Yesterday I had the pleasure of attending the National Association of Subrogation Professionals, Eastern PA Chapter Meeting on behalf of WWR. The Conference was attended by both Legal and Insurance professionals and topics included Waiver of Subrogation Rights, Filing a Claim in Arbitration Forums and Fire Loss Investigation.
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Spoliation or as many in our field have incorrectly stated “spoilation” is an issue faced by many subrogation professionals. While “spoilation” is the incorrect spelling and pronunciation, it does partially convey the meaning of it’s properly spelled cousin. Blacks Law Dictionary defines spoliation as, “The intentional destruction, mutilation, alteration or concealment of evidence, usually a document.” In a sense, the evidence is spoiled.
In the subrogation world, spoliation normally applies to the destruction of a home, boat, automobile, or product therein, more so than a document. Most commonly, spoliation is a defense raised by a defendant against the plaintiff at the time of suit. The spoliation defense arises after a loss occurs (due to a fire, product defect, etc.) where the alleged cause of the loss is not preserved by the spoliator or the spoliator does not give the opposing party an opportunity to investigate the loss scene. An opposing party typically claims their case is prejudiced due to an inability to investigate and/or examine the alleged cause of the loss. It is important to point out that the spoliation can be either intentionally or unintentional.
It should be noted that spoliation applies not only to the alleged cause of the loss, but also extends to alternative potential causes. Mt. Olivet Tabernacle Church v. Edwin L. Wiegand Division, et al., 781 A.2d 1263 (Pa. Super. 2001). The policy behind this application reasons that a defendant is prejudiced if unable to investigate other potential causes and in turn partially indemnify themselves or exculpate liability completely.
In Pennsylvania, if the Court finds that spoliation has occurred, it may issue sanctions, preclude testimony, direct the jury to consider an adverse inference toward the spoliator, or in the most severe of cases dismiss the entire action. The ultimate decision of whether and how to sanction a party rests within the sound discretion of the trial court. Eichman, et al. v. McKeon, et al., 824 A.2d 305 (Pa. Super. 2003).
In determining the appropriate sanction, Pennsylvania courts consider three key elements:
- the degree of fault of the spoliator;
- the degree of prejudice suffered by the opposing party; and
- whether a lesser sanction than dismissal will avoid unfairness and deter such future conduct.
The Courts goal is to achieve accuracy at trial, punish the spoliator, and compensate the victims. Schroeder v. DOT, 710 A.2d 23 (Pa. 1998).
When examining fault, the Court imposes a general duty to preserve relative evidence when the spoliator knows litigation is likely and when it is foreseeable that discarding the evidence would prejudice the opposing party. Secondly, the Court will look for the presence or absence of good faith, not necessarily for the presence of bad faith.
The Courts have held that prejudice to the opposing party is less severe: (1) when alternative causes of the loss are speculative; (2) when an independent third party, such as a fire marshal, investigates the loss thus mooting the defendant’s need to rely solely on the plaintiff’s investigation; and (3) in design defect cases, because products with identical designs are easily attainable for examination.
Generally Courts should select the least onerous sanctions that are commensurate with the spoliator’s fault and the opposition’s prejudice. Where fault and prejudice are not severe, dismissal of the entire action is rarely appropriate. Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 73 (3rd Cir. Pa. 1994).
To guard against spoliation, it is recommended to our clients to have a third party perform the site investigation when possible. When practical, we recommend preserving all possible causes of the loss until causes can be conclusively ruled out or the opposition stipulates in writing to the items disposal. Lastly, when scheduling and conducting a loss clean up, remain in contact with the opposition to insure against the unilateral discarding of relevant evidence and ward off claims of bad faith.