Safeco Insurance Company of Indiana a/s/o Ramona Smith v. Blue Sky Innovation Group, Inc ( 2024 )

IN THE
FILED
Indiana Supreme Court Apr 02 2024, 11:39 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
Supreme Court Case No. 23S-CT-272
Safeco Insurance Company of Indiana as Subrogee of Ramona Smith,
Appellant (Plaintiff below),
–v–
Blue Sky Innovation Group, Inc.; Cabela’s Wholesale, L.L.C.; TMBC,
L.L.C. of Missouri; Bass Pro Outdoor World, L.L.C.; Cabela’s Retail MO,
L.L.C.; Bass Pro, L.L.C.; Bass Pro Group, LLC; and Michaelis Corporation,
Appellees (Defendants below).
Argued: November 13, 2023 | Decided: April 2, 2024
Appeal from the Marion Superior Court
No. 49D12-2110-CT-35831
The Honorable Patrick J. Dietrick, Judge
On Petition to Transfer from the Indiana Court of Appeals
No. 22A-CT-1924
Opinion by Justice Massa
Chief Justice Rush and Justices Slaughter and Molter concur.
Justice Goff concurs in part and dissents in part with separate opinion.
Massa, Justice.
Safeco Insurance appeals the trial court’s dismissal of its third-party
spoliation and negligence claims against the Michaelis Corporation,
arguing Indiana common law recognizes the tort. We hold that it does not
under these facts and affirm the trial court.
Facts and Procedural History
Ramona Smith owned a home insured by Safeco. In 2019, a fire caused
more than $500,000 worth of damage, and Safeco covered the loss.
Safeco hired Michaelis to restore the Property and conducted a scene
examination determining the fire originated from a kitchen counter
dehydrator. A Michaelis representative was present for the examination,
and “the need to preserve the kitchen was verbally communicated[.]”
Appellant’s App. Vol. II, p. 32. With the kitchen sealed off, Michaelis
constructed a temporary structure to protect the fire origin area from the
elements. Michaelis eventually demolished the kitchen and discarded the
dehydrator.
With an eye toward bringing an action for the defective dehydrator
causing the fire for which it had to make Smith whole, Safeco sued
Michaelis for negligence and spoliation of evidence impeding its ability to
bring a successful claim. Michaelis moved to dismiss under Indiana Trial
Rule 12(B)(6), arguing Safeco failed to state a claim upon which relief may
be granted because Indiana only recognizes third-party spoliation claims
under narrow circumstances, none of which exist here. Michaelis also
argued the economic loss doctrine bars Safeco’s negligence claim.
The trial court construed both claims against Michaelis as third-party
spoliation claims, which “under prevailing Indiana case law . . . have only
be[en] recognized in limited circumstances. No such circumstances have
been pled by Safeco” and granted Michaelis’ motions. Id. at 16–17. Safeco
appealed and the Court of Appeals reversed, finding Safeco sufficiently
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 2 of 13
pled third-party spoliation and negligence claims. Safeco Ins. Co. of Ind. v.
Blue Sky Innovation Grp. Inc., 211 N.E.3d 564, 574 (Ind. Ct. App. 2023).
Michaelis petitioned for transfer, which we granted, thus vacating the
Court of Appeals’ opinion. Ind. Appellate Rule 58(A).
Standard of Review
Appellate review of a ruling on a Trial Rule 12(B)(6) motion is de novo.
Caesars Riverboat Casino, LLC v. Kephart, 934 N.E.2d 1120, 1122 (Ind. 2010).
“A motion to dismiss under Rule 12(B)(6) tests the legal sufficiency of a
complaint: that is, whether the allegations in the complaint establish any
set of circumstances under which a plaintiff would be entitled to relief.”
Trail v. Boys & Girls Club of Nw. Ind., 845 N.E.2d 130, 134 (Ind. 2006)
(citation omitted). Appellate courts do not test the sufficiency of the facts
alleged regarding their adequacy to provide recovery but test the
sufficiency of whether a legally actionable injury has occurred in a
plaintiff’s stated factual scenario. Id. The appellate court accepts the
alleged facts as true, drawing every reasonable inference in favor of the
non-moving party. Id. An order to dismiss is affirmed when it is
“apparent that the facts alleged in the challenged pleading are incapable
of supporting relief under any set of circumstances.” McQueen v. Fayette
Cnty. Sch. Corp., 711 N.E.2d 62, 65 (Ind. Ct. App. 1999), trans. denied.
