It’s summer, and that means barbeques, vacations, and fireworks. Despite increasing safety measures, fireworks continue to result in conflagrations. Fires continue to be the cause of the largest property losses in the United States. The Consumer Product Safety Commission reported a $7.05 billion property loss from fires over the three year period 2009-2011. There was actually an increase in the number of reported fires from 357,000 to 365,500 during this same time.
But despite the risks, we love our fireworks. Annual fireworks revenue is estimated at $940 million, and the National Fire Protection Association says that more than 19,000 fires occur annually from their misuse. On July 4, fireworks account for two out of five of all reported fires.
When it comes to fireworks, humans have a nearly infinite incapacity to cause mayhem. For example, in Alvarado et al. v. Sersch, a fire was started when a cleaning service at a student apartment used a firework that the plaintiff claimed looked like a candle to start a gas stove for cleaning.
Evidence preservation resulting from fires caused by fireworks is as critical as with other fires. Failure to preserve key evidence can result in serious obstacles for a subrogation claim. Such fires can pose unique challenges—imagine a neighborhood fire where several different homeowners were setting off fireworks—but the general principles concerning evidence preservation remain. What follows is an overview of key evidence preservation tips and highlights of what can happen when that evidence is not preserved.
Preservation Priority
It is important to understand that without key evidence, an insurer will have no basis for a subrogation case. Thus, if steps are not taken to preserve evidence immediately, your rights can be compromised severely. A failure to preserve key evidence can lead to sanctions in lawsuits and, in severe cases, dismissal of claims.
Each state differs on the particular rules concerning evidence preservation and sanctions for failing to do so. Some have statutes that govern; others have an independent tort claim for spoliation of evidence (e.g., Alabama, Alaska, Florida, Indiana, Louisiana, Montana, New Mexico, Ohio, and West Virginia). But virtually every state recognizes a defense or sanction in cases where evidence is altered or destroyed.
Sanctions include evidence preclusion, adverse inferences, grants of summary judgment, and dismissal. The severity of sanction can depend on whether there was evidence that a plaintiff was negligent, engaged in intentional conduct, or had improper motives. For instance, in Miller v. Montgomery County, unexplained or intentional destruction of evidence gave rise to an inference that such evidence was unfavorable to the party who destroyed it. In Nally v. Volkswagen of America Inc., preclusion of expert testimony was allowed where the plaintiff’s expert failed to preserve and conducted destructive testing on key evidence.
Sanctions can be imposed if spoliation occurred before a case begins. One critical test is whether the litigant knows or has reason to know that evidence would be used in litigation. This test is critical in fire cases, as causation is always an issue.
An example of a severe sanction where case dismissal was upheld is New York Central Mutual Fire Ins. Co. v. Turnerson’s Elec. Co. In this case, the fire was so severe that the fire department could not determine the cause. A private investigator, who apparently had limited training in fire analysis, removed an electrical circuit box and issued a report stating that it was the origin of the fire. However, the investigator destroyed the electrical panel apparently at the instruction of the claims examiner. Not surprisingly, the defendant’s summary judgment motion was granted based on the claim that a key piece of evidence was destroyed before the defendant had an opportunity to inspect or test it.
Another case where the plaintiff’s case was dismissed is Erie Insurance Exchange v. Davenport Insulation, in which a fire originated in a fireplace. When firefighters were at the house, the fireplace was substantially torn up and debris was scattered throughout house. The key piece of evidence, the firebox, was put in the master bedroom. The record demonstrated, however, that the insurer did not take steps to preserve evidence and did not send notice to the contractor who installed the fireplace until one year after house was repaired.
In this case, there were three different experts, each with a different potential cause of fire. The eventual theory settled on was that the firebox installers omitted a safety strip that would have protected the wooden framing from embers. But because that fireplace was destroyed after the fire, there was no evidence whether or not the metal safety strip was installed. Other case evidence showed that the fire inspector had signed off on construction, and that the family used the fireplace for five years without incident. Further, the subcontractor’s employee said he always installed the metal strip.
