J & D Towing, LLC v. American Alternative Insurance Corporation

Supreme Court of Texas

NO. 14–0574

Decided: January 08, 2016

Case Facts 

J&D (owned by Robert Davis) is a towing company that had only one truck as of 2011. The company purchased the truck in April 2011, seven months before the accident before it was involved in an accident. The truck was destroyed in the accident involving a reckless car driver. After a few months of negotiation, Brueland Insurer offered a $25 000 compensation for Davis, an amount he accepted. He used the money to buy another truck and resumed business. He, however, filed a case with the American Alternative Insurance Corporation (AAIC) by under-insured motorist policy. The corporation refused to increase the value, denied the claim and canceled the policy. J&D then sued AAIC stating that he had incurred loss-of-use damages that amounted to over $27000 between December 2011 and March 2012 (Texas Judicial Branch, n.d).

The insurance company agreed to pay for the market value of the truck but not the loss-of-use damages stating that the truck was totally destroyed so there was no way it would lose its use. The Insurance Company argued that Texas' law allowed for a loss-of-use damages compensation where there was partial destruction but not when it was a total loss. The Texas Court of Appeals concurred with the insurance company, citing a 1932 case where a mare was killed and not compensated. The owner had sued for loss-of-use damages, but the courts ruled that the mare was dead (totally destroyed) and thus there was no way she could lose her use. J&D appealed the case to the Supreme Court of Texas. The Supreme Court reversed the Court of Appeals' Decision and rendered judgment for J&D (Texas Judicial Branch, n.d). 

Ruling and Rationale

J&D won the case. The judges decided so, citing that many other courts had ruled that there is no reasonable distinction between loss-of-use damages for a partially damaged property and one which is totally destroyed (Texas Judicial Branch, n.d). The court also cited the principle of full and fair compensation in case there is partial or destruction. In both cases, the property owner loses some amount of profits due to interruption of operations. Choosing to compensate in partial damage cases but not in destruction ones is therefore not fair. The court also cited that several treatises have accepted to have a clause on compensation in case of a totally destroyed property. This, they say, is in line with the principle of fair and full compensation. The judge mentioned Dobbs' Law of Remedies and Professor John Fleming's treatises. Finally, the court also employed the Restatement (Second) of Torts reasoning which offers the plaintiff the compensation of the property's value and a choice between the interest and the loss-of-use damages. The Restatement states that there is an interruption between the destruction and compensation. Sometimes, there might be unreasonable delays by the insurance company while negotiating compensation terms. Such delays cannot be compensated for by the payment of the property value but by the loss-of-use damages between the time of the damage and the time a new property is purchased (Texas Judicial Branch, n.d).

In this case, there is indeed substantive delay the insurance company thus limiting the profits that J&D could have made between December 2011 and March 2012. During that time, he had no other truck, and his business was not running smoothly. The court did not look at the suit regarding the type of destruction but the deprivation that faced Davis. They concluded stating that the Davis had incurred losses because he was deprived the use of the truck for some time (Texas Judicial Branch, n.d)

Ruling and Rationale

J&D won the case. The judges decided so, citing that many other courts had ruled that there is no reasonable distinction between loss-of-use damages for a partially damaged property and one which is totally destroyed (Texas Judicial Branch, n.d). The court also cited the principle of full and fair compensation in case there is partial or total destruction. In both cases, the property owner loses some amount of profits due to interruption of operations. Choosing to compensate in partial destruction cases but not in total destruction ones is therefore not fair. The court also cited that there are several treatises that have accepted to have a clause on compensation in case of a totally destroyed property. This, they say, is in line with the principle of fair and full compensation. The judge mentioned Dobbs’ Law of Remedies and Professor John Fleming’s treatises. Finally the court also employed the Restatement (Second) of Torts reasoning which offers the plaintiff the compensation of the property’s value and a choice between the interest and the loss-of-use damages. The Restatement states that there is interruption between the destruction and compensation. Sometimes, there might be unreasonable delays by the insurance company while negotiating compensation terms. Such delays cannot be compensated for by the payment of the property value but by the loss-of-use damages between the time of the damage and the time a new property is purchased (Texas Judicial Branch, n.d).

In this case, there is indeed substantive delay the insurance company thus limiting the profits that J&D could have made between December 2011 and March 2012. During that time, he had no other truck and his business was not running smoothly. The court did not look at the suit in terms of the type of destruction but the deprivation that faced Davis. They concluded stating that, the Davis had incurred losses because he was deprived the use of the truck for some time (Texas Judicial Branch, n.d)

Reference;

Texas Judicial Branch. (n.d). J&D Towing, LLC, Petitioner, v. American Alternative Insurance Corporation, Respondent. Retrieved March 31, 2017 from http://www.txcourts.gov/media/1247477/140574.pdf