Actual Cash Value in Texas is Fair Market Value

Taxes are not Part of the Actual Cash Value of an Automobile

In an attempt to create a class action two plaintiffs whose vehicles were total losses in an insured against accident claimed that the insurer should pay for the taxes and fees associated with replacing their totaled vehicles, thus making them whole. The appeal, Jessica Singleton, individually and on behalf of all others similarly situated; Tony Cooper, individually and on behalf of all others similarly situated v. Elephant Insurance Company, a foreign insurance company, No. 19-50470, United States Court Of Appeals For The Fifth Circuit (March 18, 2020) resolved the claim.


When an insured automobile is so damaged that it would cost more to repair than to replace, it is usually deemed a total loss. The insurance company then reimburses the policyholder for the value of the vehicle, with the expectation that the policyholder will probably use this money to purchase a replacement. Of course, purchasing and registering the replacement vehicle requires the payment of taxes and fees to the state.

Singleton and Cooper were involved in collisions and subsequently filed insurance claims. Elephant determined that their vehicles were total losses and compensated them in amounts corresponding to the estimated “adjusted vehicle value” of their automobiles before the accidents, minus the applicable deductibles. Elephant did not compensate them for the taxes and fees attendant to replacing their vehicles in Texas.

Singleton and Cooper brought a putative class action against Elephant to recover these taxes and fees. They alleged that Elephant was liable for breach of contract and for violating provisions of the Texas Insurance Code that require prompt payment of claims.

The district court dismissed the complaint on Elephant’s motion. It ruled that they had failed to state a claim for breach of contract. And because they had no contract claim, the district court further ruled that they had failed to state a claim under the Texas Insurance Code. This appeal followed.

The Policy

Jessica Singleton and Tony Cooper’s policies provided that, in the event of a total loss, Elephant’s liability would be limited to the “actual cash value of the stolen or damaged property at the time of the loss, reduced by the applicable deductible . . . and by its salvage value if [the policyholder] or the owner retain[ed] the salvage.” The policies also stated that the “actual cash value is determined by the market value, age and condition of the auto . . . at the time the loss occurs.”


Under Texas law, if language in an insurance policy is worded so that it can be given a definite or certain legal meaning, it is not ambiguous. The Fifth Circuit noted that a contract is ambiguous is a question of law and ambiguity does not arise simply because the parties offer conflicting interpretations. Rather, ambiguity exists only if the contract language is susceptible to two or more reasonable interpretations.

The Fifth Circuit determined “actual cash value” according to its ordinary and generally accepted meaning noting that the Supreme Court of Texas has stated that, in the case of “marketable chattels, for which market value can be determined,” “[a]ctual cash value . . . is market value.” Mew v. J&C Galleries, Inc., 564 S.W.2d 377, 377 (Tex. 1978).

Used automobiles are indisputably marketable. Fair market value is defined as the price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm’s-length transaction. This definition plainly excludes taxes and fees that are remitted to the state.

That the state collects taxes and fees from the buyer is irrelevant to the question of fair market value because those amounts are not part of the price paid to the seller. Accordingly, the Fifth Circuit concluded that the district court was correct to dismiss the breach-of-contract claim.

Since the basis of the complaint is that Elephant does not compensate its policyholders for the taxes and fees involved in replacing their vehicles the Fifth Circuit decided, as a matter of law, that such compensation was not required, there was no remaining fact issue on the question of the market value of Singleton’s and Cooper’s vehicles.


Elephant, the insurer wrote a policy that was clear and unambiguous. The state of Texas defines Actual Cash Value as fair market value when dealing with a marketable chattel like a used car. If, before the accident, the plaintiffs offered their vehicles for sale on the open market they would not have been able to recover from a good faith purchaser more than the value of the vehicle. The argument that they were entitled to taxes was, in my opinion, silly and disposed of properly by the Fifth Circuit.

© 2020 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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