Discussion and Decision
Our Court of Appeals first recognized a cause of action for third-party
spoliation in Thompson ex rel. Thompson v. Owensby, 704 N.E.2d 134 (Ind.
Ct. App. 1998), trans. denied, and later emphasized it is recognized “only in
narrow circumstances where a relationship exists between the claimant
and the third party sought to be held responsible for a failure to preserve
evidence[,]” Kelly v. Patel, 953 N.E.2d 505, 510–11 (Ind. Ct. App. 2011)
(emphasis added). In between these two decisions by appellate panels, our
Court declined to recognize a third-party spoliation tort claim “under the
circumstances” of the case in Glotzbach v. Froman, 854 N.E.2d 337, 339 (Ind.
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 3 of 13
2006). We continue to hold that view and land in the same place today
under these similar circumstances. We affirm the trial court’s dismissal of
Counts III and IV of the amended complaint and apply our precedent in
Webb v. Jarvis to explain why we go no further.
I. The trial court properly dismissed Safeco’s third-
party spoliation claim in Count III of the amended
complaint.
Spoliation is “‘[t]he intentional destruction, mutilation, alteration, or
concealment of evidence, usually a document. If proved, spoliation may
be used to establish that the evidence was unfavorable to the party
responsible.’” Cahoon v. Cummings, 734 N.E.2d 535, 545 (Ind. 2000)
(quoting Spoliation, Black’s Law Dictionary (7th ed. 1999)). There are two
types of spoliation claims: first-party spoliation and third-party spoliation.
First-party spoliation “refers to spoliation of evidence by a party to the
principal litigation,” and third-party spoliation refers to the spoliation of
evidence “by a non-party.” Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349,
350 (Ind. 2005).
A. Overview of Indiana third-party spoliation law
In 1991, our Court considered third-party actions more broadly in Webb
v. Jarvis, 575 N.E.2d 992 (Ind. 1991), weighing the duty a physician owes to
an injured third-party. In Webb, a physician prescribed a patient anabolic-
steroids. Id. at 994. The patient later battered and threatened his wife who
left the family home, fearing for her safety. Id. The wife and an officer later
returned to the family home, where the patient shot the officer. Id. The
officer sought recovery from the physician, arguing the physician had a
duty to account for possible harm to third parties when he administered
medical treatment. Id. at 994. Our Court concluded that the officer’s claim
was rooted in negligence and established three factors to balance: (1) the
relationship between the parties, (2) the reasonable foreseeability of harm
to the person injured, and (3) public policy concerns. Id. at 995.
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 4 of 13
That same year, the Court of Appeals rejected an invitation to recognize
a third-party spoliation claim. See Murphy v. Target Prods., 580 N.E.2d 687,
690 (Ind. Ct. App. 1991), trans. denied. In Murphy, the plaintiff was injured
in a workplace accident, and the court considered whether an employee
has an action against his employer “asserting tortious interference with
that employee’s prospective products liability claim against a third party
due to the intentional or negligent spoliation of potential evidence.” Id. at
688. The court concluded that “in the absence of an independent tort,
contract, agreement, or special relationship imposing a duty to the
particular claimant, the claim of negligent or intentional interference with
a person’s prospective or actual civil litigation by the spoliation of
evidence is not and ought not be recognized in Indiana.” Id. at 690.
By contrast, third-party spoliation was later recognized in Thompson ex
rel. Thompson v. Owensby, 704 N.E.2d 134 (Ind. Ct. App. 1998), trans. denied.
In Thompson, a cable restrained a dog that broke free and mauled the
plaintiff. Id. at 135. The plaintiff sued the dog’s owner and the
manufacturer of the cable. Id. The dog owner’s insurance carrier took
possession and later lost the cable. Id. The plaintiff then filed a spoliation
claim against the defendant’s insurance company for failing to preserve
the evidence. Id. at 136. The plaintiff argued the insurance company
“assumed a duty to safeguard the cable” and breached that duty when it
lost the cable. Id. The court considered whether the insurance company
had a duty to preserve the cable, and applied the Webb factors permitting
the claim to proceed because “[l]iability insurance carriers are no strangers
to litigation, and it strains credulity to posit in a motion to dismiss that a
liability carrier could be unaware of the potential importance of physical
evidence.” Id. at 137–40.
In 2005, this Court addressed two certified questions from the United
States District Court, asking us to recognize an independent claim for
intentional first-party spoliation of evidence. Gribben v. Wal-Mart Stores,
824 N.E.2d 349, 350 (Ind. 2005). In Gribben, an employee-plaintiff sustained
a fall at Wal-Mart and moved to amend her complaint to add a claim for
spoliation of evidence against employer-defendant for failing to preserve
the surveillance video. Id. We concluded that available remedies
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 5 of 13
outweighed considerations for recognizing an independent tort of first-
party spoliation and expressly left open whether Indiana law recognized a
tort of spoliation by third parties. Id. at 355–56.
