STATUTE OF LIMITATIONS
- Personal Property2 YearsTex. Civ. Rem. Code Ann. § 16.003
- Personal Injury/Death2 YearsTex. Civ. Rem. Code Ann. § 16.003
- Breach of Contract/Written4 YearsTex. Civ. Rem. Code Ann. § 16.051
- Breach of Contract/Oral4 YearsTex. Civ. Rem. Code Ann. § 16.051
- Breach of Contract/Sale of Goods4 YearsTex. Bus. & C. Code § 2.725
- Statute of Repose/Products15 YearsTex. Civ. Rem. Code Ann. § 16.012(b)(c)*
- Statute of Repose/Real Property10 YearsTex. Civ. Rem. Code Ann. § 16.008, 16.009**
- Breach of Warranty/U.C.C.4 YearsTex. Bus. & Com. Code Ann. § 2.725
- Workers’ Compensation2 YearsTex. La. Code Ann. §§ 417.001 and 417.004
- Strict Product Liability2 YearsTex. Civ. Prac. & Rem. Code Ann. § 16.003
Statute of Limitations Exceptions
*15 years from sale unless manufacturer says useful life is longer. Tex. Civ. Prac. & Rem. Code Ann. § 16.012.
**10 years from substantial completion of improvement to real property. Tex. Civ. Prac. & Rem. Code § 16.008. If claim during 10-year period, extended for two (2) years from date of claim. If injury occurs during 10th year, may sue up to two (2) years after accrual. Tex. Civ. Prac. & Rem. Code § 16.009.
Contributory Negligence/Comparative Fault
Modified Comparative Fault: 51% Bar. Damaged party cannot recover if it is 51% or more at fault. If 50% or less at fault, it can recover, although its recovery is reduced by its degree of fault. Plaintiff may find his damages reduced by his portion of fault. Tex. Civ. Prac. & Rem. Code Ann. §§ 33.001-33.017.
Med Pay/PIP Subrogation
Med Pay: Yes. Subrogation right based on contract and governed by equity. State Farm v. Waibel, 2001 WL 252071 (Tex. Civ. App. – Austin, 2001).
The two (2) year personal injury statute of limitations runs from the date of the insured’s accident. Tex. Civ. Prac. & Rem. Code Ann. § 16.003 (2000).
PIP: No subrogation/reimbursement rights. V.T.C.A. § 1952.155(b) (Eff. 4/1/07). However, V.T.C.A. § 1952.155(c) allows a PIP carrier to subrogate against an uninsured motorist. “Add-On” PIP State.
Automobile: No Reimbursement Requirements. However, it does require “action” to recover deductible to be taken unless it gives insured notice within 90 days before statute of limitations runs that it won’t take action. If no such action is taken, and no proper notice is given, the insurer must pay the insured the amount of the deductible. Tex. Ins. Code § 542.204 provides: “Action to Recover Deductible. (a) Notwithstanding any other provision of this code and except as provided by Subsection (b), if an insurer is liable to an insured for a claim that is subject to a deductible payable by the insured and a third-party may be liable to the insurer or the insured for the amount of the deductible, the insurer shall: (1) take action to recover the deductible against the third-party not later than the first anniversary of the date the insured’s claim is paid; or (2) pay the amount of the deductible to the insured. (b) An insurer is not required to take action or pay the amount of the deductible as required by Subsection (a) if, not later than the earlier of the first anniversary of the date the insured’s claim is paid or the 90th day before the date the statute of limitations for a negligence action expires, the insurer: (1) notifies the insured in writing that the insurer does not intend to take further collection actions against the third-party; and (2) authorizes the insured to take further collection actions. (c) This section applies regardless of whether the third-party who may be liable for the amount of the deductible is insured or uninsured.”
Tex. Ins. Code § 542.202 provides that the word “action” means “taking various actions such as reasonable and diligent collection efforts, mediation, arbitration, and litigation against a responsible third-party or the third-party’s insurer.”
If “third party may be liable”, the subrogation claim must be brought within one year of payment or must pay insured’s deductible, unless notice given to insured that subrogation will not be pursued. Tex. Ins. Code § 542.204 is only a notice provision. It does not require a subrogated carrier to pay the deductible first out of a subrogation recovery. You should first look at the applicable insurance policy to see how it deals with a deductible, if at all.
Made Whole Doctrine
In Ortiz v. Great Southern Fire & Cas. Ins. Co., 597 S.W.2d 342 (Tex.1980), the Texas Supreme Court ingrained in Texas jurisprudence the Made Whole Doctrine. However, the extent and breadth of that case has been grossly misunderstood, and in 2007, the Texas Supreme Court clarified that the terms of a Plan or policy can negate the application of the Doctrine. Fortis Benefits v. Vanessa Cantu and Ford Motor Co., 234 S.W.3d 642 (Tex. 2007) (Successful Amicus Curiae Brief on behalf of National Association of Subrogation Professionals (NASP) filed by Gary L. Wickert); Osborne v. Jauregui, Inc., 2008 WL 1753553 (Tex. Civ. App. – Austin, 2008). If a contract provides for subrogation regardless of whether the insured is first made whole, the contract’s specific language controls and the equitable defense of the Made Whole Doctrine must give way. Osborne, supra. The Ortiz case is one of the most misconstrued cases in Texas jurisprudence. Ortiz has never stood for the blanket proposition that an insurance company’s right of subrogation may not be exercised unless and until the insured is made whole. Veazey v. Allstate Texas Lloyds, 2007 WL 29239 (N.D. Tex. 2007). In fact, it points out that if any part of a third-party settlement is intended as compensation for damages which represent the insurance payment made by a subrogating insurer, the insurer is entitled to subrogation.
In Ortiz, a homeowner suffered $15,000 in damage after a negligent carpet installation started a fire. This damage included $4,000 in damage to real property which was covered under a Great Southern policy, and $11,000 in damage to personal property, which was not insured at all. The insured settled with the third party for $10,000, and Great Southern asserted a $4,000 equitable subrogation interest in the $10,000 settlement. Neither the settlement agreement nor any proof submitted to the court indicated which portion of the damages paid by the third-party tortfeasor related to or represented the benefits paid by Great Southern. The trial court and appellate court held that Great Southern was entitled to subrogation, notwithstanding the Ortiz’ claim that they weren’t made whole. The Supreme Court reversed, but did not affirmatively find that the amount recovered by an insured from his insurer and a third-party tortfeasor combined must exceed the damages for the insured and uninsured property before the insurer is entitled to subrogation. Ortiz, supra. To the contrary, the Texas Supreme Court held that if any portion of a settlement is intended as compensation for damages paid by the insurer, the insurer is entitled to subrogate after paying a pro rata share of the costs of collection. Id. Because the record in Ortiz did not reflect how much of a $10,000 settlement, if any, was intended for damages to the insured’s real property, equitable subrogation was not allowed based on the Made Whole Doctrine.
