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Written by: The Deerfield Team
On January 8, 2016, the Texas Supreme Court released a decision that reversed a 60-year trend in Texas auto insurance litigation. In J&D Towing, LLC vs. American Alternative Insurance Corp. (AAIC), the Court reversed a confusing trend of prohibiting the recovery of loss-of-use damages in total loss cases.
Traditionally, claimants whose damaged property can be repaired are entitled to recover the cost of repairs as well as loss-of-use damages. Because claimants whose property is totally destroyed often replace the property immediately, and because courts have tried to limit the possibility of double recovery, claimants who have suffered a total loss have only been entitled to the fair market value of the lost property.
Though it has been the norm in Texas courts for decades, the Fort Worth Court of Appeals decided in Morrison v. Campbell in 2014 that “there is no compelling or logical reason to treat loss of use claims differently in destroyed property cases than we do in repairable property cases.” The Court was not trying to establish a new general rule, but ruled that a claimant should be able to recover loss-of-use damages on top of the fair market value of lost property when an insurer delays payment on a total loss.
This 2014 ruling helped support J&D Trucking’s successful appeal to the Texas Supreme Court concluded two years later.
The Texas Supreme Court was careful to encourage future total loss cases to be considered according to their own particular circumstances, and provided some guidelines. The ruling leaves many unanswered questions in its wake, such as how damages in total loss cases should be measured, whether the new ruling will be abused by claimants as previously feared, and whether insurers will be motivated to settle claims more efficiently. The full impact of this historical decision will be felt in the coming years.
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The Deerfield Team
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SOURCES:
Bean, Philip K. “Litigation Update: Loss-of-Use Damages in the Event of a Total Loss,” Kane Russell Coleman & Logan PC. Published in Lexology. Aug 31, 2015. http://www.lexology.com/library/detail.aspx?g=c8f15a4a-b006-42f8-a0c9-468169d2e630
Craven, William, and Gregory Hudson. “Texas Rule Change: Supreme Court Holds Loss of Use Damages Are Recoverable Where Property Total Loss,” Property Insurance Law Observer. Jan 15, 2016. http://propertyinsurancelawobserver.com/2016/01/15/texas-rule-change-supreme-%20court-holds-loss-of-use-damages-are-recoverable-where-property-total-loss/
Jones, Stephanie K. “Texas Supreme Court: Loss-of-Use Damages Allowed in Total Loss Cases,” Insurance Journal. Jan 21, 2016. http://www.insurancejournal.com/news/southcentral/2016/01/21/396028.htm
“Loss of Use Law and Legal Definition,” US Legal. http://definitions.uslegal.com/l/loss-of-use/
McGrath, Richard A. “When Is A Loss A Total Loss?” McGrath Insurance Group, Inc. http://www.mcgrathinsurance.com/node/164
“What is Double Recovery?” Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed. http://thelawdictionary.org/double-recovery/
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