Texas insurance lawyers have to read the recent Texas Supreme Court case, J&D Towing, LLC v. American Alternative Insurance Corporation. The facts are set out in the March 3 writing. This is an appeal from the Waco Court of Appeals.
The Court starts out: We begin with first principles. Compensation is the chief purpose of damages awards in tort cases. Indeed, we have long held that the basic reason underlying rules for the ascertainment of damages for any tortious act is a fair, reasonable, and proper compensation for the injury inflicted as a proximate result of the wrongful act complained of. Reasonable and proper compensation must be neither meager nor excessive, but must be sufficient to place the plaintiff in the position in which he would have been absent the defendant’s tortious act. In this way, compensation through actual-damages awards functions as an instrument of corrective justice, an effort to put the plaintiff in his or her rightful position.
Actual damages must be either direct or consequential. Direct damages compensate for a loss that is the necessary and usual result of the tortious act. By contrast, consequential damages, also known as special damages, compensate for a loss that results naturally, but not necessarily, from the tortious act. Although consequential damages need not flow from the act, they must be both forseeable and directly traceable to the act. If the purported consequential damages are too remote, too uncertain, or purely conjectural, they cannot be recovered.
Loss of use damages are often appropriately couched in terms of consequential damages. By design, loss of use damages compensate a property owner for damages that result from a reasonable period of lost use of the personal property. The amount of damages may thus be measured according to the particular loss experienced, such as the amount of lost profits, the cost of renting a substitute chattel, or the rental value of the owner’s own chattel.
Where personal property has been only partially destroyed, Texas law is clear as to direct and loss of use damages. The default rule for measuring direct damages is the difference in the market value immediately before and immediately after the injury to such property at the place where the damage was occasioned. But this rule is not absolute. For example, where it would be economical and reasonable to repair the property, the owner of the injured property may instead recover the reasonable costs of such replacements and repairs as are necessary to restore the damaged article to its condition immediately prior to the accident. Additionally, whether the owner recovers direct damages under the default rule or otherwise, the owner may recover loss of use damages, such as the pecuniary loss of the use of an automobile damaged in a collision.
Where personal property has been totally destroyed, however, Texas law is less clear. As an initial matter, the measure of direct damages is the fair market value of the property immediately before the injury at the place where the injury occurred. But we have not yet directly spoken on loss of use damages in total destruction cases. Despite that lack of guidance, some Texas courts of appeals have held that loss of use damages are unavailable in total destruction cases, but other courts of appeal have seriously questioned the validity of that rule.
This court then began a 31 page discussion of how they reached their decision by citing past law and what is occurring in other states.
The final decision by this Texas Supreme Court is that the owner of personal property that has been totally destroyed may recover loss of use damages in addition to fair market value of the property immediately before the injury. The thing to be kept in view is that the party shall be compensated for the injury done. Total destruction cases are no exception.
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