As anyone who has had their vehicle destroyed in a car accident can tell you, replacing that vehicle can sometimes be the least of their worries. Because most of us are ill-prepared to handle the mounting costs of rental vehicles while we wait for insurance companies to assess and pay the replacement costs insureds are due. For many years in this state, however, where an insured’s vehicle was adjudged a total loss, drivers could not recover for the loss-of-use of their vehicle:
Since…1932, at least six other courts of appeals have expressly stated that, although loss-of-use damages are available in partial-destruction cases, these damages are unavailable in total-destruction cases. Some courts have justified that rule on the ground that loss-of-use damages are “included as a part of the award for total loss”—that is, the award based on the fair market value of the property—and thus permitting additional damages for loss-of-use would constitute a double recovery.
J&D Towing, LLC v. Am. Alternative Ins. Corp., 478 S.W.3d 649, 662 (Tex. 2016).
The Fort Worth Court of Appeals, however, recently “broke rank” with the majority of these courts, ruling that loss-of use damages may be recovered in total loss cases where an insurer unreasonably delays the payment of a claim. See Morrison v. Campbell, 431 S.W.3d 611, 623 (Tex.App.–Fort Worth 2014, no pet.). As the Morrison court noted:
In a case in which an insurer unreasonably delays paying the claim for a vehicle’s total loss, the insurer’s unreasonable action causes the owner of the destroyed property to be unable to immediately replace the vehicle and, consequently, to suffer the loss of the use of a vehicle. This is so because even if the property owner does not have the independent financial means to immediately replace the vehicle on his or her own, when the owner has a valid claim under an insurance policy, the owner would be able to replace the vehicle immediately upon the claim’s prompt payment. Thus, when an insurance policy covers the claim, it is only the insurer’s unreasonable delay that causes the harm. Because the owner cannot replace the vehicle as quickly as the owner would be able to with a prompt claim payment, the owner suffers both property damage (in the form of the loss of the car’s fair market value) as well as loss of the car’s use.
But the Second District’s decision in this regard, would be merely the tip of the iceberg in respect to the jurisprudence on this subject. Because in January of 2016, the Texas Supreme Court issued its decision in J&D Towing, LLC v. Am. Alternative Ins. Corp., 478 S.W.3d 649 (Tex. 2016). The court, recognizing the Morrison court’s dramatic departure from prior decisions, truly doubled down. In this regard, the court first notes that as long and well established as the principal may be, it has never made sense, and the tides of change favor allowing such damages:
It is abundantly clear from both early caselaw and early legal treatises that a majority of jurisdictions within the United States permitted loss-of-use damages in partial-destruction cases, but prohibited loss-of-use damages in total-destruction cases. Why that prohibition existed is not as obvious, though some courts referenced the common-law action of trover. But regardless of the theoretical underpinnings of the prohibition, recent caselaw and treatises have shifted away from the prohibition. And the reasons for the shift appear to coalesce around one simple point: The owner of totally destroyed personal property may suffer loss-of-use damages to the same extent that the owner of partially destroyed personal property may suffer loss-of-use damages—permitting the damages in the latter case and not the former is, therefore, illogical.
Id. at 664. Given the lack of any rational basis for disallowing such recovery in total loss cases, and the need to allow a full and fair compensation for damages, the court chose to allow the recovery of loss-of-use damages in all property damage cases:
We agree with this modern trend, and we now hold that 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 conclude our discussion the way we began it—with the guiding principle of Texas tort law: “The thing to be kept in view is that the party shall be compensated for the injury done.” Total-destruction cases are no exception. To be sure, compensation for the value of personal property may differ depending upon whether the property was partially or totally destroyed. But that is a direct-damages question, not a consequential-damages question. The consequential-damages inquiry here is concerned with a different injury wholly independent of the measure of property damage. This inquiry seeks to make whole a plaintiff who has suffered economic injury that flows naturally, but not necessarily, from the loss of personal property. Indeed, this inquiry turns not on the nature of destruction, but on the nature of deprivation. And, as many of our sister courts have convincingly held, it is by compensating a plaintiff for loss-of-use damages incurred during the period of deprivation—a period reasonably necessary to obtain replacement property—that the principle of full and fair compensation is satisfied.