Texas has specifically rejected adopting the Wisconsin holding in Garrity v. Rural Mut. Ins. Co., 253 N.W.2d at 514 (Wis. 1977), which says that an insurer may not subrogate at all if the insured is not made whole for all of its losses. Veazey, supra. In Texas, the burden of proving that the insured has been made whole, or exactly what portion of a third-party settlement satisfies covered as opposed to non-covered losses, is on the party filing suit. Id. In other words, if a subrogated carrier settles directly with a third party and the insured must file suit to seek reimbursement from the carrier, the burden is on the insured. On the other hand, if the insured settles and the carrier must file suit to seek reimbursement from the insured, the burden will be on the insurance company. Id. One Texas Court of Appeals decided one unreported case in which it determined that the burden of proof was on the insurer to show what amount, if any, of any third-party settlement agreement is allocated to the insured’s loss, in order to avoid the Made Whole Doctrine. Phillips Petroleum Co. v. Brantley, 2003 WL 22923413 (Tex. App. – El Paso 2003) (unreported decision). On the other hand, in Veazey, a federal district court declared that there are some situations in which an insurance company can subrogate even if the insured is not made whole, and, in that case, the burden was on the insured to prove what amount, if any, of Allstate’s recovery from the third party was to be allocated to the uninsured losses. Veazey, supra. The Court held that Veazey had no right to any payments made by the third party to Allstate for insured damages already covered by Allstate – only to payments for uninsured damages.
In Fortis Benefits, the Texas Supreme Court specifically and forcefully acknowledged that the Made Whole Doctrine does not apply to contractual subrogation claims. Fortis Benefits, supra. Effectively overruling Esparza, the Supreme Court confirmed that the application of the Made Whole Doctrine can be summarily overcome by a boiler-plate provision in an insurance contract that purports to entitle the insurer to subrogation out of the first monies received by the insured. Esparza, supra. The Court stated: “We do not disagree that equitable and contractual subrogation rest upon common principles, but contract rights generally arise from contract language; they do not derive their validity from principles of equity but directly from the parties’ agreement. The policy declares the parties’ rights and obligations, which are not generally supplanted by court-fashioned equitable rules that might apply, as a default gap-filler, in the absence of a valid contract. If subrogation arises independent of any contract, then an express subrogation agreement would be superfluous and serve only to acknowledge this preexisting right, a position we reject…Contractual subrogation clauses express the parties’ intent that reimbursement should be controlled by agreed contract terms rather than external rules imposed by the courts.” Fortis Benefits, supra.
The Texas Supreme Court cited the U.S. Supreme Court decision in Sereboff as standing for the proposition that the equitable Made Whole Doctrine should not apply when the Plan specifies to the contrary. Sereboff, supra. The Fortis Benefits decision correctly points out the clear distinction between equitable subrogation and contractual subrogation, and allows plan and/or policy language to negate its anti-subrogation effect: “The three varieties of subrogation-equitable, contractual, and statutory-represent three separate and distinct rights that, while related, are independent of each other. Independent, however, does not mean co-equal. We generally adhere to the maxim that ‘equity follows the law,’ which requires equitable doctrines to conform to contractual and statutory mandates, not the other way around. Where a valid contract prescribes particular remedies or imposes particular obligations, equity generally must yield unless the contract violates positive law or offends public policy. This Court has ‘long recognized a strong public policy in favor of preserving the freedom of contract.’” Fortis Benefits, supra.
Nonetheless, there are some instances where an insured is precluded from arguing that he had not been made whole. For example, when the subrogation provision relied upon by the insurer is found in a contract executed after the payment of benefits giving rise to the subrogation claim, i.e., a settlement agreement, the parties waive the Made Whole Doctrine. Rosa’s Café, Inc., v. Wilkerson, 183 S.W.3d 483, 488 (Tex. App. – Eastland 2005, no pet.). Also, a jury verdict on the issue of damages conclusively establishes the amount necessary to make the insured whole. As a result, an insured is collaterally estopped from arguing otherwise. State Farm Mut. Auto Ins. Co. v. Perkins, 2006 Tex. App. Lexis 6030 (Tex. App. – Eastland, 2006).
Not long after Fortis Benefits, the Texas Legislature passed a law which made several changes to health insurance subrogation and which was touted as a “legislative compromise” between the Fortis Benefits case and the Made Whole Doctrine. 2013 Texas Senate Bill No. 1339, Texas Eighty-Third Legislature, 2013 Texas Senate Bill No. 1339, Texas Eighty-Third Legislature. This bill created a new Chapter 140 in the Texas Civil Practice and Remedies Code. Section 140.004 changes the effect of Fortis Benefits by confirming that a policy or plan may still contractually provide for rights of subrogation and reimbursement. However, new § 140.005 creates a formula for calculating health subrogation recoveries:
140.005. PAYORS’ RECOVERY LIMITED.
(a) If an injured covered individual is entitled by law to seek a recovery from the third-party tortfeasor for benefits paid or provided by a subrogee as described by Section 140.004, then all payors are entitled to recover as provided by Subsection (b) or (c).
(b) This subsection applies when a covered individual is not represented by an attorney in obtaining a recovery. All payors’ share under Subsection (a) of a covered individual’s recovery is an amount that is equal to the lesser of:
(1) One-half (1/2) of the covered individual’s gross recovery; or
(2) The total cost of benefits paid, provided, or assumed by the payor as a direct result of the tortious conduct of the third party.
(c) This subsection applies when a covered individual is represented by an attorney in obtaining a recovery. All payors’ share under Subsection (a) of a covered individual’s recovery is an amount that is equal to the lesser of:
(1) One-half (1/2) of the covered individual’s gross recovery less attorney’s fees and procurement costs as provided by Section 140.007; or
(2) The total cost of benefits paid, provided, or assumed by the payor as a direct result of the tortious conduct of the third party less attorney’s fees and procurement costs as provided by Section 140.007.
(d) A common law doctrine that requires an injured party to be made whole before a subrogee makes a recovery does not apply to the recovery of a payor under this section.
The key to effective and complete subrogation under this new statute is now whether or not the subrogated carrier/plan engages subrogation counsel to enforce its subrogation rights or merely relies on the plaintiff’s attorney to do the heavy lifting. The carrier/plan is now limited to the lesser of half of the gross third-party recovery or the amount of its subrogation interest, whichever is less.
It is important to note that the new Chapter 140 does not destroy the holding in Fortis Benefits. The statute was definitely enacted in response to the Supreme Court’s decision in that case, but it states that the carrier can still contract for a better subrogation right that existed under the Made Whole Doctrine prior to Fortis Benefits. Even after the enactment of the new statute, the carrier needs a good subrogation clause in its policy/plan in order to avoid the harsh effects of the common law Made Whole Doctrine. Fortis Benefits still provides guidance on that issue. Also, the new statute applies only to policies/plans providing health benefits, so the Fortis Benefits opinion is untouched as to other types of subrogation, most notably property damage claims.
Applicability of New Statute to Med Pay Subrogation. It is likely that the new statute applies to other policies, such as automobile insurance policies which provide Med Pay benefits. This is not clear from the statute but you can bet your first-born child that it will be argued by trial lawyers to be applied as broadly as possible.
Economic Loss Doctrine
Majority Rule. The ELD prohibits a plaintiff in a non-product liability case from recovering in negligence or strict liability for purely economic losses. Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77 (Tex. 1977); Purina Mills, Inc. v. Odell, 948 S.W.2d 927 (Tex. App. 1997); Equistar Chems. L.P. v. Dresser-Rand Co., 240 S.W.3d 864 (Tex. 2007); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex. 1986).