A year later, this Court took up a third-party spoliation claim in
Glotzbach v. Froman, 854 N.E.2d 337 (Ind. 2006). In Glotzbach, an employee
was killed in an explosion. Id. at 338. Three days later, government
investigators told employer not to dispose of the debris, but days later,
employer reported it was thrown away. Id. The trial court denied
defendant’s motion to dismiss a third-party spoliation claim, and the
Court of Appeals affirmed. Id. Our Court granted transfer and, like today,
reviewed Court of Appeals precedent that recognized third-party
spoliation in very limited circumstances but found those special
circumstances lacking. Id. at 338–42. In not recognizing the tort under the
circumstances of that case, we did not explicitly reject it as a matter of law
in all cases. Id. We acknowledged without disapproving the Court of
Appeals’ approach and went no further in applying it, noting in the
opening paragraph that “[t]he legislature is, of course, free to provide a
different rule if it concludes otherwise.” Id. at 337.
Subsequent to our decision in Glotzbach, the Court of Appeals limited
its third-party spoliation law in American National Property and Casualty
Company v. Wilmoth, 893 N.E.2d 1068 (Ind. Ct. App. 2008), trans. denied. In
Wilmoth, a rental home fire resulted in several deaths. Id. at 1069.
Firefighters discarded items onto the front yard; weeks later, the items
were discarded by the homeowners. Id. at 1070. The survivor filed a
complaint against the homeowners’ insurance company alleging the
company “permitted [the] spoliation of evidence” that they might need in
an action against the homeowners. Id. at 1069. Applying the three factors
authorized under precedent, the court examined the relationship between
the parties, the foreseeability of the type of harm to the plaintiff, and the
public policy behind recognizing a duty. Id. at 1070–71. The court
recognized a relationship between the insurance carrier and third-party
claimant but concluded that “[t]he duty to preserve evidence” is limited
because the insurance company never possessed the evidence. Id. at 1071.
The court also determined that it was unforeseeable that the loss of
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 6 of 13
evidence would be needed for a future claim, id. at 1072, and declined to
find a duty requiring insurers to preserve all “potentially relevant
evidence available” because “[r]etention and safekeeping” of the
“evidence would be a practical impossibility[,]” id. at 1073.
More recently, in Shirey v. Flenar, the Court of Appeals considered
whether a patient had a spoliation of evidence claim against a doctor who
lost or destroyed her medical records “that he knew or should have
known [were] relevant to [her] personal-injury claim[.]” 89 N.E.3d 1102,
1107 (Ind. Ct. App. 2017). The court again examined the parties’
relationship, the foreseeability of harm, and public policy concerns, id. at
1108–11, and concluded the doctor “had an enforceable duty to preserve
[the plaintiff’s] medical records once she requested them from him[,]” id.
at 1111.
Having established the historical ground rules, we must now balance
our Webb factors to analyze whether Michaelis had a duty to preserve the
evidence. See Thompson, 704 N.E.2d at 137–40; Wilmoth, 893 N.E.2d at
1070–73; Shirey, 89 N.E.3d at 1107–11.
B. Relationship between the parties
A “duty to preserve evidence may be assumed voluntarily or imposed
by statute, regulation, contract, or certain other circumstances.” N. Ind.
Pub. Serv. Co. v. Aqua Env’t Container Corp., 102 N.E.3d 290, 301 (Ind. Ct.
App. 2018). But that duty is determined by whether a special relationship
exists between the parties. See Webb, 575 N.E.2d at 995 (stating a duty
“flows from that special consensual relationship”). These special
relationships are “premised on privity.” Id. “[A]n alleged tortfeasor’s
knowledge of the plaintiff’s situation or circumstances may support
recognition of a duty.” Thompson, 704 N.E.2d at 137 (citation omitted).
