Professional Negligence Law Reporter

The Indiana Supreme Court held that a property restoration company was not liable to an insurer under a third-party spoliation theory.

Safeco Insurance Co. hired property restoration company Michaelis Corp. to restore the property of insured Ramona Smith and conduct a scene examination to determine the origin of a fire that occurred at Smith’s home. The need to preserve Smith’s kitchen was verbally communicated to a Michaelis representative during the examination; however, Michaelis later demolished the kitchen and discarded the kitchen counter dehydrator from which the fire allegedly originated. Safeco sued Michaelis, alleging spoliation of evidence. The trial court granted the defendant’s motion to dismiss.

Affirming the trial court, the state high court noted that third-party spoliation claims are recognized in narrow circumstances where there is a relationship between the claimant and the third party alleged to be responsible for the failure to preserve evidence. Here, the court found, a special relationship does not exist between the parties, who were not bound by an oral or written contract. Moreover, the court said the insurer did not produce a written request that Michaelis preserve the evidence at issue here, and there is no proof that the company had taken possession of the dehydrator.

The court concluded that allowing a third-party spoliation claim here could result in future parties going to great lengths to preserve evidence for possible litigation and may cause duplicate litigation. Citing case law, the court said that imposing a duty on a third party to maintain potential evidence for potential litigation for an unknown amount of time is unreasonable.

Citation: Safeco Ins. Co. of Ind. v. Blue Sky Innovation Grp., Inc., 2024 WL 1401308 (Ind. Apr. 2, 2024).