When Is Property A Total Loss?

Dallas insurance lawyers will get a lot of calls wherein someone is asking the above question. This most often arises in the context of a motor vehicle accident. The Tyler Court of Appeals addressed this issue in a 2007 opinion styled, Canal Insurance v. Hopkins Towing. Here is some of the relevant information.
Henry Sweeney was operating a tractor-trailer rig hauling a load of peas when he lost control of the rig, which traveled off the road and into a deep ditch. The tractor-trailer struck several small trees and, eventually, rolled over onto its left side. Sweeney was the lessee and operator of the tractor, which was owned by Mullinax. Mullinax also owned the trailer. Both the tractor and trailer were insured against physical damage under an insurance policy issued by Canal. Mullinax was the named insured.
Trooper Faulkner ordered that a wrecker service be called in to tow the tractor and trailer. After two other wrecker services had refused the job because they “didn’t have the capabilities to do it,” Hopkins was called in to do the job. Because of the layout of the wreck site and the position of the tractor and trailer, Hopkins determined that they would have to use special air bags to return the trailer to an upright position. Hopkins recruited a subcontractor out of Tyler, Texas to supply the necessary air bags and operating personnel. In addition, Hopkins supplied three of his tow trucks and seven or eight employees who worked through the night, and in the rain, in order to remove the tractor and trailer from the ditch.
The tractor and trailer were initially towed to a vehicle storage facility operated by Hutto’s Wrecker Service. At Mullinax’s later request, Hopkins subsequently towed both to Hopkins’s own vehicle storage facility. Hopkins submitted a bill of $12,690.00 to Mullinax for the work his company performed to remove the tractor and trailer and tow them to Hutto’s facility, and for the work performed by the airbag subcontractor. When Mullinax failed to pay the bill, Hopkins sought payment from Canal. Because the language of the insurance policy in question did not expressly provide coverage of third parties who perform towing services, Canal refused to pay Hopkins.
Hopkins filed a lawsuit against both Mullinax and Canal. Hopkins’s cause of action against Canal was based upon section 2303.156(b) of the Texas Occupations Code. Mullinax filed a pro se answer but did not appear at trial. Canal filed an answer and appeared at trial by way of its representative, Ron King, and through counsel. Following a bench trial, the trial court entered a final judgment against Mullinax and Canal, holding them jointly and severally liable to Hopkins for the initial towing charges of $12,690.00 plus prejudgment interest and court costs. This appeal followed.
Canal challenged the legal sufficiency of the evidence supporting the trial court’s written finding of fact that Canal had paid “a claim of total loss on a vehicle.” Specifically, Canal claims that there was “no evidence that Canal paid ‘a claim of total loss.'” It is undisputed that Canal paid an insurance claim to Mullinax for the damage to the tractor and trailer. Likewise, Canal does not challenge the following pertinent findings of fact made by the trial court:
16. The estimated fair market value of the truck prior to the wreck was $10,000, while the estimated cost to repair was $10,687.17.
17. The estimated fair market value of the trailer prior to the wreck was $9,125.00, while the estimated cost to repair was $11,509.20.

The only question for review is whether evidence that repair costs will exceed the fair market value of the property to be repaired constitutes legally sufficient evidence of a total loss.
Section 2303.156(b) applies to instances where “an insurance company . . . pays a claim of total loss on a vehicle.” According to Canal, the legislative history shows that the legislature intended the phrase “total loss” to apply only “in such cases where the vehicle is without value.” This Court disagreed. On the whole, the legislative history reflects a concern by legislators regarding whether the interest acquired under section 2303.156(b) would be superior to the interest possessed by secured lenders. The fact that a major consideration of the legislature was about who would have a superior interest in the affected vehicles shows that the legislature was, as a whole, unlikely to be under the impression that these vehicles would be “without value.” Instead, the legislative history shows that they considered the phrase “total loss” to be consistent with the word “totaled.”
It is commonly understood that “totaled” vehicles are those for which repairs would be too costly compared to the value of the vehicle. This comports with the Texas Supreme Court’s definition of “total loss.” As stated above, a “total loss” has been defined by the Texas Supreme Court to occur in situations where a reasonably prudent uninsured owner, desiring to restore the property to its preincident condition, would not utilize that property for such restoration. Generally, a reasonably prudent uninsured owner would not repair a vehicle where the repair costs exceeded the vehicle’s preincident fair market value. Therefore, a “totaled” vehicle would also be a “total loss.”
The Texas Supreme Court has consistently defined and interpreted the term “total loss” for over 100 years. This definition does not require that the property be without value; it merely requires that a reasonably prudent uninsured owner, desiring to restore the property to its preincident condition, would not utilize that property for such restoration. Further, such a definition also comports with the word “totaled.” The trial court concluded that “Mullinax’s truck and trailer were a ‘total loss’ because the cost of repair of the damages to them was equal to, or in excess of, their fair market value at the time of the loss.” The trial court did not err in its interpretation of “total loss.”

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