As anyone who has had their vehicle destroyed in a car accident can tell you, the insurance payment for the car is only part of the problem. You still need a way to get to work, school, and appointments while the claim is handled and you look for a replacement.
Texas law allows a vehicle owner to seek compensation for that time. The Texas Supreme Court set this rule in January 2016 in J&D Towing, LLC v. American Alternative Insurance Corp. The court held that when personal property is totally destroyed, the owner may recover loss-of-use damages. Those damages are on top of what the property was worth right before the accident. The decision remains the leading Texas Supreme Court authority on this issue. That rule applies when a car, truck, or motorcycle is declared a total loss after a car accident caused by someone else.
What Are Loss-of-Use Damages?
Loss-of-use damages compensate a vehicle owner for the time they could not use their vehicle because someone else damaged or destroyed it. The Texas Supreme Court treats them as consequential damages, meaning losses that flow naturally from the accident but do not happen in every case. The vehicle’s lost value is different. The court calls that direct damages, because every owner of a destroyed vehicle loses it.
Loss-of-use damages can be measured in different ways, depending on the facts. One is the cost of renting a substitute vehicle. Another is the reasonable rental value of the owner’s own vehicle for the time without it. When the vehicle was used to earn income, the measure may be the profits the owner lost.
How the Texas Supreme Court Changed the Rule in 2016
Before 2016, Texas law treated repairable and totaled vehicles differently. An owner whose car was in the shop could recover loss-of-use damages. Most Texas courts of appeals refused those damages when the car was totaled. Those courts reasoned that paying the car’s full value already compensated the owner, so adding loss-of-use damages would be a double recovery.
In 2014, the Fort Worth Court of Appeals broke from that approach in Morrison v. Campbell. That case involved a totaled motorcycle. The court allowed loss-of-use damages when the insurer unreasonably delayed paying the claim.
The Texas Supreme Court settled the question statewide in J&D Towing, and its holding does not depend on insurer delay. A negligent driver totaled the only tow truck owned by J&D Towing, a small towing company. The driver’s insurer paid its $25,000 property damage limit. J&D bought a replacement truck about 10 weeks later and then filed an underinsured motorist claim with its own insurer for the loss of use. A jury awarded J&D $28,000. The Supreme Court ruled for J&D, explaining that the question turns on how long the owner was deprived of the property, not on whether it was partially or totally destroyed.
Limits on Loss-of-Use Damages in a Total Loss Case
The Texas Supreme Court made clear that loss-of-use damages are not unlimited. The same rules that apply to other consequential damages apply here:
- The damages must be foreseeable and directly traceable to the accident.
- The damages cannot be speculative. The owner does not have to prove the amount with mathematical exactness, but the evidence must rise above guesswork.
- The damages cover only the time reasonably needed to replace the vehicle. An owner cannot recover for extra time caused by their own unreasonable delay. The court described this as a duty to mitigate damages.
The opinion does not set a fixed number of days, so the reasonable replacement period depends on the facts of each claim. The court also noted that when an owner keeps a totaled vehicle, the at-fault party may be entitled to a credit for the vehicle’s salvage value.
Who Pays Loss-of-Use Damages After a Total Loss?
When another driver caused the crash, loss-of-use damages are generally part of the property damage claim against that driver. The driver’s liability insurance usually pays that claim. This is called a third-party claim because it is made against someone else’s insurance company. The Texas Department of Insurance (TDI) advises that when the other driver is at fault, that driver’s insurance should pay for your car repair, medical bills, and a rental car.
Policy limits matter in a total loss. Texas Transportation Code Section 601.072 currently requires a minimum of $25,000 in property damage liability coverage per accident. The vehicle’s value and the loss-of-use damages both come out of that amount. When the total exceeds the at-fault driver’s limits, the owner may be able to file an underinsured motorist (UIM) claim under their own policy, as J&D Towing did. The owner may also be able to file a negligence lawsuit against the at-fault driver personally.
Many auto policies also offer optional rental reimbursement coverage. This first-party coverage pays for a rental under your own policy, regardless of who caused the crash, up to the daily and total limits stated in the policy.
Fault can reduce or bar recovery. Under Texas’s proportionate responsibility rules in Civil Practice and Remedies Code Sections 33.001 and 33.012, an owner’s damages are reduced by their own percentage of fault for causing the accident. An owner found more than 50% responsible cannot recover damages from the other driver.
What If Your Own Insurance Company Delays a Total Loss Claim?
A slow claim can stretch out the time you go without a vehicle. When you file a claim under your own policy, the Texas Prompt Payment of Claims Act in Chapter 542 of the Texas Insurance Code sets deadlines the insurer must meet. These deadlines apply only to first-party claims, meaning claims you make under your own policy. They do not govern a third-party claim against the other driver’s insurer. The main deadlines work in this order:
- Within 15 days after receiving written notice of the claim, the insurer must acknowledge it, begin investigating, and request the items it needs from you (Section 542.055).
- Within 15 business days after receiving everything it requested, the insurer must tell you in writing whether it accepts or rejects the claim (Section 542.056). If it needs more time, it must notify you of the reason within that period. It then has up to 45 more days to decide.
