Loss Of Use In Insurance

Benbrook insurance lawyers need to be aware of this case. The reason to be aware of this case is that the case is, as of the date of this post, on appeal to the Texas Supreme Court. Hopefully their decision will put to rest some of the arguments in the Courts of Texas dealing with how to handle “loss of use” issues. The style of this case is, American Alternative Insurance v. Davis. It is from the Waco Court of Appeals.
The crux of this case involves whether a chattel owner should be compensated for measurable loss-of-use damages suffered when the owner’s chattel is totally destroyed and the owner is unable to replace the chattel or obtain a substitute immediately. The dispute arises from an automobile accident on December 29, 2011. At the time of the accident, Davis was driving a wrecker owned by his business, J & D. The only issue submitted to the jury pertained to J & D’s damages for the loss of use of its wrecker.
Davis testified that the wrecker in question was a 2002 Dodge 3500 with an 806 Vulcan wheel-lift unit on the rear. Davis stated that this was J & D’s only wrecker. Davis did not replace the wrecker until the second week of March 2012 because he claimed that he was financially unable to purchase a replacement wrecker. Accordingly, J & D was unable to continue operations for a period of approximately four months.
In explaining the delay in replacing the wrecker, Davis noted that the responsible persons’ insurance company “low-balled” him on the value of the wrecker. After several rounds of negotiations, J & D finally settled its claim against their insurance company for the policy limit of $25,000, which was more than the appraised value and purchase price of the wrecker. Afterwards, J & D made a claim for loss-of-use damages under its underinsured-motorist policy with AAIC, which had a policy limit of $85,000. AAIC denied J & D’s claim and ultimately cancelled the policy. This lawsuit followed.
With regard to damages, Davis stated that the primary income of J & D comes from “repossessions; city rotation, which is through HPD of the City of Huntsville; and my private property tow aways and private calls as well, but the primary would be rotations–rotations, repossessions, and private properties.” As a result of the accident, Davis was forced to turn down dispatch calls from the Huntsville Police Department. Davis also noted that the accident prevented J & D from fulfilling contractual repossessions for Capital Asset and Recovery and other tows requested by private parties. After explaining his calculations, Davis asserted that J & D lost between $27,866.25 and $29,416.25 from the time of the accident until the wrecker was replaced in March 2012.
At the conclusion of the evidence, the jury returned a verdict in favor of J & D in the amount of $28,000.
Texas law distinguishes between property that was damaged to the point of being totally destroyed and damaged property that can be repaired. For decades, Texas courts have held that, 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. In other words, a chattel owner can recover only the market value of the property, not loss-of-use damages, in a total-loss case. On the other hand, when personal property, such as a vehicle, is damaged but repairable, the owner may recover the cost of repairs and damages for the loss of use of the vehicle.
In the instant case, it is undisputed that J & D’s wrecker was a total loss. Therefore, under the above-mentioned law, J & D would only be entitled to the market value of the wrecker and could not recover loss-of-use damages.
Based on the above, the Waco Court of Appeals reversed the trial court judgment in favor of Davis. Now we need to see what the Texas Supreme Court says.