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  • PROPERTY DAMAGES: LOSS OF USE RECOVERABLE IN TOTAL LOSS CASES

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    For decades, Texas law only permitted loss of use damages to cases involving partial destruction of property involved in motor vehicle accidents or other highway related property-loss collisions.


    No longer.


    The Texas Supreme Court has recently come down on the side of the plaintiff, reversing more than 60 years of case law that previously denied recovery for loss of use damages where the affected property was totally destroyed. J & D Towing, LLC v. American Alternative Insurance Corporation, No. 14-0574, 2016 WL 91201 (Tex. Jan. 8, 2016). In J & D Towing, an accident with a third party rendered the towing company’s only truck a total loss. J & D claimed its total losses exceed the third party insured’s offer of $19,000.00, which included loss of use damages based on its inability to conduct further business.


    J & D initially settled for the insured’s policy limits of $25,000.00 then sought recovery for loss of use damages under its underinsured motorist policy. J & D’s insurer, American Alternative Insurance Corporation (AAIC) denied the claim, stating that (a) J & D has already received an additional $5,500.00 over the value of the truck from the third party’s insured, and (b) the underinsured motorist policy only provided coverage for monetary amounts J & D was “legally entitled to recover.” Relying on six decades of legal precedent, AAIC argued that Texas law precluded recovery for loss of use damages when the property in question was totally destroyed. J & D subsequently filed suit.


    Remarkably, at trial, AAIC did not contest J & D’s loss of use model nor introduce one of their own, instead relying entirely on the legality of J & D’s recoverability. The trial court held for J & D, and awarded the plaintiffs a $28,000.00 jury award – less the $5,500.00 already paid by the third party insured. However, a Waco appellate court reversed, holding the trial court’s loss of use jury instructions was an abuse of discretion.


    The Texas Supreme Court reversed, holding, inter alia, that accident victims may incur property loss of use damages in total loss cases just as readily as in partial destruction cases. Quoting a longstanding principle of Texas tort law, the Court exclaimed that the “full and fair compensation” principle remain intact. Id. at 42. Interestingly, the Court did not elucidate how such total loss of use damages should be measured, or if in fact they were correctly measured.


    What one can take away from the ruling is that in total loss of use cases, the plaintiff should only pursue damages that are “reasonably necessary” to obtain replacement property. Id. In addition, said damages cannot be too remote; they must be “foreseeable and directly traceable to the tortious act.” Id. at 43. Finally, the high Court stated that although “mathematical exactness is not required,” total loss of use damages must not be speculative, and damages may not be awarded for “an unreasonable period of lost use.” Id. Again, the Court left open as how an unreasonable period may be defined. It is clear, however, the Court expects the plaintiff to be diligent “in remedying his loss” in order to return the plaintiff to his rightful position, “not the position he wishes to acquire.” Id.


    In conclusion, this is a huge property damages victory for plaintiffs who have suffered total loss of use. Not only are plaintiff’s entitled to total loss of use damages for the fair market value of their property/vehicle, but also prejudgment interest and consequential damages, including lost profits.


    Issues worth consideration:


    The court made reference, in its opening statement, that J & D “lost its only tow truck when a negligent motorist collided with the truck and rendered it a total loss.” Id. at ¶ 2. Emphasis Added. One has to wonder if the ruling of the Texas high court would have been different if J & D had had more than one truck, or a “fleet” at its disposal.


    The definition of “property damage” within general commercial underinsured motorist policies typically includes loss of use. Terms of noncommercial underinsured motorist policies vary widely from one insurer to the next.


    Setterberg Law Office

    www.SetterbergLawOffice.com

    randy@setterberglawoffice.com

    Randy
    Apr 24, 2016
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