Texas Supreme Court Holds Loss of Use Damages Award Valid

For many years, the legal principle in Texas civil courts was that a damages claim alleging loss of use was not recoverable when the property alleged to lack any use was destroyed. However, the Texas Supreme Court turned this precedent upside down in a 2016 case. See J&D Towing, LLC v. Am. Alternative Ins. Corp., No. 14-0574 (Tex. 2016).

In this case, the plaintiff (J&D Towing, LLC) was involved in an automobile collision where the company’s only tow truck was deemed a total loss. The plaintiff reached a settlement agreement with insurance company for the negligent automobile driver. The plaintiff then filed a claim with its insurance company seeking compensatory damages related to its loss of use of the tow vehicle.

Settlement could not be reached and the case went to trial.  A jury awarded damages to the plaintiff for loss of use of the vehicle, but that damages award was struck down by the Court of Appeals. Nevertheless, the case was appealed to the Texas Supreme Court, which reinstated that verdict in favor of the plaintiff. 

Texas Supreme Court’s Rationale for Reinstating Loss of Use Damages Award  

The Texas Supreme Court reasoned that, despite a well-settled legal precedent recognizing the prohibition on recoverable damages for loss of use claims when a total loss is present, there is a “sea change” occurring throughout the country on this issue that holds loss of use damages are in fact recoverable in total loss claims.

The Court is correct that a number of cases have been decided in various jurisdictions across the country holding that a damages claim for loss of use is permissible in total loss claims because (i) there is no persuasive reason to distinguish between a partial loss claim and total loss claim and (ii) the long-standing legal principle that a party be fully and fairly compensated, which would include plaintiffs who are awarded damages for loss of use in a total loss claim. In effect, if a court limits the award in a total loss case to solely the fair market value and interest in the destroyed item, the court would effectively be denying the claimant the ability to obtain full and fair compensation. 

Lessons Learned from this Decision

If you are an insurance company, it is important to understand that, as a result of this decision, there will likely be an increase in loss of use damages claims in a variety accidents where there is a total property loss.

You can be prepared be instituting policies and protocols that require the claimant to prove the actual damages sought in their claim. 

Questions? Speak to a Brownsville Civil Defense Lawyer

If you or your company have questions about loss of use damages or you are reviewing a claim for loss of use damages stemming from a total property loss, now is the time to take advantage of the skill and experience of Brownsville civil defense attorneys with Colvin, Saenz, Rodriguez & Kennamer, L.L.P. Contact our office today to schedule a meeting.

Resources:

txcourts.gov/media/1247477/140574.pdf

lexology.com/library/detail.aspx?g=3607fa09-fcfd-4712-968f-169416bc5a55