Texas is no longer out of step with the majority trend in other jurisdictions permitting loss of use damages in cases involving totally destroyed property. In addition to recovering the fair market value of destroyed property, the owner or subrogated insurer should now be able to recover loss of use damages, including damages for lost profits.
The Texas Supreme Court issued the opinion in J&D Towing, LLC v. American Alternative Insurance Corporation on January 8, 2016. The opinion of the court is available online. The question presented was simple – in addition to recovering the fair market value of the truck immediately before the accident, may J&D recover loss-of-use damages, such as lost profits?
The plaintiff, J&D, lost its only tow truck in a collision that rendered the truck a total loss. A couple of months after the accident, the at-fault party’s insurer settled with J&D for its policy limit of $25,000 for property damage. J&D used the money to purchase another truck and filed an uninsured motorist claim with American Alternative Insurance Corporation (AAIC), requesting compensation for the loss of use of the truck pursuant to the policy provision that required AAIC to “pay damages which an ‘insured’ is legally entitled to recover from the owner or operator of an “uninsured motor vehicle” because of … “property damage” caused by an ‘accident’.”
J&D ended up suing AAIC and asked the jury to award loss of use damages in the sum of either $27,866.25 or $29,416.25, with the difference being whether the jury awarded damages for a nine-week period or a ten-week period. AAIC argued that it was not obligated to pay under the policy because Texas law does not permit recovery of loss-of-use damages in total-destruction cases and the underinsured-motorist policy only required AAIC to pay for damages that J&D was legally entitled to recover. The jury awarded loss of use damages of $28,000, and the trial court entered a judgment for $22,500 ($28,000 less $5,500 – the amount of the $25,000 settlement with the at-fault party’s insurer that did not cover the $19,500 value of the truck, which partially compensated J&D for its loss of use damages).
AAIC appealed the trial court’s decision. The court of appeals held that J&D was not entitled to damages for loss of use, so it reversed the trial court’s judgment and rendered judgment that AAIC take nothing.
Emphasizing the principle of full and fair compensation, the Texas Supreme Court expressly permitted loss of use damages for the destroyed truck. The court looked to the laws of other states for guidance and found that an impressive number of courts have endorsed the availability of loss of use damages in cases involving totally destroyed property.
It is now Texas law 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.”