In a subrogation case, what type of evidence is required toprove real property damages at trial? Many times, the only evidenceof damages that is readily available is the property adjuster'sXactimate estimate and testimony. As of late, this type of evidenceis no longer sufficient. In McGinty v. Hennen, for instance, the Texas SupremeCourt held that the plaintiff must provide specific evidence thatthe cost to repair the damaged property was reasonable andnecessary.

The Case

In Texas, the plaintiff can recover the reasonable and necessarycosts to repair damaged real property, as long as there is noteconomic waste—meaning the cost to rebuild the property does notexceed the value of the property. The plaintiff in McGintyalleged his house had developed mold because of water leaks fromseveral construction defects. The plaintiff then sued the builderfor breach of the construction contract. He claimed that hisdamages were in excess of $600,000 for mold remediation and therepair work.

The plaintiff presented two damages experts: a mold remediationexpert and a local general contractor who had 30 years ofexperience. The Xactimate estimates from both experts were admittedas evidence. The defendant did not present any expert testimonychallenging the amount of the plaintiff's damages. During trial,the plaintiff's experts testified regarding their estimated coststo rebuild, and that the Xactimate prices were within one to twopercent of the costs in Corpus Christi. However, neither expertgave an opinion that repairs were necessary or that the costs werereasonable. In fact, the experts never said the words “reasonableand necessary.” The defendant then appealed on the grounds therewas no evidence the cost to repair was reasonable andnecessary.

The Appeal

The 14th Court of Appeals in Houston held that although theplaintiff's experts did not opine that the costs were reasonableand necessary, there was sufficient evidence—namely the estimatesand testimony—to support the jury's finding that the costswere reasonable and necessary.

The Texas Supreme Court disagreed, however, stating the legalstandard for damages is reasonable and necessary. The plaintiff'sexperts merely explained their processes for arriving at the costto repair the house by using the Xactimate program, researchinglocal materials, and relying on information from previous jobs.They did not provide evidence that these costs were reasonable andnecessary. Without some other evidence that the costs werereasonable and necessary—the Court referenced using competitivebids—there simply was no evidence to support the plaintiff'sdamages.

Therefore, how does one prove property damages in Texas? TheCourt did not list what types of evidence is sufficient to provethat the damages were “reasonable and necessary,” but the opinionreferenced those terms on numerous occasions. Reading between thelines, a damage expert should be prepared to testify that eachelement of damage is “reasonable and necessary.”

Further, it is necessary to meet with your damages expert earlyon—be it a claims adjuster or a building consultant—to specificallyidentify all of the information that the expert relied upon toarrive at his or her estimate. If that projection is solely basedon an Xactimate estimate, then the court may not consider that tobe sufficient evidence.

Jake P. Skaggs is a member in the subrogation and recoverydepartment of Cozen O'Connor, where he has worked since 2004. Hemay be reached at [email protected].