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January 19, 2016

Loss of use damages now available in total property loss cases in Texas

In J&D Towing, LLC v. American Alternate Insurance Corp., the Texas Supreme Court decided a very important issue of first impression, whether one who suffers a total loss to personal property can recover not only the value of the property but loss-of-use (lost profits) damages. Joining the modern trend of courts around the U.S., the Texas court said “yes,” holding that there should be no distinction between partial loss of property and total loss. (It has always been the case that in a partial loss of property loss-of-use damages are recoverable.) The case is an interesting one to read. It begins: “Nearly a century ago, a Texas attorney argued that the rule at issue in this case made it ‘cheaper to kill a mare in Texas than it is to cripple her’”. It gets better from there. The opinion is, in part, a history lesson in the development of damages for partial loss of property vs. total loss. “It is a story of grit and perseverance. A courageous but ill-fated stand at the Alamo, a Palm Sunday massacre at Goliad, and finally, a decisive defeat of Santa Anna at San Jacinto – all monumental moments that culminated in our triumphant birth as a young republic.” …“Beginning in the dark era of slavery, that trend [of only allowing loss-of-use damages in partial loss cases] grew more pronounced in cases where the destruction of horses and automobiles disrupted their owners’ businesses.”

The Court goes on to cite to Scriptures, a Civil War-era Alabama case on damages related to the value of hire of a slave named Israel, a New York case involving a horse that drowned while towing a boat on the Erie Canal when two boats collided, and the historic shift from horse power to horsepower and cases involving cars. The Court questioned why the trend had developed to disallow loss-of-use damages for total destruction cases and noted the speculation that it was as a result of common law action of trover. “The action of trover is the ancestor of the action of conversion. Birthed in the late fifteenth century, trover was a remedy for an owner of personal property who lost his property and could not recover it from the finder of the property.” The Court found “trover is not an altogether convincing explanation for the widespread prohibition of loss-of-use damages that developed in early American caselaw and treatises.” The Court noted there has been a sea change on the availability of loss-of-use damages in total destruction cases and now there is a clear consensus that loss-of-use damages are available in total destruction cases.

Now in Texas, 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.

We are happy to answer any questions you may have on this.