J & D Towing, LLC v. American Alternative Insurance Corp.
478 S.W.3d 649
| Tex. | 2016Background
- J & D Towing (owner Robert Davis) owned a single 2002 tow truck that was rendered a total loss in a December 29, 2011 collision caused by another driver.
- J & D settled with the tortfeasor’s insurer for $25,000, then sued its own underinsured-motorist insurer (AAIC) claiming additional loss-of-use damages (lost profits/rental value) not covered by that settlement.
- AAIC denied responsibility, arguing Texas law bars loss-of-use damages when personal property is totally destroyed and thus the policy (which pays only "legally entitled" damages) was not triggered.
- At trial the jury awarded J & D $28,000 in loss-of-use damages; the trial court credited part of the tortfeasor settlement and entered judgment for J & D; AAIC appealed solely on the legal availability of loss-of-use damages in total-loss cases.
- The Texas court of appeals reversed, holding loss-of-use damages are unavailable for totally destroyed chattels; the Texas Supreme Court granted review to decide whether loss-of-use damages may be recovered in total-destruction cases.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loss-of-use (consequential) damages are recoverable when personal property is totally destroyed | J & D: Same logic as partial-destruction — lost use during reasonable replacement period is foreseeable and necessary for full compensation | AAIC: Texas law draws a categorical line; total-destruction recovery is limited to fair market value (to avoid double recovery or speculation) | Loss-of-use damages are recoverable in total-destruction cases in addition to fair market value, subject to usual limits (foreseeable, non-speculative, reasonable replacement period) |
| Whether trial court abused discretion by submitting loss-of-use question to the jury | J & D: Evidence supported a jury determination of reasonable loss-of-use damages | AAIC: Legal bar meant the question should not have been submitted | Trial court did not abuse its discretion; submission and jury award upheld |
| Whether JNOV should have been granted | J & D: No — legal availability and factual evidence supported recovery | AAIC: Legal error only, so JNOV appropriate | JNOV was properly denied because loss-of-use damages are legally available |
| Whether AAIC coverage was triggered (is tortfeasor underinsured) | J & D: Tortfeasor’s settlement plus unrecovered loss-of-use means available liability limits were insufficient — tortfeasor was underinsured | AAIC: Tortfeasor’s payment equaled or exceeded legally recoverable damages (market value), so no underinsurance | Court held J & D was entitled to loss-of-use damages; therefore tortfeasor’s limits were insufficient and AAIC coverage was triggered (no remand necessary) |
Key Cases Cited
- Pridgin v. Strickland, 8 Tex. 427 (Tex. 1852) (early Texas authority recognizing recovery for value and for loss of services/use)
- Pasadena State Bank v. Isaac, 228 S.W.2d 127 (Tex. 1950) (establishes market-value default for chattels and discusses partial-destruction measures and loss-of-use in that context)
- City of Canadian v. Guthrie, 87 S.W.2d 316 (Tex. Civ. App. Amarillo 1935) (early Texas case articulating prohibition on loss-of-use for total destruction cited by some later courts)
- Mondragon v. Austin, 954 S.W.2d 191 (Tex. App.—Austin 1997, pet. denied) (Texas court of appeals questioning the total-destruction prohibition)
- Morrison v. Campbell, 431 S.W.3d 611 (Tex. App.—Fort Worth 2014, no pet.) (Texas court of appeals permitting loss-of-use when insurer unreasonably delays; influential in modern trend)
- Lund v. North Star Dodge Sales, Inc., 667 S.W.2d 115 (Tex. 1984) (cited for principles on loss-of-use and damages; illustrates Texas line of cases on consequential damages)