Texas law permits loss-of-use damages in total-destruction cases
The Texas Supreme Court made a decision that restores logic and equity to property damages awards in auto accident claims. In its January 8, 2016 decision in J&D Towing, LLC v. American Alternative Insurance Corporation, the court ruled that Texas law permits loss-of-use damages in total-destruction cases.
This loss of use ruling is a victory for auto accident victims who were previously subjected to an irrational interpretation of Texas law by insurance companies.
Facts of the case
J&D Towing purchased the company’s only tow truck for $18,500 in April 2011. A car struck the tow truck in December 2011.
The driver of the car admitted fault and both parties agreed that the tow truck was a total loss. The car driver’s insurance company settled with J&D for the policy limit of $25,000, about $5,500 in addition to the estimated value of the tow truck.
The company was able to purchase a new tow truck and resume business in March 2012. However, J&D could not operate between the date of the accident and the purchase of the new truck.
J&D held an underinsured motorists policy issued by American Alternative Insurance Corporation (AAIC). J&D filed a claim with AAIC seeking loss of use damages for the time the company was not able to operate. AAIC denied the underinsured motorists claim and cancelled J&D’s policy, and J&D filed suit.
AAIC argued that Texas law did not permit loss of use damages for totally destroyed property and that J&D would be entitled to loss of use damages only had the tow truck been partially damaged.
In other words, had the auto accident caused less damage to the tow truck, the owner of the damaged property would be entitled to more money. If you think that logic makes no sense, your interpretation is in line with the Texas Supreme Court.
The appellate court reversed the $28,000 jury verdict awarded to J&D, but the Texas Supreme Court reversed the appellate court’s decision, thereby rendering a judgment in J&D’s favor.
The Texas Supreme Court decision is based in sound logic. A policyholder whose property has been damaged beyond repair should have the same rights to loss of use as a policyholder whose property sustained less severe damage.