The Parable of the Crippled Mare: Loss-Of-Use Now Recoverable in Texas Total Loss Auto Cases

By Gary Wickert | February 4, 2016

Many years ago, a lawyer argued that the long-standing Texas rule prohibiting recovery of damages for loss of use of personal property, unless the property was a total loss or destroyed, was unfair. City of Canadian v. Guthrie, 87 S.W.2d 316 (Tex. Civ. App. 1932). His client’s one-eyed, underfed mare lived a simple life. One night, however, she was caught roaming the city streets in search of food and was placed in the city pound. Her owner failed to pay her board bill. Thus, she was put out of her misery. As the Court of Appeals then put it, “when Panhandle Pete’s pistol popped, she petered, for which the pound-keeper paid Pete a pair of pesos.” Her owner protested her death and sued for damages, including $350 for the loss of her services in his occupation of hauling. The Court rejected that claim, holding that although “damages occasioned by the loss of the use and hire of an animal are recoverable where the animal is injured, no such damages are recoverable for the total loss or death of an animal.” Rather, “the measure of damages in the case of a wrongful killing of an animal is its market value, if it has one, and if not, then its actual or intrinsic value, with interest.” That rule, the owner’s attorney argued, made it “cheaper to kill a mare in Texas than to cripple her.”

On January 8, 2016, the Texas Supreme Court in J & D Towing, LLC v. American Alternative Insurance Corporation, 2016 WL 91201 (Tex. 2016), changed nearly a century of law and ruled for the first time that the owners of automobiles and other damaged personal property which are a total loss may recover loss-of-use damages. J & D Towing, LLC (J & D) owned only one tow truck, a 2002 Dodge 3500 purchased in April 2011 for $18,500. On December 29, 2011, the tow truck was rendered a total loss as a result of the negligence of the defendant. The defendant’s carrier offered to settle J & D’s property damage claim for $10,299.12 if J & D retained the truck or $16,715.61 if the carrier retained the truck. Believing the truck was worth between $19,000 and $20,000 at the time of the accident, J & D refused to accept the settlement offer. On February 29, 2012, the defendant’s liability carrier settled with J & D for $25,000, the policy limits for property damage. Around March 8, 2012, J & D used that money to purchase another truck and resumed its business.

J & D then filed an underinsured motorist (UIM) claim with its own carrier, American Alternative Insurance Corporation (AAIC), requesting compensation for the loss-of-use of the truck. It claimed that the funds from the settlement with the defendant were insufficient to compensate for these damages, rendering the defendant an “underinsured” motorist. AAIC denied the claim and cancelled the policy. J & D thereafter sued AAIC to recover “any and all loss-of-use damages to which [it] may be entitled.” J & D presented to a jury various calculations of the loss-of-use damages J & D claimed it incurred between December 29, 2011 and March 8, 2012. Aggregating the totals of those calculations, J & D asked the jury to award loss-of-use damages in the sum of either $27,866.25 or $29,416.25, with the difference being whether the jury awarded damages for a nine-week period or a ten-week period.

AAIC challenged the availability of loss-of-use damages in its motion for summary judgment arguing that the UIM policy only covers damages that J & D is “legally entitled” to recover from the defendant. Because Texas law did not permit recovery of loss-of-use damages in total-loss cases, and because J & D’s vehicle was a total loss, J & D was not legally entitled to recover loss-of-use damages. The Trial Court denied both motions. At trial, the only question submitted to the jury concerned the proper amount of loss-of-use damages. The jury awarded J & D $28,000. After the jury returned its verdict, the Trial Court held a brief hearing to determine the amount of the credit to which AAIC was entitled in light of the settlement with the defendant’s liability carrier. The Court concluded that J & D’s truck was worth $19,500 at the time of the accident and thus AAIC was entitled to a credit of $5,500 – the amount of the settlement that did not cover the value of the truck but instead partially compensated J & D for its loss-of-use damages. The Trial Court entered judgment for J & D in the amount of $22,500 plus interest and court costs.

AAIC appealed with the issue being whether Texas law in total loss cases allowed recovery of loss-of-use damages. AAIC’s position was that Texas law has never allowed recovery of loss-of-use damages in total-loss cases. The Court of Appeals agreed, reversing the decision. The Supreme Court reversed the Court of Appeals, holding for the first time, 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.”

Until this decision, a person whose vehicle was totally destroyed could only recover the market value of the lost vehicle, while a person whose vehicle was repaired could also recover the loss-of-use of the vehicle. Hanna v. Lott, 888 S.W.2d 132 (Tex. App. − Tyler 1994, no writ); Pasadena State Bank v. Isaac, 228 S.W.2d 127 (Tex. 1950); Mondragon v. Austin, 954 S.W.2d 191 (Tex. Civ. App. − Austin 1997). One argument against recovering for loss-of-use when the vehicle is a total loss is if the owner rents a vehicle for two weeks before buying a replacement vehicle, the insured is not really out anything that would justify his recovery of the reasonable rental value for the time it took to buy a new vehicle. The insured can buy a car that has two weeks fewer miles on it, and potentially is two weeks newer and would have a higher resale value. Rental prices generally exceed the depreciation value, but once you’ve crossed that line, it blurs a bright line test. A defendant would argue that he would be paying more than actual damages if liable for loss-of-use, because the plaintiff is getting the free use of a vehicle for two weeks. The law didn’t even make an exception when the owner could not secure financing and was therefore unable to replace the property. Hanna v. Lott, supra.

The Supreme Court in J & D Towing, LLC noted that a majority of jurisdictions within the United States permit loss-of-use damages in partial-destruction cases, but prohibit them in total-loss cases. However, the Court noted that case law and treatises have shifted away from the distinction, because the owner of total-loss personal property may suffer loss-of-use damages to the same extent that the owner of repairable personal property, and that the distinction was “illogical.”

The Supreme Court didn’t specify whether the change in the law was prospective or retroactive in nature. However, in Texas, the general rule is that you must read an opinion to see whether there is language in it that limits the applicability of the holding to subsequent cases. If you don’t see that sort of limitation, it is generally assumed that the case applies retroactively. For example, in Guillot v. Hix, a case involving when a cause of action for workers’ compensation subrogation accrues argued by Gary L. Wickert, the Supreme Court specifically stated:

Our holding today may bar actions which have not been filed in reliance upon the rules established by our prior decisions. We therefore make our holding applicable only to injuries which occur today and hereafter. Injuries which occurred before today remain subject to the rules in Fidelity, Brandon, and Campbell. Guillot v. Hix, 838 S.W.2d 230 (Tex. 1992).

The J & D Towing, LLC decision should apply retroactively to all pending losses or cases, not just prospectively, because this is not a change in prior law as declared by the Texas Supreme Court. Until now, only appellate courts have weighed in. This was the first time the Texas Supreme Court has ruled on the issue.

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About Gary Wickert

Gary Wickert is an insurance trial lawyer and a partner with Matthiesen, Wickert & Lehrer, S.C., and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and is a national and international speaker and lecturer on subrogation and motivational topics. He can be reached at More from Gary Wickert

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