Firm Newsletter - February 2016

Photo by ferlistockphoto/iStock / Getty Images

Photo by ferlistockphoto/iStock / Getty Images

Texas Supreme Court Permits Loss of Use Damages in Total Loss

Recently, the Texas Supreme Court issued the opinion in J&D Towing, LLC v. American Alternative Insurance Corporation that addressed the issue of collecting loss of use damages in cases involving a total loss. In an opinion delivered by Justice Willett, the court ruled that in addition to recovering the fair market value of destroyed property, the owner can now recover loss of use damages, including damages for lost profits. Willett’s opinion begins with a quote inspired by an old adage it is “cheaper to kill a mare than to cripple her.” This quote highlights the Texas Supreme Court’s issue with the logic behind that long standing principle of the measure of damages in a total loss case in Texas. However, the court points out this decision is not meant to be “a license for unrestrained raids” on Defendants’ moneys.

J&D Towing purchased the company's tow truck in April 2011. This truck was the only truck J&D owned. In December of 2011, the tow truck was involved in a collision and as a result it was totaled. The driver of the other vehicle admitted fault and the insurance company settled with J&D for the policy limit of $25,000 which was more than the truck’s market value.

J&D Towing Company was able to purchase a new tow truck and commence business in March 2012. However, J&D was not able to operate between the date of the accident and the purchase of the new truck in 2012. J&D then filed an uninsured motorist claim against American Alternative Insurance Corporation (AAIC), requesting money for the loss of use of the tow truck based on the policy’s language.

At trial J&D requested that the jury award damages for 9-10 weeks’ worth of lost profits. AAIC argued that Texas law does not permit recovery of loss-of-use damages in total-destruction cases and therefore they were not required to pay for damages that J&D was not permitted to recover by law. The trial court disagreed and entered a judgement for $22,500 taking into consideration the policy limits settlement which was more than the truck’s value.

AAIC appealed the trial court’s decision. The court of appeals held that J&D was not entitled to damages for loss of use. The trial court was reversed.

The Texas Supreme court reversed the Court of Appeals and based its conclusion with the guiding principle of Texas tort law “The thing to be kept in view is that the party shall be compensated for the injury done.” The court held that when the loss-of-use damages are foreseeable and traceable to the tortious act. They are limited to a period no longer than reasonably necessary to replace the property. The owner of property can also recover the total loss value as well as non-speculative loss-of-use damages. The Court reached this conclusion by analyzing the laws in other states. Specifically, the court looked at various treatises and restatements examining the rules and rational be-hind them. Ultimately, the Texas Supreme Court reversed the court of appeals’ judgment and rendered a judgment for J&D.

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