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Expert Answers to Your Industry Questions
Damage Prevention Professional invites you to send us your questions about excavation safety and
damage prevention, and we will have them answered by a professional working in an appropriate area
of the industry. Send your questions to: Ask The DP Pro, Damage Prevention Professional, 10740 Lyndale
Avenue South, Suite 15W, Bloomington, MN 55420 or email to [email protected]
Q
How do you quantify “loss of use?”
A
Answer by James J. Proszek
“Loss of use” is a measure of damages designed to compensate a property owner for the loss of the use of property that has been damaged
by another during the reasonable time it takes to repair the property.
This measure recognizes that simply awarding repair costs or the diminished value of the property may not adequately compensate the property
owner for all the loss he has suffered.
The ways to quantify loss of use damages, and limitations on such
damages, vary based on the laws of the specific state in which the damage occurred. There are, however, four generally accepted ways to quantify loss of use damages:
Lost Profits: In the case of commercial property, loss of use
damages can be quantified by the profits the property would have
earned during the time it was out of service. While the amount need
not be proved with mathematical precision, the owner must show the
amount with reasonable certainty. It must also be based on lost net
profit, not gross earnings.
Cost of Hiring Replacement Property: The rental cost of
comparable substitute property, or “lease in” value, is another way to quantify loss of use damages. Where the property owner actually rents a substitute, the actual rental cost can determine the amount of loss of use damages.
In many states, a property owner can recover loss of use damages based
on the rental cost of a substitute even though the plaintiff does not actually rent a substitute. Where this method is used, the amount must be
based on cost of comparable property in the same market as that of the
damaged property.
In some states, the property owner must show that there was comparable property available to rent before using this method to quantify
loss of use damages. In other states, the property owner must show that
he could not have rented substitute property before availing himself of
this method.
Rental Value of the Property: This method is also known as
the “lease out” value. It is based on the amount the owner would have
received if he had rented the property to a third party.
Interest: Finally, loss of use damages may be quantified by the
interest the plaintiff would have earned on the value of the property
during the time it was out of service.
Even with the above four ways to quantify loss of use damages, there
are limitations. In some states, loss of use damages are only available if
the property can be repaired, and not if it is completely destroyed. In
either case, a plaintiff can only recover loss of use damages for the reasonable amount of time it took to repair or, in the case of property which
has been completely destroyed, replace the damaged property.
Some states also limit loss of use damages to the market value of the
property before the damage. In other words, the amount of loss of use
damages cannot exceed the pre-injury value of the property. In such
states, the property owner must show the value of the property before
the damage. DP
James J. Proszek is a shareholder in the Tulsa, Oklahoma office of
the law firm Hall, Estill, Hardwick, Gable, Golden & Nelson. He
is a trial attorney with more than 30 years of experience. He has
represented utility owners in litigation over damage to underground facilities and right-of-way disputes in 33 states. He can be
reached at [email protected]
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