(Article from Insurance Law Alert, January 2016)
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Clarifying unsettled Texas law, the Texas Supreme Court ruled that loss-of-use damages are allowed in total destruction property cases, and are not limited to partial destruction cases. J&D Towing, LLC v. Am. Alt. Ins. Corp., 2016 WL 91201 (Tex. Jan. 8, 2016).
The coverage dispute arose out of a car accident, which resulted in the total destruction of a tow truck. The tow truck company settled with the insurer of the other driver for the loss of the truck, and then sought loss-of-use damages from American Alternative Insurance Company under an underinsured-motorist policy. American denied the claim on the ground that Texas law does not permit recovery of loss-of-use damages in total destruction cases. In ensuing litigation, a jury awarded the towing company loss-of-use damages. American appealed, arguing that the trial court erred in allowing the loss-of-use damages issue to be submitted to a jury. The appellate court agreed and reversed the trial court, ruling that Texas law allows recovery of loss-of-use damages only in partial destruction property cases. The Texas Supreme Court reversed.
The Texas Supreme Court ruled 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.” The court reasoned that the distinction between partial destruction cases and total destruction cases “is not only illogical but is also against the great weight of jurisdictions that have eliminated that archaic distinction.” In addition, the court held that loss-of-use damages “must be available in total destruction cases pursuant to the principle of full and fair compensation.”
Significantly, the court cautioned that loss-of-use damages must be “foreseeable and directly traceable to the tortious act” rather than speculative. “Although mathematical exactness is not required, the evidence offered must rise above the level of pure conjecture. Moreover, the damages may not be awarded for an unreasonably long period of lost use.”