The determination of a special relationship turns on the facts. For
example, a special relationship could exist between a doctor and her
patient because the doctor has a duty to possess “the ordinary knowledge
and skill[s]” of the profession and must use those skills “in a reasonable,
diligent, and careful manner in undertaking the care and treatment of
[the] patient.” Webb, 575 N.E.2d at 995. A special relationship could also
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 7 of 13
exist between an insurance carrier and a third-party claimant. Thompson,
704 N.E.2d at 137. This special relationship could require a duty to the
third-party claimant “if the [insurance] carrier knew or should have
known of the likelihood of litigation and of the claimant’s need for the
evidence in the litigation.” Id. An insurance carrier “has a duty in the
ordinary course of business to investigate and evaluate claims made by its
insureds[.]” Burr v. United Farm Bureau Mut. Ins. Co., 560 N.E.2d 1250, 1255
(Ind. Ct. App. 1990), trans. denied. It is the insurance carrier’s knowledge of
litigation, investigation of the claim, and possession of evidence that could
create a special relationship with a third-party and a duty to maintain
evidence. Thompson, 704 N.E.2d at 137.
Safeco argues a special relationship exists because Michaelis knew there
was a need to preserve the dehydrator. Safeco argues the special
relationship formed when it “verbally communicated ‘the need to
preserve the kitchen’ to Michaelis” and when Michaelis voluntarily
constructed a temporary structure to protect evidence against the
elements. Appellant’s Br. at 23. But a special relationship does not exist
between the parties. Safeco conceded that there is no written or oral
contract that would create a special relationship between Michaelis and
Safeco. Oral Argument at 7:50–8:20. While Safeco orally communicated the
need to preserve the kitchen to Michaelis, Safeco did not communicate the
need to preserve the dehydrator was for possible litigation. Moreover,
Michaelis is not like an insurance company that regularly participates in
litigation, Thompson, 704 N.E.2d at 137, and does not ordinarily
“investigate and evaluate claims made by its insureds,” Burr, 560 N.E.2d
at 1255. Safeco is the party that is ordinarily involved in litigation,
regularly investigates its insured’s claims, and knows the possibility of
litigation. Thompson, 704 N.E.2d at 137.
C. Foreseeability of the harm
“[T]he foreseeability component of the duty inquiry requires a ‘general
analysis of the broad type of plaintiff and harm involved, without regard
to the facts of the actual occurrence.’” Shirey, 89 N.E.3d at 1108 (quoting
Goodwin v. Yeakle’s Sports Bar & Grill, Inc., 62 N.E.3d 384, 390 (Ind. 2016)).
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 8 of 13
But “a duty is limited to those instances where a reasonably foreseeable
victim is injured by a reasonably foreseeable harm.” Webb, 575 N.E.2d at
997.
Safeco alleges it was reasonably foreseeable that Safeco would be
harmed by the loss of the dehydrator because it orally communicated to
Michaelis the need to preserve the dehydrator. In Glotzbach, we observed
that an “explicit written request from the employee’s attorney to preserve
the evidence” could support recognizing a spoliation claim. 854 N.E.2d at
340. By contrast, Safeco orally communicated the general need to preserve
the dehydrator to Michaelis and a written request to preserve the evidence
to Michaelis was never produced. Cf. id.Even so, mere knowledge of the relevance to litigation is not enough to
establish a duty to maintain evidence; otherwise, third-party spoliation
claims would go well beyond the narrow circumstances in which they
currently arise because mere knowledge would broaden liability. See
Thompson, 704 N.E.2d at 137. In Thompson, the Court of Appeals
recognized a duty because an insurance company, who regularly
participates in litigation, knew why the evidence needed to be preserved
and took possession of the evidence. Id. at 137–38. The court found it was
“foreseeable that loss of the evidence would interfere with a claimant’s
ability to prove the underlying claim.” Id. at 138. Yet Michaelis is not an
insurance company that regularly participates in litigation. Instead, it is a
restoration contractor that neither investigates claims nor gathers evidence
for pending litigation. Furthermore, Michaelis did not take possession of
the dehydrator, unlike the Thompson insurance company. Instead,
Michaelis only constructed a temporary structure to protect the origin of
the fire from elements, and cleaned up to a degree, during which process
the dehydrator was discarded. Foreseeability of harm to Safeco’s future
speculative litigation is insufficient under these facts to establish a duty.
D. Public policy concerns
Public policy considerations weigh heavily against recognizing third-
party spoliation absent a special relationship. Finding a third-party
spoliation claim here could cause future parties to go to great lengths to
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 9 of 13
preserve evidence for possible litigation for an unknown period of time.
Gribben, 824 N.E.2d at 355. Third-party spoliation claims run the risk of
duplicative litigation, see Glotzbach, 854 N.E.2d at 341 (“Proving damages
in a third-party spoliation claim becomes highly speculative and involves
a lawsuit in which the issue is the outcome of another hypothetical
lawsuit.”), and raise concerns of jury confusion and inconsistent results,
Gribben, 824 N.E.2d at 355 (quoting Cedars-Sinai Med. Ctr. v. Superior Ct. of
Los Angeles Cnty., 954 P.2d 511, 519–20 (Cal. 1998)).
