William Craven and Gregory Hudson | Cozen O’Connor | January 15, 2016<\/p>\n
In J & D Towing, LLC v. American Alternative Insurance Corporation<\/i>, No. 14-0574, 2016 WL 91201 (Tex. Jan. 8, 2016), the Texas Supreme Court considered J & D Towing, LLC\u2019s (\u201cJ & D\u201d) claim for loss of use damages under its underinsured motorist insurance policy, after J & D\u2019s only towing vehicle was totally destroyed in an accident.\u00a0 After discussing decades of Texas case law limiting loss of use damages to cases involving partial destruction, the Court held that the owner of totally destroyed personal property may recover loss of use damages, in addition to the property\u2019s fair market value immediately before the injury.\u00a0 The Court\u2019s holding reverses over 60 years of prior case law prohibiting recovery of loss of use damages<\/a> in total destruction cases, and brings Texas in line with the majority of jurisdictions.<\/p>\n J & D is a vehicle towing company located in Huntsville, Texas. On December 29, 2011, an accident with a third party rendered J & D\u2019s only truck a total loss.\u00a0 J & D claimed the value of the truck exceeded $19,000, and also sought its loss of use damages based on its inability to conduct business.\u00a0 Although the third party\u2019s insurer offered to pay the truck\u2019s value, the third party insurer refused to pay for any loss of use damages<\/a>.\u00a0 After nearly two months, J & D settled its claim for the third party\u2019s policy limits of $25,000.<\/span><\/p>\n J & D then sought recovery of its loss of use damages under its underinsured motorist policy.\u00a0 While the payment from the third party\u2019s insurer exceeded the fair market value of the old truck by $5,500, J & D asserted that the additional $5,500 only compensated for a small portion of its loss of use damages.\u00a0 J & D\u2019s underinsured motorist insurer, American Alternative Insurance Corporation (\u201cAmerican\u201d), denied the claim, asserting the policy only provided coverage for amounts J & D was \u201clegally entitled to recover.\u201d\u00a0 American argued that Texas law precluded recovery of loss of use damages when the property at issue was totally destroyed.\u00a0 \u00a0\u00a0Although the insuring agreement applied to \u201c\u2018property damage\u2019 caused by an \u2018accident,\u2019\u201d there was no discussion of the policy\u2019s \u201cproperty damage\u201d definition.\u00a0 While the policy in J & D Towing<\/i>provided underinsured motorist coverage, the \u201cproperty damage\u201d definition within commercial general liability policies typically includes loss of use.\u00a0 In contrast, the terms of underinsured motorist coverage vary widely and are often driven by state legislation.\u00a0 Because the Court chose not to discuss the \u201cproperty damage\u201d definition in J & D Towing<\/i>, the effect of that definition on the Court\u2019s holding concerning loss of use damages is unclear.<\/p>\n After American denied the claim, J & D filed suit to recover the disputed damages.\u00a0 At trial, American did not contest J & D\u2019s loss of use damage model, or supply its own alternative damage model, choosing instead to contest only the legal recoverability of such damages.\u00a0 The jury awarded $28,000 for loss of use to J & D, and the trial court reduced the award by the $5,500 already paid by the third party\u2019s insurer.\u00a0 On appeal, a Waco appellate court reversed and rendered, holding that the trial court abused its discretion in submitting the loss of use instruction to the jury.<\/p>\n The Texas Supreme Court noted the logical inconsistency in allowing recovery of loss of use damages when property was partially destroyed, but not when property was totally destroyed.\u00a0 The Court also noted that limiting the remedies available in a total loss scenario hindered the general goal of providing \u201cfull and fair\u201d compensation for an injury.