- Within five business days after notifying you it will pay, the insurer must pay the claim (Section 542.057).
An insurer that owes a claim and does not follow these rules may owe interest as damages at 18% per year, plus reasonable attorney’s fees (Section 542.060). That includes delaying payment for more than 60 days after receiving all the items it reasonably requested (Section 542.058). Some deadlines are longer for eligible surplus lines insurers and after a weather-related catastrophe declared by the insurance commissioner.
Underinsured motorist claims work differently. In Brainard v. Trinity Universal Insurance Co. (2006), the Texas Supreme Court held that a UIM insurer generally does not have to pay until the other driver’s fault and the owner’s damages are established. A settlement or court judgment often settles both. That can affect when the payment deadlines apply to a UIM claim.
How Long Do You Have to File a Property Damage Lawsuit in Texas?
The general deadline to file a property damage lawsuit in Texas is two years from the day the claim accrues, under Texas Civil Practice and Remedies Code Section 16.003(a). In a car accident, the claim generally accrues on the date of the crash. Loss-of-use damages are part of that property damage claim. If the lawsuit is filed after the deadline, the defendant can ask the court to dismiss it as time-barred. Negotiating with an insurance adjuster does not, by itself, pause the deadline.
Two situations can change the timeline:
- Government vehicles. If a government employee’s vehicle caused the damage, the Texas Tort Claims Act requires written notice to the government entity within six months of the accident (Section 101.101(a)). Some city charters require notice even sooner.
- Claims against your own insurer. A claim for failure to pay benefits under your own policy, such as an underinsured motorist claim, is a breach-of-contract claim. Texas generally allows four years to file a breach-of-contract lawsuit against your insurer, but when that period begins can vary, and the policy may set its own notice requirements.
Talk With Bailey & Galyen About a Totaled Vehicle Claim
A total loss can leave you without transportation while the insurance company decides what it will pay. Since 1982, Bailey & Galyen has served clients across Texas with large-firm resources and personal attention. The firm can review your situation and explain how loss-of-use damages, policy limits, and filing deadlines may apply.
Call Bailey & Galyen to discuss your situation and learn what options may be available. The firm offers free consultations for personal injury matters, and someone is available 24/7 to help you get started. Hablamos español en nuestra oficina.
Frequently Asked Questions About Loss of Use After a Total Loss
1. Do You Have to Rent a Car to Claim Loss of Use in Texas?
No, Texas law does not require an owner to rent a replacement vehicle to claim loss-of-use damages. In Luna v. North Star Dodge Sales, Inc. (1984), the Texas Supreme Court held that an owner does not have to rent a replacement or show money spent on other transportation. Damages can instead be measured by the reasonable rental value of the vehicle for the time the owner went without it. The limits described above still apply, and the owner needs evidence of that value. What proof fits a particular claim depends on the facts, which an attorney can review.
2. Can a Business Recover Lost Profits When a Work Vehicle Is Totaled?
Yes, lost profits can be a form of loss-of-use damages when a totaled vehicle was used to earn income. In J&D Towing, the Texas Supreme Court considered whether the owner of a destroyed tow truck could recover loss-of-use damages such as lost profits. The court said yes. The holding covers personal property generally, so it can reach work trucks and equipment, not only passenger cars. Lost profits must be proven with reasonable evidence rather than estimates, and they are limited to the time reasonably needed to replace the vehicle. Business records often play a central role.
3. What Can You Do If You Disagree With the Insurance Company’s Value of Your Totaled Car?
You can negotiate the valuation and ask the insurance company how it reached its number. The Texas Department of Insurance (TDI) suggests asking which source the company used to value the car. It also suggests gathering proof of what similar cars sell for, such as dealer quotes and local listings. If you still disagree, you can ask to speak with a claims supervisor or file a complaint with TDI. If the claim is under your own policy, you may also be able to request appraisal. A drawn-out dispute can delay replacing the car, which lengthens the time without a vehicle.
4. Can You Recover Loss of Use If the At-Fault Driver Had No Insurance?
Yes, if your own policy includes uninsured motorist (UM) coverage. This coverage protects you when a driver with no insurance, or not enough insurance, causes your losses. Under Texas Insurance Code Section 1952.101, it covers property damage as well as injuries. Texas insurers must offer it with auto liability policies, and a policyholder can turn it down in writing. Because J&D Towing allows loss-of-use damages in total loss cases, they may be part of a UM claim. The policy’s terms and limits still apply. A negligence lawsuit against the uninsured driver is another option.
5. Can You Keep Your Car After It Is Declared a Total Loss?
You may be able to keep a totaled car, but you need to tell the insurance company quickly. Keeping the car is sometimes called owner-retained salvage. TDI explains that the insurer then subtracts the car’s salvage value from the amount it planned to pay. The car may also receive a salvage title, which can make it harder to insure or sell later. In a loss-of-use claim, the Texas Supreme Court noted in J&D Towing that the at-fault party may be entitled to a credit for that salvage value. Whether keeping it makes sense depends on repair costs and policy terms.
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