The Texas Supreme Court has held that a plaintiff who suffered a total
destruction of his truck as a result of defendant’s negligence may be entitled
to recover loss-of-use damages. This resolves the split between Texas appellate
courts.
The role of loss-of-use damages is to compensate plaintiffs for damages that
ensue by virtue of losing the use of their personal property during a
reasonable period of time until they become able to find a replacement for
their destroyed property. Accordingly, the damages may be in the amount of lost
profits or the cost of leasing a substitute personal property. Texas appellate
courts have been split on the issue of awarding loss-of-use damages, most of
which barred recovery in total destruction of personal property cases but,
nonetheless, allowed it in partial destruction cases.
Factual Background
In J&D Towing, LLC v. American Alt. Ins. Corp., 59 Tex. Sup.
Ct. J. 214, 2016 Tex. LEXIS 4 (2016), the facts of the case before the court
involved nothing out of the ordinary. On December 29, 2011, as the plaintiff
was driving his fairly new truck that he bought for business purposes, a car
struck his truck on the passenger side and rendered the truck a total loss.
(Texas tort law deems a vehicle to be a total loss when damages far exceed the
economic feasibility of its repair.) Shortly after the accident, the insurance
company of the ill-fated car driver settled with the plaintiff for the policy
limit for property damage in the amount of $25,000.
The plaintiff, however, believed that he was entitled to be compensated for
the inability to use his truck immediately following the accident up until he
was able to buy a replacement so that he could resume his business.
Consequently, the plaintiff filed an underinsured motorist (UIM) claim with his
insurance company, seeking compensation for the lost use of his truck.
When the insurance company denied the plaintiff’s claim, he sued the company
for the loss-of-use damages, asking the jury to award him $27,866.25 or
$29,416.25, depending on whether the jury would award for a 9- or 10-week
period of the plaintiff’s inability to use his truck.
At trial, the defendant raised no dispute as to the amount of damages that
the plaintiff sought, maintaining that it owed no loss-of-use damages in this
total-loss-of-truck case because Texas law only permitted such recovery in
partial loss of personal property cases. Believing that it had an ironclad
defense, the defendant offered no evidence and filed motions for summary
judgment and an instructed verdict.
The trial court, however, denied the defendant’s motions, and the jury
awarded the plaintiff $28,000 in loss-of-use damages. The defendant filed a
motion for judgment notwithstanding the verdict (JNOV) that the trial court
denied. After the court entered the judgment for $22,500 plus interest and
court costs, the defendant filed an appeal.
In its appellate brief, the defendant once again failed to dispute the
amount of the damages that the plaintiff sought and continued essentially the
same line of argument as at the trial. The appellate court agreed with the
defendant and overturned the trial court’s decision, finding that it abused its
discretion in submitting the issue to the jury and erroneously denied the
defendant’s JNOV motion. The plaintiff appealed to the Texas Supreme Court,
which found the plaintiff’s argument that Texas law should allow loss-of-use
damages recovery in total destruction of personal property cases just as it
allows such a recovery in partial destruction cases to sound "in fairness
and common sense."
Court’s Rationale
In its opinion, the court underscored that the longstanding distinction
between the total and partial destruction of personal property cases is not
merely illogical, but it is also inequitable. To buttress its position, the
court went into some detail in surveying Texas precedent, the law of other
jurisdictions, treatises, and Restatements on the issue of loss-of-use damages
in total destruction cases. The court repeatedly alluded to the theme it
introduced in Craddock v. Goodwin, 54 Tex. 578 (1881), that in tort
cases, "[t]he thing to be kept in view is that the party shall be
compensated for the injury done."
The overarching principle behind this theme, the court mentioned, is that
actual damages, of which loss-of-use damages constitute a part, exist to put
plaintiffs in their rightful position. It is largely these two principles that
steered the court in pronouncing the loss-of-use damages in total destruction
cases to be permissible.
Importantly, the court rectified the defendant’s interpretation of
Pasadena State Bank v. Isaac, 228 S.W.2d 127 (Tex.
1950), by explicating that, in that case, the court limited its inquiry to the
proper measure of damages in partial destruction cases, and, contrary to the
defendant, it remained silent on the issue of damages in total destruction
cases. Thus, the case before the court presented the opportunity to finally
pronounce what the law on the loss-of-use damages in total destruction cases in
Texas will be, especially given the fact that courts of appeals differed on the
issue.1
Those courts of appeals reluctant to allow recovery of loss-of-use damages
in total destruction cases largely justified their reluctance by saying that to
do otherwise would be tantamount to endorsing double recovery. In other words,
their position was that loss-of-use damages are already included in the damages
ordinarily allowed in total destruction cases.2 In
addition, these courts tended to assume that, since razed property is
ordinarily replaced with no delay, no loss-of-use damages can arise. Other
courts found this assumption to be fallacious because a speedy replacement may
fail to occur for a host of very plausible reasons. Meanwhile, plaintiffs would
remain bearing concrete economic losses.
In agreeing with these courts of appeals, the court pointed out that, since
the mid-twentieth century, the case law and treatises reveal a "clear
consensus that loss-of-use damages are available in total destruction
cases." Specifically, the court mentioned approximately 16 high courts
around the nation and lower appellate courts in more than 6 other
jurisdictions3 that recognize such damages, finding
the consistency in their reasoning to be compelling. The court agreed that the
distinction maintained between recovery of loss-of-use damages in partial and
total destruction cases is untenable, especially given the fact that recovery
of damages under both scenarios comports equally well with the notion of full
and fair compensation for causing the injury.
However, while the court permitted recovery for loss-of-use damages in total
destruction cases, it nonetheless placed limitations on their availability. To
make the recovery possible, plaintiffs will, first of all, need to establish
that the damages are "foreseeable and directly traceable to the tortious
act." Second, the damages must in no way be "speculative."
Lastly, plaintiffs can only claim the damages for periods not unreasonably
lengthy in replacing the destroyed personal property.
Acknowledgment
The author would like to thank and acknowledge
the contributions to this Commentary by Ekaterina "Katya" Long, an
associate with Cooper
& Scully's Dallas office.