\u00a0 To explain the origin of the inconsistency, the Court traced the history and progression of loss of use jurisprudence in the United States.\u00a0 After much criticism of the approach taken for over 60 years by the majority of Texas courts\u2014i.e.<\/i>, that recovery of loss of use damages<\/a> is limited to partial destruction\u2014the Court cited the \u201csea change in both caselaw and legal treaties\u201d on the availability of loss of use damages in total destruction cases.\u00a0 As noted in the opinion, the following courts have held that loss of use damages<\/a> are available in total destruction cases:<\/p>\n High Courts<\/b><\/p>\n<\/td>\n Lower Appellate Courts<\/b><\/p>\n<\/td>\n Federal Courts<\/b><\/p>\n<\/td>\n<\/tr>\n Alabama<\/p>\n<\/td>\n Florida<\/p>\n<\/td>\n District of Colorado<\/p>\n<\/td>\n<\/tr>\n Alaska<\/p>\n<\/td>\n Indiana<\/p>\n<\/td>\n Third Circuit (New Jersey law)<\/p>\n<\/td>\n<\/tr>\n Arkansas<\/p>\n<\/td>\n Louisiana<\/p>\n<\/td>\n Third Circuit (Pennsylvania law)<\/p>\n<\/td>\n<\/tr>\n California<\/p>\n<\/td>\n New York<\/p>\n<\/td>\n Eighth Circuit (South Dakota law)<\/p>\n<\/td>\n<\/tr>\n District of Columbia<\/p>\n<\/td>\n Tennessee<\/p>\n<\/td>\n Hawaii<\/p>\n<\/td>\n Washington<\/p>\n<\/td>\n Iowa<\/p>\n<\/td>\n Kentucky<\/p>\n<\/td>\n Maryland<\/p>\n<\/td>\n Missouri<\/p>\n<\/td>\n Montana<\/p>\n<\/td>\n Nebraska<\/p>\n<\/td>\n North Carolina<\/p>\n<\/td>\n Oklahoma<\/p>\n<\/td>\n West Virginia<\/p>\n<\/td>\n Wisconsin<\/p>\n<\/td>\n The Court found persuasive the \u201cnear uniformity in the reasoning underlying these decisions.\u201d\u00a0 Applying their logic, the Court was unconvinced that any distinction between partially and totally destroyed personal property for loss of use purposes was warranted.\u00a0 In the Court\u2019s view, property owners may incur loss of use damages just as readily in total destruction cases as partial destruction cases.\u00a0 Moreover, the Court quoted the \u201cguiding principle of Texas tort law: \u2018The thing to be kept in view is that the party shall be compensated for the injury done<\/i>.\u2019\u201d <\/i>In order for this \u201cfull and fair compensation\u201d principle to remain intact, the Court held that loss of use damages must be available in both partial and total destruction cases.<\/p>\n Ultimately, the Court in J & D Towing<\/i> departed from a line of Texas cases limiting recovery of loss of use damages<\/a> to cases involving partial destruction of property.\u00a0 However, the Court decided the case on the narrow legal issue of whether loss of use damages were available at all, leaving for another day any decision how such damages should be measured or whether they were measured correctly in J & D Towing.<\/i><\/p>\n The opinion makes clear that recovery of loss of use damages is not absolute, and Texas courts can (and should) consider the circumstances of each particular case in determining whether to award loss of use damages and how much loss of use damages would be warranted to provide \u201cfull and fair compensation.\u201d\u00a0 In particular, the damages should only be awarded for a period \u201creasonably necessary\u201d to obtain replacement property.\u00a0 Further, the damages cannot be too remote; rather, they must be \u201cforeseeable and directly traceable to the tortious act.\u201d\u00a0 Although \u201cmathematical exactness is not required,\u201d the damages must not be speculative.<\/p>\n Lastly, the Court described J & D\u2019s truck as a \u201ctotal loss,\u201d but in discussing the law regarding loss of use damages, the Court repeatedly referred to \u201ctotally destroyed\u201d property.\u00a0 In a footnote, the Court briefly commented on the distinction between a \u201ctotal loss\u201d vehicle and \u201ctotally destroyed\u201d vehicle, noting that Texas law treats a total loss…<\/p>\n To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"\n\n
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