Issues of Interest

We would like to highlight an accelerating trend in Illinois law on the duty to preserve evidence that may significantly impact pre-litigation handling of claims, and ultimately affect trial outcomes.

Spoliation of Evidence

The issue was first ruled upon by the Illinois Appellate Court in 1988 in Graves v. Daley, 172 Ill.App.3d 35, 526 N.E.2d 679, but had not received Supreme Court attention until ten years later. The courts have since increasingly affirmed a duty of a potential litigant-plaintiff, defendant, or party to a third-party contribution action-to preserve evidence for adequate inspection. As a result, critical decisions regarding inspection and preservation of evidence must be taken at the outset of claims investigation, and insureds clearly instructed that their duty to cooperate includes preservation.

Graves v. Daley concerned removal and destruction of a home furnace which had been fully investigated by the fire marshall and homeowner's insurance company. Suit had not been filed when the fire debris was removed, so no court order requiring preservation was in place. Nonetheless, the product liability defendant manufacturer and installers successfully argued that their inability to inspect the furnace prejudiced their defense, and were granted a discovery sanction barring all evidence regarding the condition of the furnace.

Other cases following the Graves rationale include American Family Ins. Co. v. Village Pontiac GMC, Inc., 223 Ill.App.3d, 585 N.E.2d 1115 (2d Dist. 1992) (sanction barring evidence of condition of automobile, alleged to have been cause of house fire, upheld where insurer transferred title to salvage company that destroyed car seven months after occurrence); but see, Thomas v. Bombadier-Rotax Motorenfabrik, GmbH, 869 F.Supp. 551 (N.D. IL 1994) (applying Illinois law under diversity, repair of ultralight aircraft engine and scrapping of other parts did not justify sanction of barring evidence relating to engine condition, where defendant dealer recommended engine be returned to dealer for inspection and repair, plaintiff never had inspection performed by expert, and there was no evidence of bad faith by plaintiff).

The Illinois Supreme Court, citing with approval Graves v. Daley, found that rulings by the Appellate Courts had properly elucidated a general duty by potential litigants "to take reasonable measures to preserve the integrity of relevant and material evidence." Shimanovsky v. General Motors Corp., 181 Ill.2d 112, 692 N.E.2d 286 (1998). That case involved destructive testing on a steering mechanism. Factors to be applied by the trial judge when considering imposition of discovery sanctions include: 1) surprise to the adverse party; 2) prejudicial effect; 3) the nature of the evidence; 4) diligence of the adverse party seeking discovery; 5) the timeliness of the adverse party's objection to the evidence; and 6) good faith of the party offering the evidence. 181 Ill.2d at 124, 692 N.E.2d 290. The opinion went on to balance the various factors, ultimately determining that the defendants had not sufficiently demonstrated diligence and likely prejudice, to justify a sanction of completely barring evidence of the condition of the power steering mechanism.

Extending the duty to preserve evidence, Illinois courts now allow claims that violation of that duty can support a negligence action on the ground of spoliation. E.g., Stinnes Corp. v. Kerr-McGee Coal Corp., 309 Ill.App.3d 707, 722 N.E.2d 1167 (5th Dist. 1999; reh'g den. Jan. 27, 2000). Citing the Supreme Court's treatment of the claim raised in Boyd v. Travelers Ins. Co., 166 Ill.2d 188, 652 N.E.2d 267 (1995), the Stinnes opinion assumes the existence of a duty to use due care to preserve evidence (accepting as true allegations that Kerr-McGee had a policy to identify and preserve machinery involved in employee accidents), and allowed as sufficiently plead allegations that the employer mine operator reasonably should have known that the component parts would be evidence material to future litigation. The court rejected the employer's argument that it had no pre-accident relationship with the manufacturer, citing the Supreme Court's use of "potential litigant" language in Shimanovsky. 722 N.E.2d at 1173.

Thus, the equipment manufacturer, which had reached a settlement in a product liability suit by the injured employee, was able to maintain a third-party action against the employer for the full amount of its contribution to the settlement, above and beyond the employer's worker's compensation lien, which otherwise would have to have been brought as a contribution action and been limited under the Kotecki doctrine (Kotecki v. Cyclops Welding Corp., 146 Ill.2d 155, 585 N.E.2d 1023 (1991). Rejecting the employer's argument that its liability was limited, the Stinnes court stated "Kotecki is inapplicable to the facts of this case, however, because the alleged negligent spoliation of evidence is separate from the personal injury suit brought by [the employees] for the injuries they sustained in the coal-mining vehicle accident." 722 N.E.2d at 1175. No petition for leave to appeal to the Supreme Court has been filed.

Analysis

Failure to properly preserve evidence can expose the insured to a range of sanctions just as any other discovery violation. Depending upon the factual scenario, the more critical inspection of evidence is-that it be in the same state as existed immediately post-occurrence, without modification or destructive testing-the more severe the likely sanctions. In an appropriate case, where the identities of potential litigants is clear, the insured's case may receive strong immunization by providing notice to other potential litigants and their representatives of inspections and tests which they are invited to participate in or observe.

From the opposite perspective, these cases strongly support your documented request on behalf of a potential litigant insured for rapid access to relevant evidence upon first notification of a claim, prior to suit. Doing so will not only preclude a future claim of the potential litigant's lack of diligence, but also provide evidence regarding the parties' good faith (or lack thereof).

Illinois courts now seem ready and willing to uphold a full range of sanctions, including obliterating an employer'sthird-party contribution protection under Kotecki .

Claim Investigation Recommendations

Whether your client is a potential plaintiff, defendant, or third-party contribution party, from our perspective as trial and appellate counsel we are of the opinion that under Illinois law, the client must be clearly and immediately instructed at the initial claim investigation stage regarding the need to preserve evidence. This may raise questions of practicality, particularly for situations involving investigations or orders by legal authorities, equipment or facilities that are intended to be returned to use after repair or renovation, or possible long-term storage while litigation remains viable.