Texas Supreme Court Allows “Loss of Use” Damages for Personal Property that is Totally Destroyed

Texas Supreme Court Allows “Loss of Use” Damages for Personal Property that is Totally Destroyed
January 19, 2016
In what many will see as a departure from law that predates the Civil War, the Texas Supreme Court has allowed “loss of use” recovery, even when an item of personal property has been totally destroyed.

Historically, Texas courts have allowed recovery for lost use during the time that personal property (such as cars, equipment, or tools) was being repaired. However, if the personal property suffered a total loss, Texas did not allow lost use damages for the time that the injured party needed to replace the item. In these cases, courts gave a variety of reasons for denying loss of use damages in total loss cases, while allowing it when the loss was not total.

I had a case a few years ago where the plaintiff claimed total loss of petrochemical processing equipment.   The plaintiff intended to present evidence of lost business opportunities, far in excess of the value of the equipment.  On the defendant’s behalf, I cited cases establishing that the equipment was personal property, rather than real property.  I also cited cases holding that Texas law does not recognize loss of use damages when the plaintiff alleges the total destruction of personal property. Based on these cases, the judge limited any damage testimony to the value of the equipment.

In J&D Towing v. AAIC, the Texas Supreme Court held that loss of use damages could be recovered even when total loss of personal property is claimed.  The Court’s opinion surveyed a variety of cases, some predating the Civil War.  The court determined that the position disallowing loss of use damages had never been definitively adopted by the Texas Supreme Court.  Moreover, many other states allow loss of use damages, even when personal property is subject to a total loss.

This decision will expand what may need to be resolved in litigation. For example, juries may now need to hear testimony regarding what constitutes a reasonable time to replace personal property, as well as appropriate damages for the loss of use.

Larger potential recoveries will affect litigation when business personal property, such as J&D Towing’s tow truck, is subject to total loss. For example, refineries, petrochemical plants and other process industry owners will no longer need to spend time and money claiming that damaged equipment was a “fixture,” and thus real property, in order to seek loss of use recovery.  No longer will these companies need to consider potential loss of use recovery in their decision to replace or repair damaged equipment.

On a related note, some may find the case an interesting read. It is authored by Judge Willet, who is known for his tweets and other non-judicial writings. For a copy of the opinion, click here.

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