Fifth Circuit: Under Texas Law, Damages For A Totalled Loss Vehicle Do Not Include Taxes or Registration Fees

Two policyholders in Texas brought a putative class action against their auto insurance carrier; the policyholders owned vehicles that were determined to be total losses. Their carrier, Elephant Insurance Company, paid the policyholders for the “actual cash value” of their vehicles at the time of the loss, less the applicable deductible. The payments did not include tax or registration fees for the replacement vehicles. “Actual cash value” was not defined in the policy. The Plaintiffs filed suit for breach of contract and violation of the prompt payment of claims provision of the Texas Insurance Code, alleging that they were entitled to payment for the taxes and registration fees for the replacement vehicles. The federal trial court found that the Plaintiffs were not entitled to replacement costs, which would include taxes and registration fees; therefore, there was no breach of contract. Without a breach of contract, the trial court concluded that there could not be a claim under the Texas Insurance Code. The trial court dismissed the complaint; Plaintiffs appealed.

In Singleton, et al. v. Elephant Insurance Company, No. 19-50470, (5th Cir. 2020),the Fifth Circuit interpreted the insurance policy language under Texas law and affirmed the trial court’s dismissal of the complaint. The Fifth Circuit held that “actual cash value” is the equivalent of “fair market value,” and that under Texas law, the “fair market value” of the totalled vehicles did not include taxes or registration fees for the replacement vehicles. The full opinion can be found here:

http://www.ca5.uscourts.gov/opinions/pub/19/19-50470-CV0.pdf