Spoliation of Evidence in Construction Defect Claims

In defending construction defect claims, one must always consider the defense of spoliation of evidence.  Often, either before or after making such calims, plaintiffs will repair the alleged defective condition, destroying crucial evidence that must be analyzed by the defense.  The law requires that the plaintiff give notice to the defendant of anticipated repairs, providing him with an opportunity to inspect the alleged defcts.  When notice is not given, sanctions, including dismissal in some cases, are available.

The Alabama Supreme Court has held that when the subject of the lawsuit is destroyed without giving the defense an opportunity to inspect, and that inspection is necessary to the defense, the lawsuit must be dismissed. Capitol Chevrolet Inc. v. Smedley, 614 So.2d 439 (Ala. 1993); Cincinnati Ins. Co. v. Synergy Gas, Inc, 585 So.2d 822, 827 (Ala. 1991); Ex parte General Motors Corp, 769 So.2d 903 (Ala. 1989).

In Smedley, the Court reversed the trial court’s judgment and ordered that the case be dismissed based on spoliation. The Court recognized that without access to the evidence, to independently evaluate the cause of the fire, the defendants were left with no way to establish a defense. Acknowledging that dismissal was a severe sanction, the Court held that the dismissal of claims may be appropriate if a party destroys or disposes of evidence that it knows or should know is evidence that is important to possible or pending litigation.

The Court has identified five factors to be analyzed in deciding the appropriate remedy for spoliation of evidence: (1) the importance of the evidence destroyed; (2) the culpability of the defending party; (3) fundamental fairness, (4) alternative sources of information obtainable from the evidence destroyed, and (5) the possible effectiveness of other sanctions less severe than dismissal. Vesta Fire Ins. Corp. v. Milam & Co. Constr., Inc., 901 So.2d 84 (Ala. 2004).

In Story v. RAJ Properties, Inc., 909 So.2d 797 (Ala. 2005), the Court affirmed summary judgment in favor of a builder, EIFS installer, and EIFS manufacuturer where the plaintiff homeowner had removed the EIFS form the home, repaired the damaged sheathing, and reclad the home with brick.  The defendants were not notified, and their experts testified that they were unable to conduct any significant analysis of the EIFS material or the alleged damage by viewing photographs produced by the plaintiff.

In Flury v. Daimler Chrysler Corp., 427 F.3d 939 (11th Cir. 2005) the 11th Circuit Court of Appeals reversed a jury’s verdict against Daimler with instructions that the district court enter judgment for Daimler based on the spoliation of evidence doctrine. In doing so, the Court noted that the defendant had suffered extreme prejudice when it lost its opportunity to inspect the evidence; that the trial court had erred in leaving the issue of spoliation for the jury and that the “spoliation of critical evidence for whatever reason … may result in trial by ambush.”

Sotomayor’s History Includes Decisions Favoring Insurers

Much has been written about Second Circuit Judge and Supreme Court nominee Sonia Sotomayor and her judicial history, most of which seeks to provide some insight into her future rulings on abortion, gun control, and other constitutional issues.  Philildelphia lawyer Randy Maniloff, however, has taken the time to research her past decisions as they relate to coverage issues, and finds that “her decisions have overwhelmingly been in favor of insurers.”  Read about it in Randy’s newsletter.

An Accident or an Indictment of the Industry?

Trucking accidents always present obstacles for the defense. The sheer physics involved often create situations involving serious injuries and fatalities. Couple the likely damages involved with the fact that there is a natural prejudice among the vast majority of the jury pool, and defending carriers and their drivers is frequently an uphill battle, to say the least.

With that said, it is without question that one of the major questions that absolutely must be addressed is that of collateral issues such as negligent entrustment and negligent supervision. Most of the lawsuits that I have defended contain these claims, in addition to simple negligence and wantonness claims against the driver and carrier.

The laws of evidence generally will prohibit the plaintiff from introducing evidence of past instances of negligent conduct committed by a defendant to show that he or she was negligent in the present lawsuit. However, if there is a viable claim that the owner of the vehicle negligently entrusted the truck to a driver, then the driver’s entire history can be admissible to prove that the owner should have known that the driver was incompetent, and therefore that the owner’s negligence in entrusting the truck to the driver was an additional cause of the accident.

