Friday, May 16, 2014

U.S. District Court holds no bad faith sanctions in subrogation action where insured spoliated evidence

Fireman's Fund Insurance Company brought a products liability subrogation action against Bradford-White Corporation.  It alleged that a design defect in a water heater manufactured by Bradford White caused a leak that damaged the property of its insured, Bell Partners, Inc. 

After the leak was discovered, Fireman's requested that Bell retain the subject water heater.  However, Bell disposed of the water heater without contacting Fireman's and before Bradford-White had an opportunity to inspect or test it. 

Fireman's expert asserted that other water heaters in the same building were similar to the subject water heater.  Bradford-White contested that, arguing that they were manufactured earlier and kept in outside closets instead of inside closets. 

Bradford-White moved that the case against it be dismissed on the ground of spoliation of evidence, or, at the least, that the court preclude Fireman's from arguing at trial that any evidence or test results obtained from the other supposedly similar water heaters is relevant to the condition of the subject heater.

In Fireman's Fund Ins. Co. v. Bradford-White Corp., 2014 WL 1515266 (D. Mass.), the United States District Court for the District of Massachusetts held that Fireman's Fund did not act in bad faith.  It had asked Bell to retain the heaters and Bell did not contact it before removing the heater.  Fireman's failure to take additional steps to secure the heater was at most negligent.  The court held that the appropriate spoliation sanction is an instruction to the jury that it may draw a spoliation inference against Fireman's Fund. 

The court utilized a straightforward spoliation analysis.  I was surprised that it did not address an argument that an inference can be drawn against Fireman's Fund because as the subrogee of Bell it stands in Bell's shoes.  If Bell had brought its own claim against Bradford-White, would the court have analyzed the sanctions differently?  I don't know offhand if there are any Massachusetts decisions on the issue, but it is certainly where I would have started. 

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