DAMAGES AND COMPENSATION IN CIVIL LITIGATION

Michael Sean Quinn*

You can’t have enough legal education. If you studied damages in law school and if you have been out of law school for more than six months, it’s time to go back to the fundamentals. The Supreme Court of Texas has just written an  opinion where it does that for us.  We should all read and reread this section of an opinion with is well worth reading anyway, since it is witty, attentive to legal history and — get this — acknowledges that the involvement of Texas in pre-Civil War slavery was a bad thing.  It also contains legal wisdom which will be controlling and oft cited for several generations. J[ampersand]D Towing, LLC v. American Alternative Insurance Corporation, #14-0574 (Supreme Court of Texas, January 8, 2016). The opinion was one that was unanimous, though one judge did not joint in the whole thing for some unexplained and mysterious reason(s).

Here is part of the court’s wisdom, in its words, but its citations left out:

We begin with first principles. compensation is the chief purpose of damages awards in tort cases. Indeed we have long held that “[t]he basic reason underlying rules for the ascertainment of damages for any tortious act is a fair, reasonable, and proper compensation for the injury inflicted as a proximate result of the wrongful act complained of. Reasonable and proper compensation must be neither meager nor excessive, but must be sufficient to place the plaintiff in the position in which he would have been absent the defendant’s tortious act. In this way, compensation through actual-damages awards functions as ‘an instrument of corrective justice, an effort to put the plaintiff in his or her rightful position.'[**]

“Actual damages may be either direct or consequential. Direct damages compensate for a loss that is the necessary and usual result of the tortious act. By contrast consequential damages, also known as special damages, compensate for a loss that results naturally, but not necessarily from the tortious act. Although consequential damages need not flow necessarily from the act, they must be both foreseeable and directly traceable to the act. If the purported consequential damages are “too remote, too uncertain, or purely conjectural, they cannot be recovered.”

There is so much to learn about the concept of compensation in this brief passage that it can be studied again and again. Whole litigation strategies as to proving damages (or preventing their proof) can be gleaned on these paragraphs. 

The rest of the case is interesting too. It is not particularly an insurance case; no policy terms or adjustment behaviors were at stake. It is a case at least about torts in general. It reaches the eminently sensible conclusion that if a piece of personal business property, e.g., a motor vehicle is totally destroyed, i.e., is a total loss, then the owner of the vehicle–in this case a tow truck–can recover the profits it would have made if it had been able to use the vehicle. 

Heretofore in Texas, it was the generally received view that loss-of-use damages were only recoverable if the chattel had not been physically injured at all (conversion of slave) or had been physically injured (cases from elsewhere) but had not been totally destroyed, or killed.  See Michael Sean Quinn, “Loss-of-Use” Damages, A Slave Named “Ben,” and Texas Legal History, QUINN’S COMMENTARIES ON INSURANCE LAW (January 17, 2016).

The previous, primitive in various ways, and illogical doctrine has not gone with the wind and still may not be–completely, at least. 

*Michael Sean Quinn

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**The following is obvious enough, I suppose, but I have never realized that one’s “rightful position” refers to a position where one has a right to be, understanding that “position” has a number of different meanings, and does not refer simply to physical positions. This is a personal confession and not what this case is about. The “equation” I must sketched has nothing to do with the explicit themes of the case.  

 

Originally posted on 01/12/2016 @ 11:18 pm

Michael Sean Quinn, PhD, JD, CPCU, Etc

Michael Sean Quinn, PhD, JD, CPCU, Etc. (530)

One of Texas's leading insurance scholars, Michael Sean Quinn is a past chair of the Insurance Section of the State Bar of Texas and has a broad legal practice.

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