In a decision filed February 1, 2016 and drafted by Judge Douglas Nazarian, the Court of Special Appeals underscored the importance of preserving physical evidence at issue in a lawsuit, especially when the physical evidence “is itself the subject of the case.” Cumberland Ins. Group v. Delmarva Power, 72 Sept. Term 2015, Slip Op. at 8 (Feb. 1, 2016). Destroying or failing to preserve such evidence may result in sanctions more stringent than a jury instruction of an unfavorable inference and, instead, may warrant an outright dismissal of the spoliating party’s claim.
The case involves a fire at a home insured by Cumberland. A Senior Deputy State Fire Marshal and Cumberland’s experts investigated the fire and concluded that it originated in, or in the area of, the home’s electric meter box. Cumberland continued its investigation, and no representative from Delmarva visited the property. Two months after the fire, the home was demolished, and, while Delmarva did have notice that a claim might be made against it, Delmarva never received notice that demolition of the home itself was to occur. Cumberland filed a subrogation claim against Delmarva for its alleged faulty wiring of the home’s electric meter box. Delmarva filed and was granted summary judgment based upon the destruction of the home, as the destruction divested Delmarva of the possibility of investigating or defending Cumberland’s claim. Cumberland appealed the circuit court’s ruling, and the Court of Special Appeals affirmed.
In deciding if sanctions are warranted and, if so, to what degree, it must first be determined whether spoliation occurred. In that regard, Maryland has adopted a four-part test: 1) an act of destruction; 2) the evidence was discoverable; 3) there was intent to destroy the evidence; and 4) the act occurred after suit was filed or, if before, when the filing of a claim was fairly perceived as imminent. Id. at 11 (citing Klupt v. Krongard, 126 Md. App. at 199, quoting White v. Office of the Public Defender, 170 F.R.D. 138, 147 (D. Md. 1997)). In applying this test to the Cumberland case, the Court focused on the third part – intent to destroy evidence – and concluded that “intent to destroy isn’t a prerequisite to a finding of spoliation—courts look as often to fault.” Id. at 12.
If spoliation occurred, as it did when the fire-damaged home was demolished, the trial court will, in its discretion, decide the appropriate remedy. Specifically, what is the appropriate remedy when the destroyed evidence is itself at the heart of the case? In answering this question, the Court quoted the Fourth Circuit’s opinion in Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001). The Fourth Circuit reasoned that bad faith is not required, and that “even when conduct is less culpable, dismissal may be necessary if the prejudice to the defendant is extraordinary, denying it the ability to adequately defend its case.” Slip Op. at 12-13 (internal quotation marks omitted) (emphasis added by the Cumberland court). Therefore, if the harm resulting from spoliation is severe, conduct lacking deliberate wrongdoing or bad faith can justify harsh sanctions so long as some measure of fault exists.
In Erie Insurance Exchange v. Davenport Insulation, Inc. 659 F. Supp. 2d 701 (D. Md. 2009), a case interpreting Silvestri and cited in Cumberland, the U.S. District Court for the District of Maryland determined that Silvestri imposes a two-part “either/or” test in which dismissal is justified if 1) “the spoliator’s conduct is so egregious as to make forfeiture of its claim an apt remedy” or 2) “if the loss of the evidence is so prejudicial that it substantially denies the defendant the ability to defend the claim.” With facts similar to those in Cumberland, the Erie court concluded that no appropriate sanction was available short of dismissal. The court further reasoned that a jury instruction on spoliation would not “level the playing field” because the record consisted of evidence offered primarily by the insurer.
With respect to court-imposed sanctions for spoliation, the takeaway from the Court of Special Appeals’ decision in Cumberland is that trial courts are vested with broad discretion to impose sanctions. While a jury instruction of an unfavorable inference is an option, it is not an exclusive remedy nor can it serve as a substitute for actual evidence. Courts have not hesitated to impose dismissal as a sanction even when the destruction of evidence occurred merely by neglect and without bad faith, especially when the destroyed evidence lies at the core of the case.