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Good first-party claims practice requires prompt repair of damaged vehicles. Obviously, the time it takes to repair a damaged vehicle depends on the complexity of the claim, the nature and extent of the damages, and the availability of quality replacement parts. An insured will usually be contacted by their auto carrier within a couple of days after filing the claim. If the damages need to be inspected or verified, it can take a few more days. Repairs are frequently done in a week or two. Some carriers are marketing their coverage by promising that an insured need only email a photo of the damage in order to get an estimate and a check. Most vehicle owners cannot do without a vehicle for an extended period of time so all parties to the claim try to expedite the process. During the time a vehicle is being repaired, loss of use damages and replacement vehicle rental charges begin mounting. This increases the cost to the auto carrier and potentially to a third-party liability carrier whose insured caused the accident. Recently, however, some have argued that fast-tracking the repair of vehicles puts third-party liability carriers against whom subrogation is sought at a distinct disadvantage, because they are deprived of the ability to observe and verify the nature and extent of physical property damage they are being asked to pay for.
Cost-conscious and profit-minded auto insurers aggressively pursue any subrogation potential upon being notified of a physical damage claim. They provide carriers for culpable tortfeasors with police reports, witness statements, and evidence of the claims damages which they have paid. The latter usually consists of photographs, repair estimates, and body shop invoices. With increasing frequency, however, liability carriers are refusing to take the nature and extent of such damage “evidence” at face value. Rather than simply paying the claim, they are arguing that the prompt repair of the vehicle without giving them the opportunity to inspect and verify the damages is tantamount to spoliation and is a defense to the claim against them. They argue that not all of the damages contained on the estimate was caused by their insured. They also creatively assert that without the ability to see the damaged vehicle before it was repaired, they are prevented from contesting the amount and extent of physical damage—which is a major element of the subrogated carrier’s burden of proof. When vehicle repairs are concluded long before subrogation is even a glimmer in the subrogation professional’s eye, the result can be confusion, uncertainty, and reduced subrogation recoveries. Liability carriers routinely issue blanket denials because the risk of denying a $2,500 property damage claim is extremely small. With increasing frequency, liability carriers are denying—or making nuisance value offers on—clear liability subrogation claims due to their inability to verify the amount and extent of physical property damage.
But are such claims of “spoliation” legitimate? “Spoliation” of evidence occurs when someone with an obligation to preserve evidence with regard to a legal claim neglects to do so or intentionally fails to do so. Such a failure to preserve evidence can take place by destruction of the evidence, damage to the evidence, or losing the evidence. When spoliation occurs, the party responsible may be held accountable in court through a variety of different sanctions. Those sanctions vary greatly from state to state. Unfortunately, despite the rising spoliation claims following the prompt repair of damaged vehicles, very few states have established rules regarding the legitimacy and efficacy of such arguments.
Practically speaking, the idea that promptly repairing an insured vehicle damaged in a collision would somehow be construed spoliation stretches the very meaning of the word beyond its limits. Would it mean that every time there is an accident that involves some instrumentality, product, or condition, the owner must preserve it intact and do without its use until a lawsuit is filed—possibly months down the road—simply so that all of the attorneys and their experts can examine it? The resulting loss of use damages alone would seemingly deter defendants from making such an outrageous claim. Yet, there are cases in which defendants and their liability carriers take issue with repairs which allegedly were necessitated by a collision caused by their insured. If this constitutes “spoliation”, would drivers who move their cars off of a busy roadway following an accident also guilty of the offense?
Offsetting the insured’s duty to preserve evidence is the countermanding obligation to mitigate damages. Letting a vehicle sit unrepaired for months could triple the damages of an average collision loss. Defendants would undoubtedly argue this way if a vehicle is not properly and promptly repaired so that any loss of use damages were curtailed as soon as possible. In fact, most loss of use law requires such diligence. Taking copious photographs of collision damage has become standard practice. Many appraisers and experts can tell a great deal from post-accident, pre-repair photographs. And unlike product liability cases, where the condition of a product is critical to making a product liability claim against a manufacturer, repairing a vehicle in a collision loss mitigates only the amount of damages rather than liability. And even then, in light of detailed repair estimates, garage records, photographs, and invoices, it stretches credulity to argue that somehow the inability to see the vehicle in its damaged condition would prejudice the liability carrier.
In repairing a vehicle that has been involved in a collision, there may well be a duty to preserve and retain GPS systems, dash cameras, “black boxes,” electronic control modules, and more. It will all depend on the vehicle’s role in the accident and other factors. Where product defects are of concern, preservation of evidence and making the vehicle available for inspection by all parties is axiomatically reasonable.
However, when the dispute is over the reasonable amount of repair costs, liability carriers are throwing a roadblock to subrogation efforts by claiming they cannot verify the amounts paid were reasonable. Most auto claims adjusters do not think they are destroying evidence by performing repairs. The argument that the repair bill for a damaged vehicle could have been inflated pales in comparison to the need for a family to have a working vehicle so its family members can get to work, school, etc. There is very little precedent to support these claims of spoliation. Repaired vehicles are always available for inspection and will reveal the repairs after the fact. Evidence of “old” damage which could possibly have been repaired as though it was caused in the most recent collision is a very unlikely phenomenon. After all, insurance companies are not in the business of repairing damage which they are not obligated to repair.
If you have any questions regarding this article or subrogation in general, please contact Lee Wickert at [email protected].