Although such a claim theoretically does not create additional damages for plaintiffs, it can turn an otherwise straightforward accident into an indictment of the trucking industry, by allowing a plaintiff’s attorney to grandstand about the driver’s history, rather than the subject accident. It is therefore crucial that a driver’s history must be explored early in the litigation, and if possible, these issues must be addressed in a motion for summary judgment or for partial summary judgment.

Here in Alabama, the Supreme Court has made it clear that it is “essential that the plaintiff prove that the driver was incompetent, i.e., that he is likely because of his youth, inexperience or other wise to use [the vehicle] in a manner involving unreasonable risk of physical harm to himself and others.”  Reeves v. King, 534 So. 2d 1107, 1108 (Ala. 1988). In addition to proving that the driver was incompetent, the plaintiff must also prove that the owner knew (or that given the negative history, should have known) that he or she was incompetent. If the driver’s history is relatively good, then most judges will, understanding how evidence of prior violations and accidents will prejudice a jury, dismiss the collateral claims.

It should be noted that, at least in Alabama, a spotless history is not required.  In Pryor v. Brown & Root USA, Inc., 674 So. 2d 45 (Ala. 1995). The Supreme Court considered a situation in which a personal injury action was brought against an employer in connection with an accident occurring after its employee left work but was driving the employers vehicle. The Court found that the employee had been charged with DUI in another state, and had received two speeding tickets. In affirming summary judgment in favor of the employer on a claim of negligent entrustment, the Court found that the employee’s past driving record was not sufficient to support the claim.

Likewise, in Thedford v. Payne, 813 So. 2d 905 (Ala. Civ. App. 2001), the Court of Civil Appeals considered a case in which a passenger brought an action against the driver and his mother. In reversing the trial court’s judgment on the negligent entrustment claim, the Court held that evidence showing that the driver, who had only been driving for one year prior to the accident, and had been involved in a similar accident some three months prior to the subject accident, was not sufficient proof of negligent entrustment, and that the trial Court aired in submitting the plaintiff’s claims to the jury.

In the absence of these collateral issues, it is unlikely rhat evidence of past conduct will be admitted.  However, failing to appreciate the danger that these issues raise in the defense of trucking lawsuits can place the client at a definite disadventage.

Alabama Supreme Court Clarifies Rules for Permissive Intervention

Last week, the Alabama Supreme Court upheld a trial court’s denial of a carrier’s motion for permissive intervention in a Mobile construction defect lawsuit.  As is common, the carrier had asked the trial court for permission to participate in discovery and issue special verdict forms to the jury in the event of a verdict in favor of the plaintiff.

In affirming the trial court’s denial, the Court, in QBE Insurance Corp. v. Austin Co., Inc., ___ So.2d ___ (Ala. 2009), held that the decision whether to grant or deny a motion to intervene was within the discretion of the trial judge, and adopted the 11th Circuit’s factors for making that determination:

(1) The length of time during which the would-be intervenor knew or reasonably should have known of his interest in the case before he petitioned for leave to intervene; (2) the extent of prejudice to the existing parties as a result of the would-be intervenor’s failure to apply as soon as he knew or reasonably should have known of his interest; (3) the extent of prejudice to the would-be intervenor if his petition is denied; and (4) the existence of unusual circumstances militating either for or against a determination that the application is timely.  U.S. v. Jefferson County, 720 F.2d 1511 (11th Cir. 1983).

In QBE, the Court noted that the motion was not filed until 16 months after the complaint was filed, that 17 parties were already involved in the litigation, and that discovery had nearly been completed.  Further, the Court held that QBE’s rights would not be prejudiced by the denial, as it could file a declaratory judgment action to determine any coverage issues.

Insured Not “Legally Entitled to Recover” UM Benefits

The Alabama Supreme Court recently held that an insured was barred from maintianing a claim for uninsured/underinsured motorist benefits because she had not proven that she was “legally entitled to recover damages” from the underinsured motorist.  In Kendall v. United Services Automobile Association, ___So.2d___ (Ala. 2009), the plaintiff’s vehicle was struck by a vehicle operated by Angelia Mercer, an employee of the Elmore County District Attorney’s office, who was acting within the line and scope of her duty at the time of the accident.

