Touchstone for insurers pursuing subrogation: save the evidence: spoliation of evidence is costly and disastrous, particularly to subrogees when they seek recovery of losses.

• Author: Rosenberg, David J.
• Position: Feature Articles

THE ISSUE of the spoliation of evidence is of the utmost importance to an insurer planning to pursue subrogation. All reasonable attempts must be made to preserve material evidence regarding the cause of the loss. When, for example, a product is believed to have caused a fire, the entire product--not just the defective components--should be saved. At least two courts held that an item of evidence has been spoliated if it is not preserved in its entirety.

In American Family Insurance Co. v. Village Pontiac GMC Inc., (1) for the plaintiffs sued to recover fire damage to their home allegedly caused by a short circuit in the electrical system of a car purchased by William and Nancy Gill from Village Pontiac. Their homeowners insurer, American Family, investigated the fire. Its expert concluded that the "origin of the fire was the area along the truck light wire beneath the left end of the rear seat, and the cause of the fire was a short circuit which resulted when a copper trunk light circuit wire with damaged insulation contacted a grounded wire." The wire that was believed to have caused the short circuit was removed, and the Gills transferred title to the car to their automobile insurer, Farmers Insurance Co. The car was destroyed seven months later when Farmers transferred title to a salvage yard.

The trial court sanctioned the Gills and their insurers for the destruction of the automobile. It barred any evidence, direct or circumstantial, concerning the condition of the automobile, and in light of this sanction, entered summary judgment in favor of the defendants.

Affirming the trial court's ruling, the Appellate Court of Illinois stated:

Plaintiffs were the only individuals with first-hand knowledge of the physical evidence which is far more probative under these circumstances in determining whether the vehicle caused the fire than photographs and two wires taken from the trunk area. The physical object itself in a precise condition immediately after an incident may be far more instructive and persuasive to a jury than oral or photographed descriptions. As a matter of sound public policy, an expert should not be permitted intentionally or negligently to destroy such evidence and then substitute his or her own description for it. (2) In response to the plaintiffs' argument that the sanctions imposed by the trial court were too broad, the court stated:

We do not believe that the trial court's order barring all evidence, direct and circumstantial, concerning the condition of the car was an abuse of discretion. Although plaintiffs retained two wires and pictures of the car at the fire scene, defendants had no opportunity to inspect the car and, in particular, the location and condition of the area surrounding the wires. While defendants are currently able to observe the pictures and the wires, those observations would be without the benefit of the inspection of the whole car. Defendants would be able to observe only evidence gathered by plaintiffs without reference to the object alleged to have caused the damage. (3) SANCTIONS FOR SPOLIATION OF EVIDENCE

American courts are in disagreement with respect to what sanctions should be imposed on a party that spoliates evidence. The majority of courts have held that when a party destroys evidence, the trier of fact, at most, may draw an inference that the destroyed evidence would have been unfavorable to the party that destroyed it. Some states, however, impose more severe sanctions. Courts have precluded a party that lost the material product from introducing any evidence during the trial regarding that product. As illustrated by the American Family case, some courts have dismissed actions where the plaintiff, intentionally or unintentionally, has spoliated material evidence.

1. Majority View

   An example of the application of the majority view is seen in a Connecticut Supreme Court case, Beers v. Bayliner Marine Corp. (4) Two plaintiffs were injured while traveling in a motorboat designed and manufactured by Bayliner. After their expert examined the boat, they disposed of the boat's motor before suing the manufacturer in a product liability action.

   Based on their expert's findings, the plaintiffs claimed that the boat went out of control because of manufacturing and design defects and because the defendant failed to provide adequate warnings regarding the dangers associated with the boat's operation. In response, Bayliner moved for summary judgment, arguing that it had been deprived of the ability to defend itself as a result of the plaintiff's spoliation of the boat's motor.

   Bayliner filed two affidavits in support of its motion for summary judgment. The first was from its expert, who explained that when he examined the boat, the original motor had been removed and replaced and that he was unable to form an opinion about whether the motor was defective. The second was from the Bayliner's claim adjuster, who stated that he had attempted repeatedly to inspect the boat after the accident and that the plaintiffs' attorney failed to schedule an inspection.

   The trial court granted the motion for summary judgment on the ground that the plaintiffs' destruction of the boat's motor prejudiced the defendant's ability to present a defense. On appeal, the Connecticut Supreme Court reversed on the ground that the sanction of dismissal was not warranted.

   The court recognized that other states dismiss actions where the plaintiffs have spoliated material evidence, and it also recognized that some states preclude a party from presenting evidence regarding the defective nature of a product that it lost or destroyed. It concluded, however, that these sanctions are unnecessarily harsh, and it held that a party that has lost or destroyed a material object may proceed to trial and present evidence regarding the lost object. The court added, however, that a jury, under certain circumstances, may draw an adverse inference against the party that destroyed the evidence.

   The court explained:

   ... [W]e adopt the rule of the majority of the jurisdictions that have addressed the issue in a civil context, which is that the...