In Texas, the ELD has historically only been applied in cases involving strict product liability or failure to perform a contract. The ELD has never been a general rule of tort law; it is a rule sounding in negligence and strict product liability. Pure economic loss is still commonly recoverable in certain torts, including: (1) negligent misrepresentation, Grant Thornton L.L.P. v. Prospect High Income Fund, 314 S.W.3d 913, 920 (Tex. 2010); (2) legal malpractice, Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat’l Dev. & Research Corp., 299 S.W.3d 106, 122 (Tex. 2009); (3) accounting malpractice, Atkins v. Crosland, 417 S.W.2d 150, 152–53 (Tex. 1967); (4) breach of fiduciary duty, ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 873–74 (Tex. 2010); (5) fraud, Trenholm v. Ratcliff, 646 S.W.2d 927, 933 (Tex. 1983); (6) nuisance, Comminge v. Stevenson, 76 Tex. 642, 13 S.W. 556, 558 (Tex. 1890); (7) fraudulent inducement, Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998); and (8) fraudulent interference with contract, Am. Nat’l Petroleum Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 278 (Tex. 1990).
Product Failure. The ELD applies when losses from an occurrence arise from failure of a product and the damage or loss is limited to the product itself. The ELD in Texas was originally established to set perimeters only in such product liability cases. Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011). In such cases, recovery is generally limited to remedies grounded in contract (such as warranty claims or contract-based statutory remedies), rather than tort. Signal Oil & Gas Co. v. Universal Oil Prods., 572 S.W.2d 320 (Tex. 1978) (Where only the product itself is damaged, such damage constitutes economic loss recoverable only as damages for breach of an implied warranty under the Business and Commerce Code). Usually, written or implied warranty claims are the only recourse in such situations, although an implied warranty claim could sound in either contract or tort depending on the damages alleged. JCW Elecs., Inc. v. Garza, 257 S.W.3d 701 (Tex. 2008). Injury to the defective product itself is an “economic loss” governed by the Uniform Commercial Code. Mid Continent Aircraft Corp. v. Curry Cnty. Spraying Serv. Inc., 572 S.W.2d 308 (Tex. 1978) (distinguished cases involving personal injury or damage to property other than the product itself, noting that those damages could be recovered under strict liability theories). Where a defective product causes damages to the product itself and to surrounding property, the damages to the product itself can be recovered in tort along with the damage to the surrounding property. Signal Oil and Gas Co. v. Universal Oil Products, 572 S.W.2d 320 (Tex. 1978). The ELD bars recovery for economic loss alone in cases involving defective product claims. In re Smith, 524 B.R. 125 (Bankr. S.D. Tex. 2015). Furthermore, Texas applies the “benefit of the bargin” test, which means that a commercial buyer cannot recover economic losses from a component-part manufacturer for damage caused to a product by the integrated component part. Golden Spread Coop., Inc. v. Emerson Process Mgmt. Power & Water Sols., Inc., 2019 WL 403577 (N.D. Tex. 2019).
Other Property Exception. The ELD prevents recovery in tort for purely economic damage unaccompanied by injury to persons or property. There are two principal rationales for the rule: (1) Purely economic harms proliferate widely and are not self-limiting in the way that physical damage is, possibly leading to indeterminate liability and pressure to avoid economic activity altogether; and (2) the risks of economic harms are better suited to allocation by contract because (a) the parties usually have a full opportunity to consider their positions and manage risks ahead of time, and (b) pecuniary remedies are fungible. The rule is based on the proposition that commercial parties may negotiate for whatever warranty or liability limits they choose and adjust their price accordingly. LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234 (Tex. 2014); Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011); Am. Eagle Ins. Co. v. United Techs. Corp., 48 F.3d 142, 144 (5th Cir.), on reh’g, 51 F.3d 468 (5th Cir. 1995); Golden Spread Electric Cooperative, Inc. v. Emerson Process Management Power & Water Solutions, Inc., 2020 WL 1696128 (5th Cir. 2020). When a defect in a product deprives a buyer of profits, those are purely economic damages recoverable only in contract. Hininger v. Case Corp., 23 F.3d 124 (5th Cir. 1994)(denying recovery in tort of profits lost when tractor wheels broke). Physical damage is generally recoverable in tort, but a defective product causing damage to itself is not enough—the ELD still limits recovery for such damage to contract. LAN/STV, supra. This is because “damage to the product itself is essentially a loss to the purchaser of the benefit of the bargain with the seller,” recoverable in contract rather than tort. Mid Continent Aircraft Corp. v. Curry Cty. Spraying Serv., Inc., 572 S.W.2d 308 (Tex. 1978). If, however, the defective product damages other property, the ELD does not bar recovery in tort for those damages. Signal Oil & Gas Co. v. Universal Oil Prod., 572 S.W.2d 320 (Tex. 1978) (allowing recovery in tort when a reactor heater exploded and damaged “other property in the area”).
If a product was purchased as a complete whole, damage to that product caused by one of its component parts is considered damage to the product itself—rather than damage to other property—and limited to recovery in contract by the ELD. See Mid Continent Aircraft Corp., 572 S.W.2d at 310, 313 (holding that damage to an aircraft’s wings and fuselage on emergency landing forced by a defective engine was limited by the ELD); Arkwright-Bos. Mfrs. Mut. Ins. Co. v. Westinghouse Elec. Corp., 844 F.2d 1174, 1175–76, 1177–78 (5th Cir. 1988) (holding that ELD barred recovery in tort for damage to a turbine caused by a defective blade that suddenly broke). The self-damage rule applies both when a component part breaks and prevents the product from functioning properly, see, e.g., Hininger, 23 F.3d at 125, 127 (tractor wheels leaked air and cracked, causing down-time), and when the component part’s failure causes physical damage to a different component part, see, e.g., Mid Continent Aircraft Corp., 572 S.W.2d at 310–11, 313. And, it applies even when the defective component part was manufactured by an entity other than the entity that assembled the final product. Hininger, 23 F.3d at 126–27 (holding that purchaser of tractor could not recover in tort from company that supplied defective tires to the entity that incorporated them into the finished tractor and sold it to purchaser). One recent case went a step further, applying the ELD when, in the hands of a commercial firm assembling its own finished product, the failure of a component part purchased from one supplier physically damages another component part not purchased from that supplier. Lopez v. Huron, 490 S.W.3d 517 (Tex. App.—San Antonio 2016, no pet.).
Failure to Perform Contract. Recently, Texas has expanded the ELD to prohibit tort claims when economic damages result from the failure to perform a contract properly, even where there is no contractual privity between the parties. Schambacher v. R.E.I. Elec., Inc., 2010 WL 3075703 (Tex. App. 2010). Unfortunately, this can leave some plaintiffs without a remedy when a subcontractor’s negligence causes economic damages. Where there is a negligent failure to perform a contract and the plaintiff seeks damages for breach of a duty created under contract, as opposed to a duty imposed by law, tort damages are unavailable as a result of the ELD. Southwestern Bell Telephone Co. v. DeLanney, 809 S.W.2d 493 (Tex. 1991). The ELD does not prohibit recovery for damage to property falling outside the scope of a subcontract, but within the scope of the overall contract. Munters Euroform GMBH v. American Nat’l Power, Inc., 2009 WL 2837643 (Tex. Civ. App. – Austin, 2009). It does not limit recovery from a subcontractor to the subject of a subcontract when the subcontractor’s actions or product damages property beyond the scope of the subcontract. Id. The ELD bars recovery for economic loss alone only in claims that arise from party’s failure to perform contractual duty. In re Smith, 524 B.R. 125 (Bankr. S.D. Tex. 2015).
