A V.I. Supreme Court ruling will impact insurance options and rates in the territory, local insurance industry representatives said.
Exactly how, they say they’re not yet certain.
Their assessments generally echo arguments made in the case before the ruling was handed down on June 3. Attorneys for insurance companies and the V.I. government warned premiums will increase and the range of products offered by insurance companies will decrease.
Insurance company officials say those effects will happen, but they are still waiting to see how they can adjust.
The case that spawned the ruling involves Frederic Balboni Jr., who was struck by an automobile driven by Emica King that was owned by the security firm Ranger American of the Virgin Islands, according to court documents.
Balboni was visiting the Virgin Islands at the time of the collision, according to the majority opinion, written by V.I. Supreme Court Chief Justice Rhys Hodge.
“Balboni sued Ranger American and King in the Superior Court of the Virgin Islands,” Hodge wrote. “Balboni maintains that as a result of the incident ‘he has suffered and endured hospitalizations and repeat surgeries, skin grafts, and many rounds of physical therapy,’ as well as ‘a brain injury’ and that ‘the pain and suffering he has endured is unimaginable.’”
Whether Balboni receives any damages — and the extent of his injuries — remains to be decided at trial, Hodge wrote.
Balboni’s attorney filed a motion before trial arguing that an insurance damages cap in V.I.Code Title 20, Section 555 violates the Constitution, as well as portions of the Revised Organic Act of 1954.
The cap limits some kinds of damages: pain and suffering, physical impairment, disfigurement and “other not-pecuniary damages” to a maximum of $100,000.
“Non-pecuniary damages” is legal jargon for damages not easily quantified.
A Superior Court judge rejected the constitutional challenge, but did not rule on the Revised Organic Act portion. Balboni appealed to the Supreme Court.
Specifically, Balboni’s lawyers argued that the cap violated the first paragraph of section 3 of the Organic Act, which is labeled “Bill of Rights,” and which the justices refer to as “The Virgin Islands Bill of Rights.”
“No law shall be enacted in the Virgin Islands which shall deprive any person of life, liberty, or property without due process of law or deny to any person therein equal protection of laws,” the section reads in part.
If the question of whether the cap violates territorial law is settled, then constitutional questions don’t need to be addressed, Hodge wrote.
Hodge and Associate Justice Ive Swan agreed the cap did violate the Virgin Islands Bill of Rights, Hodge wrote.
“Had Balboni fallen into an open hole on the same sidewalk and suffered identical injuries, Virgin Islands law would not preclude him from seeking unlimited non-economic damages against the contractor or any other responsible party,” he wrote.
The 1999 law enacting the cap didn’t have any evidence to back it up because it was a small section of a much larger bill, Hodge wrote. The Legislature raised the cap in 2007, but the record showed senators opining about personal experiences without offering evidence to support them.
“There is no evidence that a cap on non-economic damages — in any amount — will have any effect on the automobile insurance market in the Virgin Islands,” Hodge wrote.
Associate Justice Maria Cabret objected, saying senators clearly intended the cap to stabilize the market. She also questioned whether the court could act the same way as a state court by applying rights beyond the Constitution, because the Organic Act is a federal law, not a true state constitution.
“The Virgin Islands Bill of Rights hasn’t been written yet,” she wrote.
Insurance companies have choices to make in response, said Theresa Fabela, president of Dorchester Insurance Company and president of the V.I. Insurance Guarantee Fund Association.
“All companies doing business here have three options,” she said, of the insurance industry.
Companies could simply stop providing automobile insurance at all, to avoid a potential situation where “runaway juries” damage an insurance company, Fabela said.
Companies could also impose a maximum cap of their own making on auto insurance policies, Fabela said.
“You could see insurance companies saying the most we’re going to offer is $100,000,” she said. “It limits choices for consumers if somebody wants to have a million-dollar limit and the company is going to say no.”
The third option would be for insurance companies to raise premiums slightly for all types of different insurance policies to cover the increase in risk, Fabela said. That could be a steam-valve measure if subsequent jury awards increased, Fabela said.
“This is an unfortunate decision,” she said. “I will say we were disappointed to hear about it.”
Other companies could withdraw from the territory, Fabela said.
“Insurance companies are not forced to do business here,” she said.
The effects of the decision may not directly affect the bottom rung of auto insurance consumer, said Guardian Insurance president Raymond Fournier.
Territorial law requires all motorists to have a minimum of $10,000 for bodily injury for one person, $20,000 for bodily injury for two or more people, and $10,000 for property damage. Those amounts likely cover the minimum amount of damage for the average driver, Fournier said.
“For the regular person on the street, typically the insurance will be enough,” he said.
However, the impacts are likely to be felt among customers — in many cases, corporations — who rely on higher policies because of the nature of their business, like fuel delivery companies, security companies, or furniture delivery companies, Fournier said. Guardian is still weighing how much and when to potentially increase insurance premiums for those customers, Fournier said.
“Those companies carry a higher limit, and what would happen for those companies, it would probably be more difficult,” he said. “Commerce will be affected by it.”
The impacts of the decision could also be felt among victims of automobile collisions foreclosed from receiving higher policy payouts, Fournier said.
“If one of those trucks hits somebody, before this decision and still today, but maybe changing in the coming year, the limits could be lower, the recovery could be lower,” he said. “I don’t think it really helps anybody.”