Premiums

Text: 76 The JUA argues that the premiums collected and withheld by the [Secretary] are the private property of the [JUA] under the plain language of Law 253. According to the JUA, although the premiums pass through Flores Galarza's hands before reaching the JUA, the premiums are never funds of the Commonwealth. To the contrary, the JUA argues, given that the JUA's responsibility for the compulsory insurance comes into effect at the time the premiums are paid to the Secretary of the Treasury, the premium has to belong to the [JUA] at that time. Flores Galarza, the JUA argues, is thus merely a fiduciary who holds the premiums for the benefit of the JUA, as demonstrated by the 2002 Amendment's reference to the Secretary of the Treasury's collection service performed in favor of the [JUA]. P.R. Laws Ann. tit. 26, § 8055(c). Flores Galarza, on the other hand, contends that Law 253 does not entitle JUA to ownership of the collected premiums until they are transferred to it by [Flores Galarza]. Therefore, Flores Galarza argues, because Law 253 does not state when the Secretary must transfer the insurance premiums to the JUA, his retention of the $173 million in premiums was not a withholding of private property—it was merely a temporary retention or delay in the transfer of funds which did not yet belong to the JUA. 77 In our view, Law 253 supports the JUA's claim of a property right to that portion of the insurance premiums not owed to privately insured motorists or their insurers (Earned Premiums 30 ). Law 253 created the JUA for [t]he main purpose of ... provid[ing] the compulsory liability insurance to the applicants for said insurance that have been rejected by private insurers. Id. § 8055(b). As an insurer, the JUA is entitled to the Earned Premiums. Law 253 gives the JUA the power to hold property, and provides that the JUA shall receive premiums from the Secretary and that the Secretary shall transfer these premiums to the JUA. While the Secretary collects the insurance premiums and holds them for some unspecified amount of time before relinquishing them to the JUA, the Secretary is not an insurer—he is merely the custodian of these funds. As a custodian, the Secretary has no entitlement to the premiums, and his woefully undeveloped argument that the premiums do not vest in the JUA until the Secretary transfers them does not convince us otherwise. Cf. Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980) ([T]he State's having mandated the accrual of interest does not mean the State or its designate is entitled to assume ownership of the interest.). The JUA has successfully alleged an entitlement to the Earned Premiums under Law 253, and therefore a property interest in those funds. See id. at 161, 101 S.Ct. 446 (recognizing interest earned on private funds as property entitled to protection under Fifth Amendment); see also Brown, 538 U.S. at 235, 123 S.Ct. 1406; Phillips v. Wash. Legal Found., 524 U.S. 156, 170-72, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998). 78 We thus proceed to the second step of the takings analysis (i.e., whether the property was taken). The JUA argues that Flores Galarza's withholding of the Earned Premiums constituted a permanent physical occupation and a per se taking for which just compensation must be paid. Specifically, the JUA contends that Flores Galarza physically took, albeit temporarily, $173 million of its insurance premiums, before transferring a large portion of those premiums to the JUA pursuant to the 2002 Settlement. The JUA's assertion of a property right in the Earned Premiums, together with its allegation of a physical appropriation of those funds, is sufficient to allege the taking of a constitutionally protected property interest in those premiums under the first prong of the qualified immunity analysis. See Webb's, 449 U.S. at 164-65, 101 S.Ct. 446 (holding that taking of interest earned on private funds was a taking). 79