Case: J&D Towing, LLC v. Am. Alternative Ins. Corp.
Texas Supreme Court
59 Tex. Sup. J. 214 (Tex. 2016)

After its only tow truck was totaled in an accident caused by an underinsured driver, J&D Towing settled with the driver for the $25,000 limit of her policy and then sued its own insurance company, American Alternative Insurance Corporation, under an underinsured motorist policy for the loss-of-use of the truck, claiming the funds from the settlement with the driver were insufficient to compensate it for these damages. The jury rendered a verdict in favor of J&D Towing, awarding the company a total of $28,000, but the Tenth Court of Appeals reversed on the grounds that Texas law does not permit loss-of-use damages in total-destruction cases.

J&D Towing appealed to the Texas Supreme Court, arguing that Texas law permits loss-of-use damages in partial-destruction cases, and the same should hold true in total-destruction cases. The Texas Supreme Court agreed, noting the 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. Accordingly, the Texas Supreme Court reversed the court of appeals' judgment and rendered judgment for J&D.

In a thorough and detailed opinion, the Texas Supreme Court first observed that loss-of-use damages are appropriately couched in terms of consequential damages and that, by design, they compensate a property owner for damages that result from "a reasonable period of lost use" of the personal property. The Court next recognized the divergent decisions of Texas courts regarding the availability of loss-of-use damages in total-destruction cases, but ultimately found no basis in Pasadena State Bank v. Isaac, 149 Tex. 47, 228 S.W.2d 127 (1950), or any other Texas Supreme Court case, for barring loss-of-use damages in total-destruction cases.

The Court then examined the law of other jurisdictions, observing "[t]he modern trend . . . is both quantitatively and qualitatively persuasive: A substantial number of jurisdictions hold that the principle of full and fair compensation requires the availability of loss-of-use damages in total-destruction cases just as in partial-destruction cases." Agreeing with this trend, the Court held 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.

However, the Court went on to remind of the guiding principle of Texas tort law – the party shall be compensated for the injury done – and to emphasize that its ruling was "not a license for unrestrained raids on defendants' coffers." The Court also discussed restrictions on loss-of-use damages in total-destruction cases, including that they must be traceable to a tortious act and that plaintiffs in total-destructions cases may not be awarded damages for a period of lost use that exceeds the reasonable time necessary to replace the destroyed property. "After all," the Court stated, "the role of actual damages is to place the plaintiff in his rightful position, not the position he wishes to acquire."

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