The ELD also applies when losses from an occurrence arise from failure of a product and the damage or loss is limited to the product itself. Equistar Chemicals, L.P. v. Dresser–Rand Co., 240 S.W.3d 864 (Tex. 2007). Texas has clarified that although many courts have stated in overly broad terms that the ELD means that “purely economic losses cannot be recovered in tort”, such broad statements are not accurate. Sharyland Water, supra. It even applies when replacement parts are purchased. Sanitarios Lamosa, S.A. de C.V. v. DBHL, Inc., No. CIV.A. H-04-2973, 2005 WL 2405923 (S.D. Tex. 2005) (applying ELD to damage suffered by toilet tanks in which plaintiff had installed defective ballcocks purchased from a supplier, because the toilet was the “completed product”).
In Golden Spread Electric Cooperative, Inc. v. Emerson Process Management Power & Water Solutions, Incorporated, 2020 WL 1696128 (5th Cir. 2020), a commercial firm purchased a new customized computer software system to run a generator, and the generator was damaged due to incorrect programming. the faulty component part to integrate it with other components with the intent to use, not to resell, the finished unit. In considering whether to apply the ELD, the 5th Circuit refused to apply a strict separately-bargained-for test, but rather analyzed the ELD’s “rationales in [the] particular situation” to determine whether the risk suffered is better addressed in tort or in contract. They applied the ELD and dismissed the case.
Exceptions: An exception to the ELD exists when there is a fraudulent inducement, even if the plaintiff suffers only economic damages to the subject of the contract. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41 (Tex. 1998).
While the ELD generally precludes recovery in tort for economic losses resulting from a party’s failure to perform under a contract when the harm consists only of the economic loss of a contractual expectancy, it does not bar all tort claims arising out of a contractual setting. In Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d 716 (Tex. 2014), a builder contracted with a plumber to install the plumbing system in a house during original construction. The homeowner and builder later sued the plumber and asserted breach of contract claims arising from extensive damages caused by plumbing leaks. The trial court granted summary judgment (1) in favor of the plumber on the builder’s breach of contract claims because the builder was not the owner of the property and did not suffer compensable damages, and (2) in favor of plumber on the homeowner’s breach of contract claim because the homeowner was not a party to the plumbing subcontract, and (3) in favor of the plumber on the homeowner’s negligence claim because the homeowner’s pleadings alleged only breach of contract. The Court of Appeals affirmed, stating that the homeowner’s tort claims were barred by the ELD because the homeowner’s property damage was “a mere economic loss arising from the subject matter of the plumbing subcontract.” In reversing the Court of Appeals, the Supreme Court held that the ELD does not bar a homeowner’s negligence claims against a subcontractor because the subcontractor owes an independent duty to the homeowner. Damages caused by the subcontractor’s breach of that independent duty “extend beyond the economic loss of any anticipated benefit under the subcontract.” Id. The Court based it’s opinion on a long-standing common law duty to perform a contract with due care. Montgomery Ward & Co. v. Scharrenbock, 204 S.W.2d 508 (Tex. 1947). This duty supports a claim in tort, in contract, or both. Therefore, a defendant cannot avoid tort liability to the world simply by entering into a contract with one party. If it could, the ELD consumes all claims between contractual and commercial strangers. Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex. 2011). After Chapman, a plaintiff can recover in tort where the defendant breaches a duty which is independent of the contractual undertaking and the harm suffered is not merely the economic loss of a contractual benefit. The Supreme Court held that the plumber’s duty not to flood or otherwise damage the house is independent of any obligation undertaken in its plumbing contract with the builder, and the damages flowing from a breach of that duty extend beyond the economic loss of any anticipated benefit under the contract itself. After Chapman, the ELD precludes recovery in tort for economic losses resulting from a party’s failure to perform under a contract when the harm consists only of the economic loss of a contractual expectancy. It no longer bars all tort claims arising out of the performance of a contract.
The ELD will not apply when the plaintiff seeks damages to property other than the construction work itself. If a subcontractor’s work causes a fire, the building owner may pursue a tort claim against the subcontractor because, when undertaking the plumbing work, the plumber assumed a duty not to start a fire or otherwise damage the building. Chapman, supra. The ELD will apply, however, to bar a tort claim by the homeowner if the damages sustained as a result of the plumber’s work were only to the plumber’s work or were other purely economic losses.
An insurer of leased premises has no subrogation claim against the tenant for losses paid to the landlord when the leased premises are destroyed by a fire and the lease agreement, signed by the landlord and tenant, contains a limitation of liability clause which provided that neither party is liable for the insurable casualty damage to the leased premises, even when the tenant assigns its lease to the third party prior to fire. Interstate Fire Ins. Co. v. First Tape, Inc., 817 S.W.2d 142 (Tex. App. – Houston [1st Dist.] 1991). However, the application of the “Sutton Rule” has never been addressed in Texas. Landlords and tenants are free to contract between themselves that the tenant will pay for specific kinds of repair without a showing that the tenant caused the damage. Where a lease states that the tenant “must promptly pay or reimburse [landlord] for loss, damage, consequential damages, government fines or charges, or cost of repairs or service in the apartment community due to: a violation of the Lease Contract or rules; improper use; negligence; other conduct by you or your invitees, guests or occupants; or any other cause not due to [landlord’s] negligence or fault”, it is subject to only one interpretation: that the tenant is required to pay the landlord for any damages to the apartment complex as long as the apartment complex was not at fault. The provision in the lease agreement obligating the tenant to reimburse the landlord for all damage “not due to the landlord’s negligence or fault” was not unenforceable per se, even though the provision was overly broad and could have encompassed scenarios in which the landlord would have had a non-waivable duty to repair under the Property Code. A jury’s finding that the tenant’s negligence did not proximately cause damage from the fire did not support the finding that the tenant was not at fault or didn’t cause the damage, as required for the tenant to establish that the landlord had a non-waivable duty to repair a condition that was not “caused by” the tenant. If there is sufficient evidence that the tenant’s actions, even if not negligent, caused the fire, the lease provision is not unenforceable under the Code as applied. Philadelphia Indem. Ins. Co. v. White, 490 S.W.3d 468 (Tex. 2016).
Tort of Spoliation: Texas does not recognize an independent cause of action for intentional or negligent spoliation of evidence by parties to litigation. Trevino v. Ortega, 969 S.W.2d 950, 951 (Tex. 1998).
Adverse Inference Instruction: A spoliation instruction is an instruction given to the jury outlining permissible inferences they may make against a party who has lost, altered, or destroyed evidence. Brewer v. Dowling, 862 S.W.2d 156, 159 (Tex. App. – Fort Worth 1993), writ denied. A party who has deliberately destroyed evidence is presumed to have done so because the evidence was unfavorable to its case.
The Trevino Test. A trial judge has broad discretion in determining whether to provide a jury with a spoliation presumption instruction. Trevino v. Ortega, 969 S.W.2d 950, 953 (Tex. 1998); Texas Elec. Co-op. v. Dillard, 171 S.W.3d 201, 208-209 (Tex. App. – Tyler 2005). A party need not take extraordinary measures to preserve evidence, but must exercise reasonable care in preserving evidence. Trevino, 969 S.W.2d at 951. A court may determine there is no breach of the duty to preserve evidence if the alleged spoliator offers an “innocent explanation” such as the evidence was destroyed in an ordinary course of business. Id. Finally, the party alleging spoliation is not entitled to remedy unless it establishes prejudice. Id. Before a spoliation instruction can be submitted to a jury, the court must determine (1) whether there was a duty to preserve evidence, (2) whether the alleged spoliator breached that duty, either negligently or intentionally, and (3) whether spoliation prejudiced the non-spoliator’s ability to present its case or defense. In evaluating prejudice, the court should take into consideration the relevance of the evidence, whether other evidence is available, and whether the evidence supported the key issues in the case.
