Supreme Court of Puerto Rico Clarifies Application of the Collateral Source Doctrine in 1483 Actions

Adsuar’s Litigation Practice Group scored a landslide victory in Consejo de Titulares del Condominio Millennium v. Rocca Development Corp., et als., 2025 TSPR 6. The issue was whether payments made by an insurer under an insurance policy for property damage caused by a hurricane extinguished any claim or reduced the potential recovery in a pending independent action for damages stemming from construction defects. In reviewing the lower courts, the Supreme Court concluded that, because this was a collateral benefit or compensation with distinct origins and purposes, there is no undue double compensation or undue accrual of damages, and thus no reduction of the potential recovery on the pending claims for construction defects.

In 2010, the Board of Owners of the Millennium Condominium (“Board of Owners” or “Petitioner”) filed a complaint for construction defects and damages against Rocca Development Corporation, F&R Contractors, Corp., Plusmech Contractors, Inc., Jorge L. Robert Vizcarrondo, ACE Insurance Co., and Triple S, Inc., et al. (“Respondents”). In sum, it alleged that the Millennium Condominium suffered from multiple construction defects that rendered it unfit for its use and enjoyment, and that the codefendants were responsible for the potential and functional ruin of the property as a result of numerous violations of building codes and regulations. In 2017, the Board of Owners filed a direct and independent claim against its insurer, Mapfre Praico Insurance Company (“MAPFRE”), for the damage caused to the property by Hurricane Maria, for which it was eventually duly compensated. The Respondents then argued that the exception to the collateral source doctrine was applicable to the insurance payment for the losses caused by the hurricane, because the Board of Owners had received payment from its private insurer. The Petitioner objected.

In 2022, the Respondents alleged that the Petitioner was barred from claiming any damages already compensated from third parties such as MAPFRE. In response, the Petitioner argued that the compensation paid by MAPFRE was not for the same damaging event. The lower court issued a Partial Summary Judgment, holding that, when applying the collateral source doctrine, the action for construction defects and the claim to the insurer had the same purpose of seeking the repair of the property. It determined that the payment for the damages caused by Hurricane María constituted property insurance to repair the damage to the property and that, since its cause of action was thereby extinguished, the Board of Owners was not entitled to additional compensation.

On appeal, the intermediate court determined that even if the existence of the alleged construction defects was proven, the Board could be barred from receiving double compensation. On January 15, 2025, however, the Supreme Court of Puerto Rico reversed the Court of Appeals, which had modified but confirmed the Partial Judgment of the Court of First Instance. The Supreme Court held that these were independent compensation awards for distinct damages unrelated to the same event, highlighting that they were two events separated by more than a decade. The Court resolved that the intermediate forum was wrong to apply the exception to the doctrine of collateral source, because the payment covered by the policy against hurricanes does not repair in any way the possible functional ruin of the property resulting from the construction defects. Thus, the case was remanded to the Court of First Instance for the continuation of the proceedings.

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