The plaintiff filed suit against the County and her UIM carrier, USAA, alleging injuries which were undisputedly greater that $100,000.00.  The County, pursuant to Alabama law, is subject to a cap in the amount of “$100,000.00 for bodily injury or death for one person in any single occurrence.”  Code of Alabama, 1975, §11-93-2.  The County settled the claim in that amount, and the plaintiff proceeded against USAA for her UIM limits of $75,000.00.

The Alabama UM/UIM statute provides for the payment of benefits to insureds under motor vehicle liability policies “for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom….”  Code of Alabama, 1975, §32-7-23(a).

In affirming summary judgment for the carrier, the Court held that because of the $100,000.00 cap, the plaintiff was not “legally entitled to recover” any amount in excesss of that amount from the county, and therefore that USAA was not liable under the policy.

iPhone as Grounds for New Trial

Several recent articles have discussed the new phenomenon of jurors use of the internet during trials on which they are empaneled.  With the prevalence of handheld mobile devices with internet capability, it is feasible to gather information regarding almost any subject from the jury room, or even the jury box. Furthermore, social networking site such as Twitter and Facebook allow jurors to post updates as a trial is ongoing.

Recently, the New York Times  reported that a Florida judge declared a mistrial in a criminal matter in which no less than nine jurors researched the case on the internet during trial.

Not content to let jurors have all the fun, a state special education hearing office was terminated for blogging about cases on her docket.  As Law.com  reported, the district court that heard her appeal “found that given her blog posts, which offered criticism about the school district and administrative policies, the hearing officer’s impartiality had come into question, prompting parties to request her recusal in multiple matters and causing disruption to the school district.”

Although Alabama courts have not yet taken up the issue of internet research or blogging during deliberations, several Supreme Court opinions would indicate that such conduct is improper.  First, regarding communications by jurors, to grant a new trial or mistrial, the court must find that “the conduct of the juror should be such as to indicate bias or corruption in the performance of his duty, or the circumstances should indicate that his misconduct influenced the verdict rendered.”  Carr v Irons,  259 So.2d 240 (Ala. 1972).  This rule could certainly apply to blogs, email, and postings on Twitter, Facebook, etc., if the communication is deemed to show bias or corruption.  Also troublesome is the potential for receiving comments or other feedback from the juror’s audience, and the potential that he or she will gain insight outside the evidence presented.

The second consideration is the possibility of jurors conducting their own research into the evidence.  Although this practice has long been improper, the advent of handheld technology has certainly created a new wrinkle, as jurors now have virtual libraries at their fingertips at all times.  Pursuant to Alabama law, jurors may not consider “extraneous facts,” defined as those “obtained by the jury or introduced to it by some process outside the scope of the trial.”  Sharrief v. Gerlach, 798 So.2d 646, 653 (Ala.2001).  In non-internet cases, the Supreme Court has determined that it is impermissible for jurors to define terms, particularly legal terms, by using a dictionary or encyclopedia.  See Fulton v. Callahan, 621 So.2d 1235 (Ala.1993); Pearson v. Fomby, 688 So.2d 239 (Ala.1997). Another example of juror misconduct leading to the introduction of extraneous facts sufficient to impeach a jury verdict is an unauthorized visit by jurors to the scene of an automobile accident, Whitten v. Allstate Ins. Co., 447 So.2d 655 (Ala.1984), or to the scene of a crime, Dawson v. State, 710 So.2d 472 (Ala.1997).

The following are contained in the Alabama Pattern Jury Instructions, and are currently given by Alabama judges:

APJI 1.11 Jurors Not to Discuss Case During Trial

Until this case is submitted to you for your deliberations, you must not discuss the case with anyone nor permit anyone to discuss the case with you or in your hearing. You are to keep an open mind and you shall neither discuss nor decide any issue in this case among yourselves until the case is submitted to you for your deliberations under the instructions of the Court.