The intentional spoliation of evidence relevant to a cause raises a presumption the evidence would have been unfavorable to the spoliators. Id. This presumption can be rebutted by evidence that the spoliation was not a result of fraudulent intent and does not apply when documents are merely lost. Cresthaven Nursing Residence v. Freeman, 2003 WL 253283, 8, 10 (Tex. Ct. App., Feb. 5, 2003).
The Johnson Test. The presumption does not arise unless the party responsible for destruction of evidence had a duty to preserve it. Wal-Mart Stores, Inc. v. Johnson, 106 S.W.3d 718, 722 (Tex. 2003). In Johnson, the court noted that spoliation instructions have been given either for (1) a party’s deliberate destruction of relevant evidence; or (2) a party’s failure to produce relevant evidence or explain its nonproduction. However, the court noted that such a duty to preserve evidence arises “only when a party knows or reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material and relevant to that claim.” Id.
In Brookshire Brothers v. Aldridge, 438 S.W.3d 9 (Tex. 2014), the Supreme Court further clarified spoliation law in Texas. It is the responsibility of the trial court (not the jury) to decide whether there was spoliation. In order to support spoliation, (1) the party alleging same must show that the non-producing party has a duty to preserve evidence under the Johnson test, (2) the party alleging same must show that the non-producing party breached its duty to preserve material and relevant evidence, which occurs when it fails to exercise reasonable care to preserve that evidence, (3) the breach of duty may be either intentional or unintentional, and (4) there must be a direct relationship between the remedy and the act of spoliation. It cannot be excessive and must be “proportionate when weighing the culpability of the spoliating party and the prejudice to the non-spoliating party.” To determine prejudice, the Supreme Court confirmed that the following factors must be considered: (1) the relevance of the spoliated evidence to the main issues in the case, (2) the harmful or helpful effect of the evidence on the underlying case of either party, and (3) whether the spoliated evidence was cumulative of other evidence. If the spoliation is intentional, that might be enough to support a finding that the evidence is both relevant and harmful to the spoliating party. Negligent spoliation would not be sufficient to determine this. Finally, a party may present indirect evidence to try to establish what the missing evidence would have shown, but the jury may not hear evidence unrelated to the merits of the case that tends to simply highlight the spoliating party’s breach and culpability.
Willful Misconduct. Liability imposed on parents for a child’s negligent, willful, or malicious acts that cause property damage. However, child’s acts must be reasonably attributable to parent’s negligence in exercising parental duties. V.T.C.A. Family Code §§ 41.001 and 41.002.
The limit of liability is $25,000.00. Child must be between 10 and 18.
Modified Joint and Several Liability. Joint and several liability for defendants more than 50% at fault, or defendants who act intentionally. Tex. Civ. Prac. § 33.013.
Each joint and several tortfeasor paying more than its proportion of damages has a right to contribution from other jointly and severally liable defendants up to the other defendants’ unpaid share of damages. No defendant has a right of contribution against any settling person and a settling defendant has no contribution rights against non-settling defendants. Contribution claims between named defendants must be determined in the primary suit or they are waived unless right of contribution exists because a third-party was not party of the primary suit and has made no settlement with plaintiff. Tex. Civ. Prac. § 33.015; C & H Nationwide v. Thompson, 903 S.W.2d 315 (Tex. 1994). Two years statute of limitations from date judgment or settlement imposes liability on contribution plaintiff. Beaumont Coca Cola Bottling Co. v. Cain, 628 S.W.2d 99 (Tex. App. 1981).
Suspension of Drivers' Licenses
Administrative Suspension: If evidence of financial responsibility filed is not sufficient or appropriate, the Department can suspend a driver’s license. Tex. Transp. Code § 601.057. Suspension will continue until sufficient evidence of financial responsibility has been filed. Tex. Transp. Code § 601.057.
Judgment: The Department will immediately suspend the driver’s license of the judgment debtor. Tex. Transp. Code § 601.332. Suspension will remain until the judgment is stayed or satisfied, and the debtor produces evidence of financial responsibility. Tex. Transp. Code § 601.332.
Contact Information: State of Texas, Department of Public Safety, Driver Improvement & Compliance Bureau, P.O. Box 4087, 5805 North Lamar Blvd., Austin, TX 78773, (512) 424-2600, http://www.dps.texas.gov/DriverLicense/index.htm.
Only applicable to registered architects or licensed engineers. Section 151.102, hidden in the Texas Insurance Code, invalidates indemnity in construction contracts. This has small effect in personal injury cases because the statute allows indemnity against the employer of injured employee. Most construction contracts are written such that the employer provides indemnification for injuries to its employees. Tex. Ins. Code §§ 151.102, 151.103.
Diminution of Value
First Party: Texas courts have refused to allow recovery of diminution in value and have stated that “[w]here an insurer has fully, completely, and adequately ‘repaired or replaced the property with other of like kind and quality’ any reduction in market value of the vehicle due to factors that are not subject to repair or replacement cannot be deemed a component part of the cost of repair or replacement.” American Manufacturers Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154 (Tex. 2003). The Texas Department of Insurance Bulletin B-0027-00 (2000) has also held: “The position of the Department is that an insurer is not obligated to pay a first party claimant for diminished value when an automobile is completely repaired to its pre-damage condition. The language of the insurance policy does not require payment for, or refer to, diminished value.”
A vehicle’s diminution in market value due to additional mileage and the marketplace perception that a fully repaired vehicle was inferior was not part of the insurer’s obligation to repair the vehicle after a theft under the policy. Because the vehicle was fully repaired, the insurer was not required to pay its inherent diminished value, i.e., the difference between the value before the loss and after repair. Where an insurer has fully, completely, and adequately repaired or replaced the property with other of like kind and quality, any reduction in market value of the vehicle due to factors that are not subject to “repair or replacement” cannot be deemed a component part of the cost of repair or replacement. Carlton v. Trinity Universal Ins. Co., 32 S.W.3d 454 (Tex. App. 2000).
Third Party: No court decisions specifically allowing for recovery diminution in value of a damaged vehicle in a third-party claim in addition to the cost of repair to the damaged vehicle. In action for damage to a vehicle, the owner or subrogated insurer may sue for either diminution of market value or cost of repair to the damaged vehicle. Jones v. Wallingsford, 921 S.W.2d 463 (Tex. App. 1996) (Note that this case concerns Immediate Diminished Value rather than Inherent Diminished Value.) A plaintiff whose property has not been totally destroyed may recover either (1) the market value measured by the difference in the immediate pre-injury value of the property and immediate post-injury value before repairs, or (2) the cost-of-repair and loss-of-use damages, including lost profits, but the recovery of both remedies constitutes a double recovery. Texas Farm Bureau Mut. Ins. Co. v. Wilde, 385 S.W.3d 733 (Tex. App. 2012) abrogated on other grounds by J & D Towing, LLC v. Am. Alternative Ins. Corp., 478 S.W.3d 649 (Tex. 2016).
