Loss Of Use Claims

Dallas insurance lawyers need to know this recent court decision regarding “loss of use” damages. It is a Fort Worth Court of Appeals decision issued in January 2014. The style of the case is, Morrison V. Campbell. Here is some of the relevant information.
In this agreed interlocutory appeal, Morrison appealed from the trial court’s denial of his motion for summary judgment on the claim for loss of use damages brought against him by Campbell. Morrison’s vehicle struck Campbell’s motorcycle in an accident, and the motorcycle was damaged. Morrison argued that loss of use damages are not available to Campbell because his motorcycle was declared a total loss. Because this court held that damages for loss of use are available in total loss cases when the insurer unreasonably delays payment of a claim, it affirmed the trial court’s denial of the motion for summary judgment.
The accident that gave rise to this suit occurred on October 23, 2009. On June 22, 2010, Morrison’s insurance carrier (Insurer) sent a letter to Campbell’s attorney denying Campbell’s claim based on its determination that Campbell was at fault for the accident because of “faulty evasive action & following too closely.”
The next month, Campbell’s attorney sent Insurer a letter regarding Campbell’s claims for damages to his motorcycle and other personal property. He stated that the damage to the motorcycle “rendered it inoperable. In addition to the property damage to his motorcycle, Campbell has lost the use of his motorcycle from the date of the collision to the present.” He asserted that the proper measure of loss of use damages is the reasonable rental value of a substitute vehicle and that the cost of renting a replacement motorcycle during this time is $125.00 per day.
The attorney stated that he was authorized to accept the amounts listed in the letter loss of use from October 23, 2009 through February 28, 2011, 493 days x $125.00 per day.
Morrison argued in one issue that the trial court erred by denying his motion for summary judgment because under the law, loss of use damages are not available to Campbell because his motorcycle was declared a total loss and he was paid the fair market value for it.
Texas law distinguishes between property that was damaged to the point of being totally destroyed and damaged property that can be repaired. In a suit for damages for personal property that has been totally destroyed, the proper measure of damages is the fair market value of the property at the time it was destroyed.Texas courts have consistently held that if personal property such as a vehicle is damaged but is repairable, the owner may recover the cost of repairs and damages for loss of the use of the vehicle, but if the property is totally destroyed, the owner can recover only the market value of the property and not loss of use damages.Campbell argues that the rule against recovering loss of use damages for totally destroyed property is the “the general rule,” as though the law has provided exceptions.
Even long-standing rules should be re-examined periodically to determine whether they retain their validity in light of changed circumstances and standards. The court therefore considered the purpose of the rule.
This court then examined prior cases dealing with this issue.
Texas courts have also stated that the reason for treating repairable property and destroyed property cases differently is that in the case of total destruction, the owner can and will replace the property immediately and therefore suffers no loss of use. This assumption also supports the idea that allowing loss of use damages for totally destroyed property would give the property owner compensation in excess of the owner’s damages.A totally destroyed vehicle compared to a total loss vehicle is essentially a distinction without a difference–in either case, the owner can replace the vehicle rather than waiting on repairs. And if the owner can afford to replace the vehicle while waiting for payment from the insurer, the owner can replace the vehicle as quickly as the owner can find a vehicle to buy. Because the vehicle will be replaced rather than repaired, the owner theoretically suffers no loss of use.
But when a vehicle is repairable and has not been declared a total loss, the owner must do without the vehicle while repairs are made. Likewise, if the owner does not have the financial resources to replace a totaled vehicle immediately, the owner must wait for payment of the insurance proceeds. The owner thus has some delay in that case, even if the vehicle is a total loss, because the owner must wait for the insurer to pay the claim. But in that case, the waiting stops with the claim’s payment, at which point the owner may replace the vehicle. When the vehicle is not totally destroyed and is not a total loss, on the other hand, the owner must continue to wait while the vehicle is repaired. Thus even if the claim is paid immediately, the owner will be without the vehicle during the repair period. The law provides compensation for that inconvenience in the form of loss of use damages.
In a case in which an insurer unreasonably delays paying the claim for a vehicle’s total loss, the insurer’s unreasonable action causes the owner of the destroyed property to be unable to immediately replace the vehicle and, consequently, to suffer the loss of the use of a vehicle. This is so because even if the property owner does not have the independent financial means to immediately replace the vehicle on his or her own, when the owner has a valid claim under an insurance policy, the owner would be able to replace the vehicle immediately upon the claim’s prompt payment. Thus, when an insurance policy covers the claim, it is only the insurer’s unreasonable delay that causes the harm. Because the owner cannot replace the vehicle as quickly as the owner would be able to with a prompt claim payment, the owner suffers both property damage (in the form of the loss of the car’s fair market value) as well as loss of the car’s use. A plaintiff in an unreasonable-delay case who recovers both the fair market value for the property and loss of use damages is not being awarded a double recovery, and a plaintiff in such a case who is not allowed loss of use damages is simply not being made whole.
Accordingly, this court held that when an insurer unreasonably delays payment on a total loss, the claimant may recover both the fair market value of the vehicle and reasonable loss of use damages.