The court found that the insurer had the means to identify the subcontractor, so there was no excuse for the long delay in notifying the parties. As the insurer’s experts were careful with scene evidence, the court found that they were thus aware of a possible subrogation target. No independent third party investigated the fire, and the only record was that of the insurer’s agents. In these circumstances, the court found that the defendant’s rights and ability to defend itself had been severely prejudiced and compromised, and it granted the defendant’s summary judgment motion.
Several tests have been articulated by courts concerning sanctions when key evidence is destroyed. Silvestri v. General Motors Corp. articulated the test for spoliation: Was loss of evidence so prejudicial that the defendant couldn’t defend claim? Was the spoiler’s conduct such that a claim dismissal is an appropriate remedy?
If evidence is altered or destroyed, all may not be lost. Schmid v. Milwaukee Electric Tools Corp. discussed the degree of fault and prejudice suffered in such circumstances. The court stated that the inquiry should be whether there is a lesser sanction that will avoid substantial unfairness and will serve to deter conduct where the offending party is at fault. If there is, a dismissal can be avoided.
It is critical to understand that whoever is in control of the scene must take all reasonable steps to preserve critical evidence commensurate with that party’s expertise and resources, as shown in American States Ins. Co. v. Tokai-Seiki (HK) Ltd. Fortunately, there are guidelines such as those found at the National Fire Protection Association (NFPA), nfpa.org.
For example, in the 2011 edition of NFPA 921: Guide for Fire and Explosion Investigations, section 9.3.6.1, spoliation of evidence refers to the loss, destruction, or material alteration of an object or document that is evidence or potential evidence in a legal proceeding by one who has the responsibility for its preservation. Spoliation of evidence may occur when the movement, change, or destruction of evidence or the alteration of the scene significantly impairs the opportunity of other interested parties to obtain the same evidentiary value from the evidence, as did any prior investigator. Section 9.3.6.7 also provides the following:
Once evidence has been removed from the scene, it should be maintained and not destroyed or altered until others who have a reasonable interest in the matter have been notified. Any destructive testing or destructive examination of the evidence that may be necessary should occur only after all reasonably known parties have been notified in advance and given the opportunity to participate in or observe the testing. Guidance regarding notification can be found in ASTM E860, Standard Practice for Examining Items That Are or May Become Involved in Products Liability Litigation, and ASTM E1188, Standard Practice for Collection and Preservation of Information and Physical Items by a Technical Investigator. Guidance for labeling of evidence can be found in ASTM E1459, Standard Guide for Physical Evidence Labeling and Related Documentation.”
For commercial fireworks, NFPA 1123 outlines a code for fireworks displays that provides guidelines on construction; handling and use of fireworks and related equipment; and recommended permit regulations.
Squelching the Fire
While these guides and publications provide protocols for evidence examination and preservation, adjuster training also is critical because they make key decisions in the field. Training should be viewed as an investment, and every insurer should have established spoliation policies, procedures, and provide education for its claims representatives. These policies should be reviewed annually and updated regularly, particularly following a loss that maybe contained some “lessons learned” in the handling of the claim.
Some key issues to consider in any fire investigation are who is in control of the site; how to follow official investigation protocols; preservation of key evidence; and meeting with counsel to set up a preservation plan. Notice to all potential parties needs to be done as soon as possible by certified mail and email. Any calls must be followed up with written notification; otherwise there is no record of when notification or instructions were given.
Other key considerations include understanding who controls the evidence and taking steps to notify and preserve, such as in instances when the property owner isn’t the insured. One can—and sometimes must—offer to preserve evidence and store it in a secure facility. If necessary, one can take court action to preserve evidence. For example, if there is a commercial building that local officials want to tear down but you need to have inspected before that occurs, you can seek court relief.
If a third party holds evidence, consider seeking injunctive relief to preserve that evidence. Always try to photograph or videotape key evidence in its original state. If, for example, a building’s destruction is imminent, notify potential parties so that they can have opportunities to inspect, photograph, or videotape the scene. If there is any testing of materials, there must be notification, protocols, and agreed-upon procedures in writing. There always is the option to seek court relief, if necessary, for testing and procedures.
As seen from the discussion above, evidence presentation in fire cases is critical, and is especially true in fireworks cases. The origin of the firework, where it was ignited and by whom and under what conditions often plays a crucial role in these types of cases. By following the steps and suggestions outlined, insurers can preserve and help enhance their subrogation rights.