However, there are cases allowing for recovery of diminution in value in other settings. Royce Homes, L.P. v. Humphrey, 244 S.W.3d 570 (Tex. App., 2008) (water damage to new home under construction), Ludt v. McCollum, 762 S.W.2d 575 (Tex. 1988); Terminix Int’l, Inc. v. Lucci, 670 S.W.2d 657 (Tex. App. 1984) (case involved permanent reduction to home due to foundation problems. Court held that an award of diminished value is recoverable in addition to the costs of repair, assuming that the permanent reduction in value refers to that reduction occurring even after repairs are made). In Texas, residual damages to market value of real estate are referred to as “stigma damages.” Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820 (Tex. 2014); see also, Ludt v. McCollum, 762 S.W.2d 575 (Tex. 1988).
Texas law is clear, however, that no double recoveries are allowed. Under certain circumstances, a plaintiff may recover for both diminution in value and cost of repairs, as long as there is no double recovery. Diminution in value does not duplicate the cost of repairs if the diminution is based on a comparison of the original value of the property and the value after repairs are made. Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex. 1995).
Note: Texas Department of Insurance Bulletin B-0027-00 states—without providing any authority or precedent—that “An insurer also may be obligated to pay a third-party claimant for any loss of market value of the claimant’s automobile, regardless of the completeness of the repair, in a liability claim that the third party claimant may have against a policyholder.” It does not apply to a vehicle which is a total loss.
One-Party Consent: It is not unlawful for an individual who is a party to or has consent from a party of an in-person or electronic communication to record and or disclose the content of said communication unless the person is doing so for the purpose of committing a tortious or criminal act. An individual may also disclose the content of any electronic communication that is readily accessible to the general public. Tex. Penal Code Ann. § 16.02; Tex. Code Crim. Proc. Ann. art. 18.20.
Texas statute gives a court the authority to order that a criminal defendant pay restitution to a “victim” of their offense. When the “victim” has been compensated from a source other than the criminal defendant, they will not be entitled to restitution; rather, the court can award restitution to the party who compensated the “victim.” Tex. Civ. Prac. & Rem. Code Ann. § 42.037(f)(1). Texas case law has affirmed that an insurer may be such a party after compensating their insured—the “victim.” Cox v. State, 1998 Tex. App. LEXIS 62, * 3 (Tex. Ct. App. 1998).
Health and Disability Insurance
Statute of Limitations: 2 Years. Tex. Civ. Prac. & Rem. Code Ann. § 16.003.
Subrogation of Medical and Disability Benefits are allowed. Texas Assoc. of School Boards, Inc. v. Ward, 18 S.W.3d 256 (Tex. App. – Waco 2000); AIG Life Ins. Co. v. Federated Mut. Ins. Co, 200 S.W.3d 280 (Tex. App. -Dallas 2006). Made Whole does not apply. Texas’s Lien Reduction Statute Applies. Tex. Civ. Prac. & Rem. Code Ann. § 140.005. Common Fund applies. Tex. Civ. Prac. & Rem. Code Ann. §§ 140.005, 140.007.
Funeral Procession Traffic Laws
There are no state law governing funeral processions, however, Texas courts recognize the tradition of vehicles stopping to allow a funeral procession to pass through an intersection. A driver that collides with a vehicle in a funeral possession may be liable if the procession was going through an intersection was noticeable. Southwestern Bell Tel. Co. v. Davis, 528 S.W.2d 191 (Tex. Civ. App. 1979).
Statute of Limitations: 2 Years. Tex. La. Code Ann. §§ 417.001 and 417.004.
Can Carrier Sue Third Party Directly: Yes.
Recovery from UM/UIM Benefits: Employer’s Policy Only.
Subrogation Against Medical Malpractice: Yes.
Subrogation Against Legal Malpractice: Yes.
Recovery Allocation/Equitable Limitations: A carrier has first money right of recovery.
Employer Contribution/Negligence: After 1/1/03 proportional reduction.
Attorney’s Fees/Costs: Apportionment.
Future Credit: Yes, may recover in third-party suit if carrier sues alone.
Auto No-Fault: No.
Dog Bite Laws
Dog owner will be liable if the victim can prove that the owner had knowledge of the dog’s dangerous propensities, was negligent, a leash law was violated, or the owner caused the injury intentionally. V.T.C.A., Health & Safety Code § 822.005.
Employee Leasing Laws
Texas enacted the Texas Staff Leasing Services Act, which addressed the use of leased employees and their employers in Texas. Tex. Lab. Code § 91.001, et seq. In particular, § 91.042 reads as follows:
(a) A license holder (person licensed to provide staff leasing services) may elect to obtain workers’ compensation insurance coverage for the license holder’s assigned employees through an insurance company as defined under § 401.011(28) or through self insurance as provided under Chapter 407.
(b) If a license holder maintains workers’ compensation insurance, the license holder shall pay workers’ compensation insurance premiums based on the experience rating of the client company for the first two years the client company has a contract with the license holder and as further provided by the Texas Department of Insurance.
(c) For workers’ compensation insurance purposes, a license holder and the license holder’s client company shall be co-employers. If a license holder elects to obtain workers’ compensation insurance, the client company and the license holder are subject to § 406.034 and § 408.001 (the workers’ compensation statute provisions protecting employers from liability for tortuous acts).
(d) If a license holder does not elect to obtain workers’ compensation insurance, both the license holder and the client company are subject to §§ 406.004 and 406.033.
(e) After the expiration of the two-year period under Subsection (b), if the client company obtains a new workers’ compensation insurance policy in the company’s own name or adds the company’s former assigned workers to an existing policy, the premium for the workers’ compensation insurance policy of the company shall be based on the lower of:
(1) the experience modifier of the company before entering into the staff leasing arrangement; or
(2) the experience modifier of the license holder at the time the staff leasing arrangement terminated.
(f) On request, the Texas Department of Insurance shall provide the necessary computations to the prospective workers’ compensation insurer of the client company to comply with Subsection (e). Texas Labor Code § 91.042 (1995).
Therefore, the Texas Staff Leasing Services Act codified the dual employment theory in Texas and held that in staff leasing situations, both the leasing company and customer are considered employers. Most, if not all, efforts by the general employee’s workers’ compensation carrier to equitably subrogate or seek equitable contribution against the workers’ compensation carrier for the special employer ceased with this statute. Due to the theory of contribution being equitable in nature, the court considered the fact that it was contemplated by the parties that the leased staff would have their workers’ compensation premiums paid for by the general employer (the staff leasing company). The Staff Leasing Services Act, however, does not cover providers of temporary workers. The term “staff leasing services” within the Act does not include temporary help or a temporary common worker employer. The Staff Leasing Services Act applies to arrangements in which the employee’s assignment is intended to be long-term or continuing in nature, rather than temporary or seasonal in nature, and where a majority of the workforce at a client company work site is a specialized group within that workforce consisting of assigned employees of the license holder. Wingfoot Enter. v. Alvarado, 111 S.W.3d 134 (Tex. 2003).
Condominium Waiver of Subrogation Laws
Associations shall maintain property insurance and general liability insurance on the common elements. The insurance policy must waive its right to subrogation against the unit owner. Tex. Prop. Code Ann. § 82.111.
Automobile Total Loss Thresholds
Percentage of Value: 100%
If total cost of repairs exceeds ACV of vehicle then it is a salvage vehicle. Tex. Transp. Code § 501.091(15).
