Passion. Preparation. Persistence.

Inadvertent Liability after a “Tow”-tal Loss

On Behalf of | Oct 8, 2015 | Firm News

The Case

Canal Ins. Co. v. Hopkins, 238 S.W.3d 549 (Tex. App.-Tyler 2007, no pet.).


The driver/lessee of a tractor/trailer rig, Henry Sweeney, was involved in an accident where he drove off the road into a ditch. The rig rolled over and could not be driven from the scene. The rig was owned by Mullinax and insured by Canal. The driver was briefly interviewed by police and then taken to the hospital.

Once the driver was taken from the scene of the accident, a trooper ordered a wrecker service to the scene to tow the rig. Hopkins Towing and Wrecking Service removed the rig from the ditch and towed it to a third-party vehicle storage facility. Later, Mullinax requested Hopkins tow the rig to the Mullinax storage facility.

Hopkins submitted a final bill to Mullinax for the work performed to tow the vehicle from the ditch to the storage facility, but Mullinax did not pay the bill. Hopkins then attempted to collect payment from Canal, but Canal also refused payment submitting that its insurance policy with Mullinax did not cover third parties who performed towing services.

Hopkins filed suit against Mullinax and Canal to recover the unpaid bill under section 2303.156(b) of the Texas Occupations Code which reads:

An insurance company that pays a claim of total loss on a vehicle in a vehicle storage facility is liable to the operator of the facility for any money owed to the operator in relation to delivery of the vehicle to or storage of the vehicle in the facility regardless of whether an amount accrued before the insurance company paid the claim.

The Court’s Analysis

The trial court found in favor of Hopkins Towing for the outstanding bill, and Canal appealed that decision citing ten points of error.

The Court of Appeals overruled each and every one of Canal’s ten points of error. Most of Canal’s points of error centered on the constitutionality of section 2303.156(b) of the Texas Occupations Code.

It argued that the statute was vague because it does not define “total loss” and does not contain language limiting liability on insurers to when there has been a post-tow transfer of title. The court disagreed, holding that a failure to define “total loss” did not make the statute unconstitutionally vague this term has been consistently defined by courts to be synonymous with “totaled.”

Additionally, the court found that the statute’s failure to limit the liability of insurers when there has been a post-tow transfer did not make the statute vague because the statute “clearly and unambiguously renders an insurance company liable, for towing fees, to the operator of a vehicle storage facility, regarding vehicles for which the insurance company has paid a claim of total loss.” Canal Ins. Co. v. Hopkins, 238 S.W.3d 549, 567 (Tex. App.-Tyler 2007, no pet.).

The Court of Appeals also dismissed Canal’s argument that the statute, as applied, constituted a taking in violation of the United States and Texas constitutions. To determine whether a taking occurred, the Court analyzed the following three-factor test established by the United States Supreme Court: (1) the economic impact of the law, (2) the interference with investment-backed expectations, and (3) the character of the governmental action. Penn Cent. Trans Co. v. City of New York, 438 U.S. 104, 124 (1978).

Relying heavily on the second factor, the court dismissed Canal’s argument that it had reasonable expectations of avoiding the monetary liability of section 233.156(b), finding that Canal chose to enter into an industry that is heavily regulated with strong ties to the public. Therefore, it could not reasonably expect to avoid regulations like the one at issue in this case.

What to Take Away

As a general warning, insurers should be cautious of this statute because they may be held statutorily liable for third-party towing costs regardless of an insurance agreement that either limits the coverage for third-party towing or fails to cover it completely.


FindLaw Network