SUPREME COURT OF TEXAS OVERTURNS LONGSTANDING RULE AND HOLDS THAT LOSS-OF-USE DAMAGES ARE AVAILABLE IN TOTAL PROPERTY DESTRUCTION CASES

In a case of interest to property and auto insurers, the Texas Supreme Court weighed in on the oft-criticized rule that loss-of-use damages are not available in total destruction cases.  In J & D Towing, LLC v. Am. Alternative Ins. Corp., No. 14-0574, 2016 WL 91201, at *1 (Tex. Jan. 8, 2016) the Supreme Court of Texas weighed in on the rule in Texas that loss-of-use damages are generally not recoverable in total damage cases. As the Court described the issue, the case addressed whether it should be cheaper to totally destroy a truck than it is to partially destroy it.  J&D Towing lost its only tow truck when a negligent motorist collided with the truck and rendered it a total loss. The question presented was whether in addition to recovering the fair market value of the truck immediately before the accident, could J&D recover loss-of-use damages, such as lost profits?

The relevant facts were undisputed by the parties. J & D is a towing company in Huntsville, Texas. In 2011, J & D owned only one tow truck, a 2002 Dodge 3500. On December 29, 2011, a car struck the passenger side of J & D’s truck. Both parties stipulated that the negligence of the driver of that car, was the sole proximate cause of the accident. The parties also stipulated that the accident rendered the truck a total loss. American Alternative Insurance Corporation (AAIC) relied on authority from other Texas courts of appeals and cases from the Texas Supreme Court, arguing that Texas law distinguishes between partial destruction and total destruction of personal property, allowing loss-of-use damages for the former but not for the latter. J & D countered that this distinction belies common sense and is out of step with the majority trend in other jurisdictions permitting loss-of-use damages in total-destruction cases.

The Court of Appeals agreed with AAIC. The Texas Supreme Court began with a thorough and insightful examination of the historical roots of the rule on loss-of-use damages and the current “clear consensus” in other jurisdictions that loss-of-use damages are available in total-destruction cases. The Court concluded that allowing loss-of-use damages in partial destruction cases but not in total destruction is “illogical.” The Court went on to hold that the owner of personal property that has been totally destroyed may recover loss-of-use damages in addition to the fair market value of the property immediately before the injury.