below, potential litigants have a duty to preserve relevant
evidence. Insurance carriers, as sophisticated entities, arguably
have an even higher burden of evidence preservation - both as to the
cause of the loss and as to retention of damaged property. On the
other hand, properly documenting your file with requests for
retention of all potentially relevant evidence will become an asset
in the event evidence is lost. Significant sanctions can be imposed
by courts against parties that lose or destroy evidence.
This article will look at the parameters of the duty
to preserve evidence followed by a short discussion of the potential
discovery sanctions for failure to preserve the evidence. There will
then be a discussion of the factors a court considers when
fashioning a sanction and an illustration of the sanctions at issue
using a party's failure to retain damaged personal property.
"Spoliation of evidence" refers to the destruction
or loss of relevant evidence by a party, or potential party, to
litigation. Hoffman v. Ford Motor Co., 587 N.W.2d 66, 71
(Minn.1998). A litigant's duty is to preserve evidence which it
knows, or reasonably should know, is relevant. Fire Insurance
Exchange v. Zenith Radio Corporation, 747 P.2d 911, 914
(Nev.1987). The duty arises as soon as a potential claim is
identified and there is foreseeable harm if relevant evidence is
lost or destroyed. Baliotis v. McNeil, 870 F.Supp. 1285, 1290
(M.D.Pa.1994). Notably for insurance carriers, sophisticated
litigants are held to an even higher standard commensurate with
their experience and expertise. Baliotis, 870 F.Supp. at
1292-93; Allstate Insurance Co. v. Sunbeam Corp., 865 F.Supp.
1267, 1278 (N.D. Ill. 1994).
Courts may impose sanctions for the spoliation of
evidence pursuant to their inherent power to "manage their own
affairs so as to achieve the orderly and expeditious disposition of
cases." Chambers v. NASCO, Inc., 501 U.S. 32, 43, reh'g
denied, 501 U.S. 1269 (1991); Campbell Indus. v. M/V Gemini,
619 F.2d 25, 27 (9th Cir. 1980); see also Unigard Sec. Ins.
Co. v. Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir.
Courts may sanction parties who are responsible for
spoliation in at least three different ways. First, a court can
instruct the jury that it may draw an inference adverse to the party
or witness responsible for destroying the evidence. Glover v. BIC
Corp., 6 F.3d 1318, 1329 (9th Cir. 1993). Second, a court may
exclude witness testimony proffered by the responsible party that
was based on the destroyed evidence. Glover, supra, at 1329. Finally
a court may dismiss part or all of a claim that is premised on the spoliated evidence.
Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804,
806-07 (7th Cir. 1995). It is important to know that courts are
required to give due consideration to the less drastic sanctions,
such as an adverse inference instruction. Halaco Engineering Co. v.
Costle, 843 F.2d 376, 381 (9th Cir. 1988), Therefore, the adverse
inference instruction is the remedy that is most likely to be seen
Parties have an affirmative duty to preserve
relevant evidence within their control, and the appropriate
sanctions for a violation of this duty vary depending on the
importance of the evidence, the degree of fault attributable to the
responsible party and the amount of prejudice to the non-responsible
party. Souza v. Fred Carries Contracts, Inc., 191 Ariz. 247, 250-51,
955 P.2d 3, 6-7 (App. 1997); American States Ins. Co. v.
Tokei-Seiki, Ltd., 704 N.E.2d 1280, 1283 (Ohio 1997). A party's
destruction of evidence need not be in "bad faith" to warrant
sanctions; rather, courts may sanction litigants for willfulness,
fault, or merely by having notice that the destroyed evidence was
potentially relevant to litigation. Unigard Sec. Ins. Co. v.
Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368 (9th Cir. 1992).
Although the finding of fault alone can justify dismissal, Halaco
Engineering Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988), a
finding of bad faith is not required in order to impose the sanction
of dismissal or exclusion of evidence. Unigard, 982 F.2d at 368.
The adverse inference instruction is based on both
evidentiary and prophylactic rationales. Akiona v. United States,
938 F.2d 158, 161 (9th Cir. 1991). The evidentiary rationale is
nothing more than the common sense observation that a party who
destroys relevant evidence is more likely threatened by the
evidence. Id. The intended prophylactic and punitive effects are
accomplished by deterring others in similar situations from
destroying evidence. Id.
The adverse inference jury instruction would look
something like this:
Plaintiff had a duty to preserve evidence, or to
inform Defendant before it destroyed, or allowed the destruction, of
Plaintiff allowed the destruction of evidence
without allowing Defendant an opportunity for reasonable inspection
of the evidence.
This Court has already determined that Plaintiff
breached its duty to preserve evidence.
You may infer that the evidence, if preserved, would
be unfavorable to Plaintiff.
The usual measure of damages to personal property is
the lesser of the cost to repair or replace. Valley Transportation
System v. Reinartz, 67 Ariz. 380, 383-84, 197 P.2d 269, 271 (1948);
Reckert v. Avra Valley Air, Inc., 19 Ariz.App. 538, 540, 509 P.2d
231, 233 (App. 1973). Personal property is often just that:
personal. It is difficult to ascertain its value - and whether it
can be economically repaired - without viewing the evidence.
Therefore, items damaged in a water loss should be preserved so as
to allow the other side to appraise the property and evaluate the
damages. By failing to give the other side this access, one runs the
risk of sanctions for the spoliation of evidence.
Similarly, when investigating the scene of a loss,
if the adverse party is not available, the utmost care should be
taken to properly document, photograph and videotape the scene so as
to provide as much evidence as possible. Being over-inclusive in
evidence preservation, documentation and providing a thorough and
careful chain-of-custody will help an insurance carrier avoid such
sanctions. Likewise, insureds should be put on notice of their
duties so as to provide spoliation defenses should litigation become
This article was published in the Spring 2007 NSPII Newsletter.