If members of your family or friends or anyone else should ask you about the case, you should tell them that you are under the Court’s instruction not to discuss it. The attorneys, parties and witnesses are not permitted to talk to you during the trial. Even a discussion which has no relation to the case might give a bad appearance. If the participants in the trial fail to greet you or converse with you during this trial it will be due to this rule.

APJI 1.14 Jurors Should Not Make Any Investigation of Their Own During the Course of Trial

No juror should attempt to make an individual investigation of the facts or of the place testified about. It therefore follows that you are not authorized to gather evidence on your own account or on behalf of any of the parties to this case. You should not [visit the scene of the accident] [attempt to inspect or examine any object or property unless that object or property has been received in evidence and the inspection is made in the court room or in the jury room].

Some Alabama judges are beginning to modify the above instructions by specifically mentioning internet research.  Also, depending on the nature of the case, thought should be given to discussing the use of the internet, blogs and social networking during voir dire examination of the jury panel.  Hopefully, more specific instructional and discussion will serve to limit new trials and mistrials that result from such conduct.  However, we have probably only seen the beginning of a trend.

Several recent articles have discussed the new phenomenon of jurors’ use of the internet during trials on which they are empaneled.  With the prevalence of handheld mobile devices with internet capability, it is possible to gather information regarding almost any subject from the jury room, or even the jury box. Furthermore, social networking sites such as Twitter and Facebook allow jurors to post updates as a trial is ongoing.

Recently, the New York Times reported that a Florida judge declared a mistrial in a criminal matter in which no less than nine jurors had researched the case on the internet during trial.

Not content to let jurors have all the fun, a state special education hearing office was terminated for blogging about cases on her docket.  As Law.com reported, the district court that heard her appeal “found that given her blog posts, which offered criticism about the school district and administrative policies, the hearing officer’s impartiality had come into question, prompting parties to request her recusal in multiple matters and causing disruption to the school district.”

Although Alabama courts have not yet taken up the issue of internet research or blogging during deliberations, several Supreme Court opinions would indicate that such conduct is improper.  First, regarding communications by jurors, to grant a new trial or mistrial, the court must find that “the conduct of the juror should be such as to indicate bias or corruption in the performance of his duty, or the circumstances should indicate that his misconduct influenced the verdict rendered.”  Carr v Irons,  259 So.2d 240 (Ala. 1972).  This rule could certainly apply to blogs, email, and postings on Twitter, Facebook, etc., if the communication is deemed to show bias or corruption.  Also troublesome is the potential for receiving comments or other feedback from the juror’s audience, and the potential that he or she will gain insight outside the evidence presented.

The second consideration is the possibility of jurors conducting their own research into the evidence.  Although this practice has long been improper, the advent of handheld technology has certainly created a new wrinkle, as jurors now have virtual libraries at their fingertips at all times.  Pursuant to Alabama law, jurors may not consider “extraneous facts,” defined as those “obtained by the jury or introduced to it by some process outside the scope of the trial.”  Sharrief v. Gerlach, 798 So.2d 646, 653 (Ala.2001).  In non-internet cases, the Supreme Court has determined that it is impermissible for jurors to define terms, particularly legal terms, by using a dictionary or encyclopedia.  See Fulton v. Callahan, 621 So.2d 1235 (Ala.1993); Pearson v. Fomby, 688 So.2d 239 (Ala.1997). Another example of juror misconduct leading to the introduction of extraneous facts sufficient to impeach a jury verdict is an unauthorized visit by jurors to the scene of an automobile accident, Whitten v. Allstate Ins. Co., 447 So.2d 655 (Ala.1984), or to the scene of a crime, Dawson v. State, 710 So.2d 472 (Ala.1997).

The following are contained in the Alabama Pattern Jury Instructions, and are currently given by Alabama judges:

APJI 1.11 Jurors Not to Discuss Case During Trial

Until this case is submitted to you for your deliberations, you must not discuss the case with anyone nor permit anyone to discuss the case with you or in your hearing. You are to keep an open mind and you shall neither discuss nor decide any issue in this case among yourselves until the case is submitted to you for your deliberations under the instructions of the Court.