Sudden Medical Emergencies While Driving
Unavoidable Accident Defense or Act of God Defense. The operator of a motor vehicle who becomes suddenly stricken by a fainting spell or otherwise loses consciousness while driving, and for this reason is unable to control the vehicle, is not chargeable with negligence or gross negligence if his loss of consciousness is due to an unforeseen cause. First City Nat. Bank of Houston v. Japhet, 390 S.W.2d 70 (Tex. App. 1965); Durham v. Wardlow, 401 S.W.2d 372 (Tex. App. 1966).
Defendant’s hypoglycemic episode was determined to be foreseeable since defendant was feeling ill prior to operating the vehicle. Harvey v. Culpepper, 801 S.W.2d 596 (Tex. App. 1990).
State Sovereign Immunity And Tort Liability
Tort Claims Act: Texas Tort Claims Act (TTCA). Tex. Civ. Prac. & Rem. Code Ann. §§ 101.001–.109 (1985).
Absent a waiver of immunity, all governmental entities are generally immune from liability. University of Tex. Sw. Med. Ctr. v. Estate of Arancibia, 324 S.W.3d 544 (Tex. 2010). TTCA is a limited waiver of sovereign immunity (qualified immunity) for certain torts. Unless there is a waiver of immunity in the TTCA, there is sovereign immunity. City of Denton v. Van Page, 701 S.W.2d 831 (Tex. 1986).
Notice Deadlines: The TTCA’s notice provisions are found in Tex. Civ. Prac. & Rem. Code Ann. § 101.101. Formal, written notice no later than six months after day the incident occurs, reasonably describing:
(1) the damage or injury claimed;
(2) the time and place of the incident; and
(3) the incident.
Tex. Civ. Prac. & Rem. Code Ann. § 101.101(a).
“Actual notice” can substitute. Tex. Civ. Prac. & Rem. Code Ann. § 101.101(c).
Claims/Actions Allowed: State’s immunity is waived for:
(1) injury caused by an employee’s use of motor-driven vehicle;* Tex. Civ. Prac. & Rem. Code Ann. § 101.021(1).
(2) injury caused by condition or use of tangible personal or real property;** Tex. Civ. Prac. & Rem. Code Ann. § 101.021(2); and
(3) claims arising from premises defects. Tex. Civ. Prac. & Rem. Code Ann. § 101.021(2).***
*State only liable if employee operating vehicle would have been liable.
**State only liable if private person would have been liable. This precludes suit against State predicated solely on respondeat superior. Involves activities conducted on real property, not defects in the real property.
***Claims involving premises liability (defect in real property) brought under this section.
Comments/Exceptions: TTCA applies to “governmental units” (State, cities, counties, school districts, water districts, emergency service organizations, and any other entity which derives Constitution or Texas statute). State employees enjoy either absolute immunity (e.g., judges) or qualified immunity (e.g., jailers, sheriffs, and other public officers or employees). State employees’ qualified immunity applies only to discretionary actions taken in good faith within the scope of the employee’s authority.
No qualified immunity for ministerial (mandatory) actions. State involved in joint enterprise is liable for the torts of other members of the joint enterprise. Texas Dep’t of Transp. v. Able, 35 S.W.3d 608 (Tex. 2000). TTCA (Tex. Civ. Prac. & Rem. Code Ann. § 101.022) has two special of premises liability cases to which two additional liability limitations apply:
(1) special defects (e.g., unusual danger); and
(2) Absence, condition or malfunction of traffic signs.
Tex. Civ. Prac. & Rem. Code Ann. § 101.060.
Damage Caps: Liability of a State government under the Act is limited to money damages in a maximum amount of $250,000 for each person and $500,000 for each single occurrence for bodily injury or death and $100,000 for each single occurrence for injury to or destruction of property.
Recovery of Sales Tax After Vehicle Total Loss
First-Party Claims: Motor vehicle sale and use tax is not due when insurer takes title to vehicle as a result of a total loss. However, motor vehicle sale and use tax is due when the insurer purchases a replacement vehicle for the insured on a total loss claim. 34 Tex. Admin. Code § 3.62.
Third-Party Claims: No applicable statute, case law, or regulation directly governing recovery of sales tax. However, in Adams v. ABC Ins. Co., 264 S.W.3d 424 (Tex. App.–Dallas 2008), the court held that the total loss settlement (which included tax and fees) was some evidence of the pre-accident fair market value of the car. Thus, a subrogated carrier has essentially two arguments. Either the taxes and fees should be considered actual damages (separate and apart from FMV of the vehicle) or they should be considered some evidence as to what the true fair market value is of the vehicle. There is no law indicating that they cannot be recovered.
Damage to Property Without Market Value
Service Value: “In the very nature of things personal effects composing the furnishings of a family and household do not, for the most part, have an ascertainable market value; and their value must of necessity be fixed by replacement cost, with due allowance for depreciation, or by their intrinsic value.” Niagara Falls Ins. Co. v. Pool, 31 S.W.2d 850 (Tex. Civ. App. 1930).
Intrinsic Value: “…the measure of damages … in the absence of a market value, is the actual value…actual value … is not a price suggested by the owner’s partiality for them, nor yet what he could sell them for, neither would it be a fanciful or sentimental value, but the actual loss in money he would sustain by being deprived of such articles of domestic use.” American Ry. Express Co. v. Thompson, 2 S.W.2d 493 (Tex. Civ. App. 1927).
Sentimental Value: “As a general rule recovery for sentimental value for personal property cannot be had in a suit for the loss of property for personal use such as wearing apparel and household goods. However…in a suit to recover for the loss or destruction of items which have their primary value in sentiment.” Brown v. Frontier Theaters, Inc., 369 S.W.2d 299 (Tex. 1963).
Municipal/County/Local Governmental Immunity and Tort Liability
Texas Tort Claims Act (TTCA): Tex. Civ. Prac. & Rem. Code §§ 101.001–.109 (1969). TTCA is a limited waiver of sovereign immunity (qualified immunity) for certain torts. “Governmental unit” includes a political subdivision (city, county, school district, etc.). Tex. Civ. Prac. & Rem. Code §§ 101.001(3).
Notice Deadlines: Formal, written notice no later than six (6) months after day the incident occurs, reasonably describing: (1) the damage or injury claimed; (2) the time and place of the incident; and (3) the incident. Tex. Civ. Prac. & Rem. Code Ann. § 101.101(a). “Actual notice” can substitute. Tex. Civ. Prac. & Rem. Code Ann. § 101.101(c).
Claims/Actions Allowed: Governmental unit liable for proprietary acts, including:
- operation and maintenance of a public utility;
- amusements owned and operated by the municipality; and
- any activity that is abnormally dangerous or ultra-hazardous. Municipal liability exists only to extent immunity waived. Municipality liable for motor vehicle and condition or use of person/real property.
See Tex. Civ. Prac. & Rem. Code Ann. § 101.021 (non-exclusive list).
Comments/Exceptions: Immunity for governmental functions (police, fire, health and sanitation). Three activities listed that are considered governmental functions:
- police and fire;
- health and sanitation; and
- bridge/road maintenance and construction.
This section doesn’t waive immunity. Must look to § 101.021 to determine if act is proprietary. Tex. Civ. Prac. & Rem. Code § 101.0215(b). Proprietary acts include construction and maintenance of streets, sanitary or storm sewers. There is NO waiver of immunity for junior college or school districts, except as to motor vehicles. Tex. Civ. Prac. & Rem. Code §§ 101.023 and 100.051.
