Can I Salvage This Situation?! An Insurer’s Duty to Maintain (or Not) a Total Loss Vehicle as Evidence
Insurers in possession of a total-loss vehicle that has evidentiary value in potential litigation may wonder if and for how long they must maintain the vehicle before pursuing salvage. As with most legal questions, the answer is “it depends.” State laws vary widely with respect to an insurer’s duty to maintain potential evidence. In some cases, if an insurer does not maintain a total loss vehicle as evidence, that failure may expose the insured to a spoliation claim (spoliation is, briefly, the destruction or alteration of evidence resulting from a party’s failure to preserve evidence relevant to a litigation or investigation). Some states also recognize a cause of action for third-party spoliation, when the alleged spoliation occurs at the hands of a third-party instead of one of the parties involved in the dispute, in which case the insurer also may be exposed to alleged spoliation.
Illinois courts, for example, recognize an independent cause of action for negligent spoliation. See, e.g., Boyd v. Travelers Ins. Co., 166 Ill. 2d 188, 193 (1995). In Boyd, a heater exploded causing personal injury and other damage. Two days after the explosion, the heater at issue was relinquished to two Travelers employees who were investigating a workers’ compensation claim. The heater later could not be located. The Boyd Court found plaintiff properly pleaded a third-party spoliation claim against Travelers that was akin to negligence—meaning that plaintiff properly alleged that Travelers had a duty to maintain the evidence, and Travelers breached that duty, causing plaintiff to be unable to prove his underlying claim against the heater manufacturer.
In contrast, Michigan does not recognize an independent tort claim for spoliation of evidence against a third party. See, e.g., Teel v. Meredith, 284 Mich. App. 660, 661, 774 N.W.2d 527, 528 (2009) (finding no cause of action existed against insurer that sent a representative to inspect scene of a deadly fire and removed certain items, allegedly spoliating evidence concerning the origin and cause of the fire and affecting plaintiff’s ability to bring, and succeed in, litigation relating to the fire).
Different still, New York courts have held that, while an insurer does have an obligation to preserve evidence, that obligation is not indefinite. Once all interested parties have the opportunity to inspect the evidence, it can be disposed, regardless of whether the parties have actually conducted an inspection. Sterbenz v. Attina, 205 F. Supp. 2d 65, 72–73 (E.D.N.Y. 2002) (finding no spoliation on the part of the insurer after it notified counsel where the vehicle was located for purposes of inspection and waited three months before disposing of the vehicle); see also Allstate Ins. Co. v. Hamilton Beach/Proctor Silex, Inc., 473 F. 3d 450, 457 (2d Cir. 2007) (holding that insurers did not engage in spoliation by discarding range and range hood where manufacturer affirmatively disclaimed any interest in range and range hood after having been provided full opportunity to inspect those items).
In addition to maintaining the physical vehicle where necessary, insurers should include data and data storage devices in any preservation hold. Autonomous vehicles and ADAS-equipped vehicles generate vast amounts of data that can tell the story of a crash event—a story in which all parties to a dispute no doubt have an interest. This data may be transmitted to a cloud, but also may be captured locally on an SD card or other device, as well as via original or after-market cameras. Where litigation is a possibility, insurers in possession of a total loss vehicle should endeavor to maintain these items along with the actual vehicle as potential evidence.
Copyright Nelson Niehaus LLC
The opinions expressed in this blog are those of the author(s) and do not necessarily reflect the views of the Firm, its clients, or any of its or their respective affiliates. This blog post is for general information purposes and is not intended to be and should not be taken as legal advice.