J&D Towing, LLC v. Am. Alternative Ins. Corp., 2016 Tex. LEXIS 4 (Tex. Jan. 8, 2016).
J&D Towing's only tow truck was rendered inoperable after a motor vehicle collision with a car. The tow truck was deemed a "total loss," and the parties agreed that the car was the sole proximate cause of the accident. J&D Towing settled with the car driver's insurance for the property damage policy limits, and then filed a claim with its own insurance for loss-of-use damages.
At trial, the jury awarded loss-of-use damages to J&D. But, citing the general rule that loss-of-use damages are not recoverable when personal property is totally destroyed, the Court of Appeals for the Tenth District of Texas reversed the trial court's ruling. J&D appealed to the Texas Supreme Court, which reversed the appellate court's denial of loss-of-use damages and entered the trial court's loss-of-use damages award.
In its opinion, the Court engages in a thorough historical analysis of Texas and American law concerning damages in partial and total loss cases. The Court found that, although the overwhelming majority of American jurisprudence supports the general rule that loss-of-use damages for personal property are only recoverable in partial-loss cases, a "sea of change in both case law and legal treatises" now form a clear consensus that loss-of-use damages are available in both total and partial loss cases.
According to the Court, the development and support of this general rule are largely due to "judicial assumptions" and the "tide of common-law development." As a result, lower courts have adopted a "monkey-see-monkey-do" approach, whereby they forego legal reasoning when denying total-destruction loss-of-use claims in favor of simply parroting the general rule and citing a string of old legal citations. Modern courts, however, have replaced the "monkey-see-monkey-do" approach with strong, consistent reasoning that supports allowing loss-of-use damages in partial and total-loss cases.
Indeed, across the nation, numerous state and federal courts have determined that loss-of-use damages should be allowed in total-loss cases. Importantly, almost all of these courts have allowed loss-of-use damages for two major reasons: (1) there is no persuasive reason for distinguishing between total-loss and partial-loss scenarios; and (2) the principle of full and fair compensation dictates that loss-of-use damages be available in total-loss cases.
Like partial-loss cases, a person whose personal property is completely destroyed will lose the ability to use that property for a period of time. By only awarding the fair market value and interest in a total-loss case, courts are denying the property owner from obtaining full and complete compensation since the owner cannot recover for the time he is unable to use the property. Therefore, owners of "totaled" property should be able to recover the fair and reasonable cost of the loss suffered as a result of their inability to use their destroyed property.
Under the Texas Supreme Court's holding, the owner of property that has been totally destroyed may recover loss-of-use damages in addition to fair market value when the loss-of-use damages are foreseeable and directly traceable to the accident, are not speculative, and are limited to a period no longer than reasonably needed to replace the property.
In the Court's own words, "above all, we reiterated, 'the thing to be kept in view is that the party shall be compensated for the injury done.'"
Tips and Takeaways:
· The old rule of no loss-of-use damages for totaled property has gone out the window.
· Be prepared for loss of use claims in all accidents, especially major accidents involving totaled property that was used for commercial or business purposes.
· Loss-of-use damages cannot be speculative; so, make the claimant prove the damages.
· Don't allow claimants to milk loss-of-use claims by taking too long to replace totaled property.
· Individual circumstances and situations in each case are very important; so, investigate each matter thoroughly and gather the relevant facts to reduce or cap damages.