Bodily Injury/Death: $250,000 Per Person. $500,000 Occurrence.
Damage to Property: $100,000 Occurrence.
Tex. Civ. Prac. Rem. Code § 101.023.
Can recover property damage and personal injury for motor vehicle exception; but only personal injury for death for condition or use of real/personal property.
Laws Regarding Using Cell Phones/Headphones/Texting While Driving
Cell Phone/Texting: No driver under 18, during the 12-month period following issuance of original license can use a cell phone while operating a vehicle, unless it is an emergency situation. Tex. Trans. Code § 545.424(2).
No texting laws, except for learner’s permits/drivers under the age of 18.
Other Prohibitions: No Applicable Laws.
You can be cited for distracted driving.
Comments: No driver may operate a motor vehicle while in a school zone. Exceptions include if the vehicle is parked/stopped or the device is hands-free or being used to summon emergency officials. Tex. Trans. Code § 545.425.
Forty cities have passed texting and cell phone laws.
Workers’ Compensation Claims by Undocumented Employees
Statute: The statute expressly includes illegal aliens. Tex. Lab. Code Ann. § 401.011 and §406.092.
Case Law: Commercial Standard Fire and Marine Co. v. Galindo, 484 S.W.2d 635 (Tex. App. 1972).
Comments/Explanation/Other: Galindo held that an illegal alien was entitled to benefits under the workmen’s compensation statute, and his illegal status did not bar a collection of benefits.
Admissibility of Expert Testimony
Admissibility Standards: Daubert
Case/Statutory Law: E.I. du Pont de Nemours & Co. V. Robinson, 923 S.W.2d 549 (Tex 1995).
Imputing Contributory Negligence of Driver to Vehicle Owner
Imputed Contributory Negligence Law: Contributory negligence of driver will not be imputed to an owner in owner’s action against third party for full value of damaged vehicle operated by permissive user, absent a showing of a an agency or control relationship. Rollins Leasing Corp. v. Barkley, 531 S.W.2d 603 (Tex. 1975).
Vicarious Liability/Family Purpose Doctrine: No Vicarious Liability Statute.
Texas does not recognize the Family Purpose Doctrine. Ener v. Gandy, 158 S.W.2d 989 (Tex. 1942).
Sponsor Liability for Minor’s Driving: No Sponsorship Liability Statue.
Product Liability Law
Statute of Limitations/Repose: 2 years for personal injury and wrongful death. Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (Vernon 2006). Discovery Rule Applies. Statute of Repose is 15 Years. Tex. Civ. Prac. & Rem. Code Ann. § 16.012.
Liability Standards: Negligence, Strict Liability, Warranty.
Fault Allocations: Modified Comparative. Tex. Civ. Prac. & Rem. Code Ann. §§ 33.001-33.017.
Non-Economic Caps/Limits On Actual Damages: Yes.
Punitive Y/N and Limits: Yes (Limits).
Heeding Presumption?: Limited.
Innocent Seller Statute: Yes. Tex. Civ. Prac. & Rem. Code Ann. §82.002(a).
Joint and Several Liability: Yes, if > 50%. Tex. Civ. Prac. § 33.013.
Available Defenses: Assumption of Risk; Misuse; Alteration; Learned Intermediary; Inherently Unsafe Products; State of the Art; Government Contractor Defense; Presumption; Compliance With Government Standards; Seatbelts; Alcohol/Drugs; Sophisticated User.
Restatement 2nd or 3rd?: Restatement 3rd
Owner Liability For Stolen Vehicles
Key In The Ignition Statutes: Tex. Transp. Code § 545.404.
Common Law Rule: Owner of motor vehicle is not liable to third party for negligent operation of vehicle by thief, unless theft was foreseeable. McKinney v. Chambers, 347 S.W.2d 30 (Tex. App. 1961); Williamson v. Wayne Strand Pontiac-GMC, Inc., 658 S.W.2d 263 (Tex. App. 1983); Simmons v. Flores, 838 S.W.2d 287 (Tex. App. 1992); Cummings v. Conner Mach., Inc., 2012 WL 1174740 (Tex. App.–Amarillo 2012).
Absent a contractual or statutory right, an insurer cannot subrogate against its own insured for a claim arising from the very same risk for which the insured is covered. Matagorda County v. Texas Ass’n of Counties, 975 S.W.2d 782 (Tex. App. 1998), aff’d, 52 S.W.3d 128 (Tex. 1996); AGIP Petroleum Co. v. Gulf Island Fabrication, Inc., 920 F.Supp. 1318 (S.D. Tex. 1996); Stafford Metal Works, Inc. v. Cook Paint & Varnish Co., 418 F.Supp. 56 (N.D. Tex. 1976); McBroome-Bennet Plumbing v. Villa France, 515 S.W.2d 32 (Tex. App. 1974). There is a “special relationship” between an insurance company and its insured, giving rise to duties of good faith and fair dealing. Crim Truck & Tractor Co. v. Navistar Intern. Transp. Corp., 823 S.W.2d 591 (Tex.1992); Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210 (Tex.1988); Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165 (Tex.1987). In State Farm Mut. Auto. Ins. Co. v. Perkins, 216 S.W.3d 396 (Tex. App. 2006), State Farm paid Perkins UM benefits because the defendant was uninsured. Perkins recovered from the owner of the defendant vehicle who was insured by State Farm under a separate policy. The ASR did not prohibit reimbursement of UM benefits to State Farm because it involved different insureds and separate and distinct policies. The policy concerns of the ASR were not present in Perkins. Exceptions to the ASR include:
- Contractual and statutory subrogation;
- Subrogation against insured under a separate and distinct insurance policy; and
- Equitable concerns (case-by-case fact analysis);
In Stafford Metal Works, Inc., Continental (fire insurer for Stafford and liability insurer for tortfeasor Cook) settled with Stafford for more than the limits and withdrew instead of defending the subrogation action remaining against Cook. There was no contractual subrogation language in the policy, so the court held that subrogation was equitable and the ASR prohibited subrogation. The federal district court gave five basic reasons for the ASR, noting there was not contractual subrogation language in the policy and, focusing on the equities, stated that Continental had a “profound opportunity for mischief.” In McBroome-Bennet Plumbing, Westchester Fire Insurance Company (“Westchester”) issued a builder’s risk insurance policy to Villa France, Inc., the owner-general contractor of an apartment house under construction. McBroome-Bennett Plumbing, Inc. (“McBroome”) was a subcontractor whose employees caused a fire resulting in $15,719.37 in damage, which Westchester paid to Villa France. Westchester, as subrogee of Villa France, sued McBroome to recover the amount paid. McBroome argued that it was not liable to Westchester on the subrogation claim because it was an unnamed co-insured party under the insurance contract because some of its property was destroyed and arguably insured under the Westchester policy. The Court of Appeals held that McBroome was not an insured under the insurance policy issued to Villa France. To deny the insurer its right of subrogation here and under the circumstances presented would be contrary to basic principles of equity and justice.
Use of Non-Original Equipment Manufacturer (OEM) Aftermarket Crash Parts in Repair of Damaged Vehicles
Authority: V.T.C.A., Insurance Code § 1952.301.
Summary: Insurers may not limit the parts that can be used in a repair in any way within the policy.