In a recent case, the Western District of Virginia dismissed a case after the plaintiff destroyed evidence, resulting in a significant disadvantage to the defendant and hindering fair adjudication. This case should be a cautionary tale, warning of the serious consequences that can result from destroying or not properly preserving evidence. If you are in the midst of litigation or believe that litigation is reasonably foreseeable, it is critical that you preserve potential evidence and have policies in place to ensure that evidence is preserved. 

Nautilus Insurance Co. v. Appalachian Power Co.

In Nautilus Insurance Co. v. Appalachian Power Co., a fire occurred in June 2018 at the workshop for Electro Finishing, Inc., for which Appalachian provided electricity. Timothy Litz owned Electro and purchased property insurance from Nautilus. John Moore, Nautilus’s designated expert, inspected the property on June 8th and told Nautilus’s Barry Vice to preserve evidence at the scene so Appalachian could also conduct an inspection. However, Vice instructed Moore not to retain any evidence from the scene during his investigation and told Moore to close his file in July 2018. Soon after, Vice told Litz he could demolish the building, which he did in July or August. Then in October 2018, Nautilus sent Appalachian a letter of notice of a potential claim. Appalachian sent an expert to inspect the scene, but discovered the building had been razed. Appalachian filed a motion to dismiss Nautilus’s claims as a sanction for spoliation of evidence.

The court noted that dismissing a case without deciding it on the merits is “the most extreme sanction” and should only be used after considering several factors including: (1) the degree of the wrongdoer’s culpability; (2) the extent of the client’s blameworthiness if the wrongful conduct is committed by its attorney; (3) the prejudice to the judicial process and the administration of justice; (4) the prejudice to the victim; (5) the availability of other sanctions to rectify the wrong by punishing culpable persons, compensating harmed persons, and deterring similar conduct in the future; and (6) the public interest.

The court here determined that Nautilus was entirely at fault for the spoliation, since it’s expert, Moore, told the building owner not to touch anything, to leave everything as is, and that a joint inspection was necessary. Instead, Vice told Moore to close his file and told Litz to raze the building. Thus, the court found Nautilus approved demolition of the building and spoliation of the fire cause and origin evidence.

The court did note that there was no evidence of bad faith on Nautilus’s part, but held that Appalachian didn’t need to demonstrate bad faith to succeed. The court held that “sometimes even the inadvertent, albeit negligent, loss of evidence will justify dismissal because of the resulting unfairness.” The court here found the spoliation resulted in “great” prejudice to the administration of justice and Appalachian. Since the building was razed, Appalachian had insufficient evidence to form a scientifically reliable expert opinion as to the cause of the fire and instead had to rely on the limited evidence collected by Nautilus’s expert.

Finally, the court concluded that dismissal was the appropriate remedy, because Nautilus’s  conduct was so prejudicial that it substantially denied Appalachian the ability to defend itself. The court additionally held that a lesser sanction would reward improper conduct and put Appalachian at a significant disadvantage and hinder fair adjudication. As a result, the court dismissed Nautilus’s claims as a sanction for spoliation of evidence.

The key takeaway from this case is the importance of preserving evidence. Particularly if you believe there is a chance you will initiate litigation, as Nautilus did here, it’s critical to refrain from destroying potential evidence. As shown in this case, destroying evidence can result in serious consequences and the dismissal of any potential legal claims. If you’re unsure about whether certain property must be preserved, it’s best to consult with an attorney first. 

If you’re involved in a legal matter, General Counsel, P.C. attorneys can help you navigate the process. Our attorneys have experience working with business owners and individuals across Virginia, specifically in Fairfax County, Arlington, Loudoun County, and Prince William.

Call us today at 703-991-7973.