If members of your family or friends or anyone else should ask you about the case, you should tell them that you are under the Court’s instruction not to discuss it. The attorneys, parties and witnesses are not permitted to talk to you during the trial. Even a discussion which has no relation to the case might give a bad appearance. If the participants in the trial fail to greet you or converse with you during this trial it will be due to this rule.

APJI 1.14 Jurors Should Not Make Any Investigation of Their Own During the Course of Trial

No juror should attempt to make an individual investigation of the facts or of the place testified about. It therefore follows that you are not authorized to gather evidence on your own account or on behalf of any of the parties to this case. You should not [visit the scene of the accident] [attempt to inspect or examine any object or property unless that object or property has been received in evidence and the inspection is made in the court room or in the jury room].

Some Alabama judges are beginning to modify the above instructions by specifically mentioning internet research.  Also, depending on the nature of the case, thought should be given to discussing the use of the internet, blogs and social networking during voir dire examination of the jury panel.  Hopefully, more specific instructional and discussion will serve to limit new trials and mistrials that result from such conduct.  However, we have probably only seen the beginning of a trend.

No Coverage for Torture Defendants

The U.S. Court of Appeals for the 4th Circuit has ruled that an insurance carrier for CACI International, a government contractor that provided its services in Iraq, has no duty to defend against claims that CACI’s employees tortured and abused detainees at Abu Ghraib prison.

The carrier, St. Paul Fire & Marine Insurance Company, issued a CGL policy to CACI with limits of $2 million.  The policy contained a coverage territory defined as the U.S. and its territories, Canada, and Puerto Rico, but stated that it would provide coverage for injuries in other parts of the world, provided “they result from the activities of a person whose home is in the coverage territory, but is away from there for a short time on your buisness.”

In its opinion, the Court held that the “short time” exception did not apply, as the complaints “allege a pattern and conduct that spanned several years.”

they result from the activities of a person whose

home is in the coverage territory, but is away

from there for a short time on your bu

Bad Faith in the Uninsured Motorist Context

It’s crucial that both practitioners and claims professionals understand the inherent pitfalls associated with uninsured motorist claims, and particularly the duty that a carrier owes to its insured. In my experience, UM claims are often treated by claims professionals in the same manner as liability claims. This is a perilous practice, and can transform a simple claim into one with punitive exposure.  Simply stated, a carrier has a duty of good faith to its insured that is not present in dealings with third party claimants.

In LeFevere v. Westbury, 590 So.2d 154 (Ala. 1991), the Supreme Court clearly stated that an uninsured motorist situation is a hybrid in that it blends the futures of both a first party claim and a third party claim. The Supreme Court also stated that in an uninsured motorist situation there is an adversarial relationship between the insured and the insurer. To assist claims adjusters and attorneys alike, the Supreme Court in LeFevere applied a balancing test, and set out a procedure or general rules which should apply in the handling of an uninsured motorist claim. The general rules are as follows:

1. When a claim is filed by an insured, the uninsured carrier has an obligation to diligently investigate the facts, fairly evaluate the claim, and act promptly and reasonably.

2. The uninsured motorist carrier should conclude its investigation within a reasonable time and should notify its insured of the action it proposes with regard to the claim for uninsured motorist benefits.

3. Mere delay does not constitute vexatious or unreasonable delay in the investigation of a claim if there is a bona fide dispute on the issue of liability.

4. Likewise, mere delay in the payment does not rise to the level of bad faith if there is bona fide dispute on the issues of damages.

5. If the uninsured motorist carrier refuses to settle with its insured, its refusal to settle must be reasonable.

These general rules were set out by the Supreme Court so that an insured will receive the benefits of the bargain. At the same time, the insurer’s right to refuse a claim will be protected. The bottom line is that adjusters should always diligently and fairly investigate all facts available to them and fully diligently and fairly investigate all those facts with regard to whether or not there is a debatable issue on either liability or damages.

If the claim is being denied not on a issue of liability or damages, but rather on a policy provision, the same general rules should apply in making that determination. Lastly, the Supreme Court has held that advice of counsel is clear evidence of a good faith effort on the part of the insurer. Davis v. Cotton States, 604 So.2d 354 (Ala. 1992).