Although SafetyFirst has authored articles about spoliation over the past several years (Here) and (Here), this topic has been making the rounds of insurance carrier discussions lately.
Spoliation of evidence is a fancy term for failing to safeguard information, documents, electronic data or other evidence that would (or could) be material to a lawsuit.
For example, you are suing a manufacturer for a defective product that injured you. They have “misplaced” or “lost” key quality control documents, inspection records and data on how the product had been tested to minimize those safety issues that might have prevented your injury. You don’t know if they purposely destroyed the documents to cover up their own negligence or if they just made mistakes with their own document retention policy. In court, a claim that they mis-handled the evidence, especially after becoming aware of your injury and/or lawsuit, could lead to serious consequences. The judge could order any prospective jurors to assume the worst — that the missing evidence was damning to their case and would have proven our case that the injury was the fault of the defective product.
In this recent article — Risk Managers: Spoliation Prevention has Insurance Underwriting Implications, too! (LINK) the author asserts that companies with strong record retention policies and well-defined filing programs can help build a strong defense when claims arise. It’s better (in most cases) to argue the claim from a factual basis — knowing all of the relevant facts instead of trying to dispose of data (electronic or paper).
From the article:
Dollars are dollars, and they can balloon an account’s loss ratio if the company must spend an inordinate amount of money because it is unprepared for electronic discovery, or has spoliation of evidence issues posed against it. These dollars can balloon an account’s loss ratio which, in turn, may impact the availability and pricing of financial protection in the form of product liability insurance. [or other forms of liability insurance like Commercial Vehicle coverage, too]
The takeaway, therefore, is that companies with strong e-discovery, document- and evidence retention systems represent better risks. They have their proverbial “act together,” to put it in street lingo.
One way to do this is to strengthen the company’s document preservation and spoliation prevention systems and to be able to present a compelling case to insurance underwriters that the risk manager’s company is a sound risk for the underwriter and insurance company. Underwriters are the gatekeepers who determine whether or not a company represents an acceptable risk and at what price.
Thus, we can increasingly expect insurers to probe and ask about systems that facilitate efficient e-discovery, thwart spoliation and maximize retention of evidence.
This will be part of any insurance company’s due diligence process in assessing the fitness and desirability of an account for insurance placement or renewal. Questions about document preservation systems and e-discovery preparedness could be on the insurance application, could surface in pre-underwriting reviews, or arise during discussions with underwriters.
The very best defense against lawsuits is to avoid crashes and injuries in the first place. Unfortunately, and despite everyone’s best intentions, crashes may occur. In that event, preserving relevant data about the driver’s qualifications, regulatory compliance status, moving violations and crash history (among other things) may be critical to mounting an appropriate good faith defense.
Check with your attorney, claims team, or insurance safety professional to learn more about how to protect your company’s specific interests.
Disclaimer: SafetyFirst and the author of this article are not legal specialists or experts. We are not attorneys and can not offer legal advice. This article (or any associated/referenced articles by SafetyFirst and it’s staff) merely discusses a general topic and is not intended as specific advice on how to prepare for litigation or any other purpose.
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