Safeco argues that public policy supports finding a third-party
spoliation claim because the destruction of evidence “can destroy fairness
and justice[.]” Appellant’s Br. at 27. Yet “other remedies remain
applicable[.]” Glotzbach, 854 N.E.2d at 341. For example, Safeco might have
pursued a breach of contract claim. See Thompson, 704 N.E.2d at 140
(explaining the Thompsons could have sought alternative remedies).
Safeco also argues a court should consider accountability when
considering policy concerns and points to Thompson for support. But
Thompson concerned an insurance company with a direct stake in the
outcome of the litigation because it understood the significance of the
evidence and the need to maintain it for litigation. Id. at 138. While
Michaelis has a financial incentive to complete the work as requested and
to Safeco’s satisfaction, Michaelis does not have a stake in the result of
litigation stemming from the fire. Cf. id. Safeco mainly argues that holding
Michaelis accountable for its actions is reasonable because the claim is in
the early stages of litigation and preclusion of such claim would ignore
the strength of Indiana’s common law tort doctrine. But, like Wilmoth,
imposing a duty upon a third party to maintain potential evidence for
potential litigation for an unknown amount of time is unreasonable. 893
N.E.2d at 1073. The balance of policy concerns does not support imposing
a duty to preserve evidence on Michaelis.
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 10 of 13
II. The trial court properly dismissed Safeco’s
negligence claim in Count IV of the amended
complaint.
Safeco argues that if a third-party spoliation claim is not recognized,
then Safeco can state a claim for negligence. A plaintiff alleging a
negligence claim must show: “(1) duty owed to [the] plaintiff by
defendant; (2) breach of duty by allowing conduct to fall below the
applicable standard of care; and (3) compensable injury proximately
caused by defendant’s breach of duty.” Goodwin, 62 N.E.3d at 386 (cleaned
up).
The trial court found both Counts III and IV of the amended complaint
to be construed as third-party spoliation claims because Safeco
incorporated and re-alleged the same acts or omissions as it did in Count
III into Count IV. See Appellant’s App. Vol. II, pp. 35–37. Safeco’s
negligence claim fails for the same reasons its third-party spoliation claim
fails. There is a “preference to place substance over form[,]” MDM Invs. v.
City of Carmel, 740 N.E.2d 929, 933 (Ind. Ct. App. 2000), trans. not sought;
see also Town of St. John v. Home Builders Ass’n of N. Ind., Inc., 428 N.E.2d
1299, 1302 (Ind. Ct. App. 1981) (treating a party’s motion to reconsider as a
T.R. 60 motion because it substantively met T.R. 60 motion’s
requirements), and the trial court did not err in dismissing Safeco’s
negligence claim because it is substantively a third-party spoliation claim.
Safeco also argued the trial court erred because Michaelis assumed a
duty of care to preserve the evidence. Yet Safeco’s amended complaint
does not allege Michaelis was liable under an assumption of duty but
raises it for the first time on appeal. See Cox v. Mayerstein–Burnell Co., 19
N.E.3d 799, 807 (Ind. Ct. App. 2014) (explaining the non-movant was not
required to negate an assumption of duty argument in summary
judgment proceedings where assumption was not pled). Parties have
ample opportunities to amend their complaint before the trial court;
however, a party cannot amend the complaint as part of its appeal. See
Leeper Elec. Servs., Inc. v. City of Carmel, 847 N.E.2d 227, 231 (Ind. Ct. App.
2006) (stating “a plaintiff may not seek to amend his complaint after
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 11 of 13
judgment unless he first has that judgment vacated or set aside under
either T.R. 59 or T.R. 60” (quotations omitted)), trans. denied. This issue
was not presented before the trial court and is thus waived. See Allstate
Ins. Co. v. Love, 944 N.E.2d 47, 52 (Ind. Ct. App. 2011) (finding waiver of
issue on appeal where the appellant failed to raise the question of
damages to the trial court until after this Court had accepted jurisdiction);
see also Hopster v. Burgeson, 750 N.E.2d 841, 848 (Ind. Ct. App. 2001)
(“When an issue is not presented before the trial court, appellate review of
that issue is waived.” (quotations omitted)).
Conclusion
The trial court did not err in dismissing Safeco’s amended complaint
against Michaelis. The trial court is affirmed.
Rush, C.J., and Slaughter and Molter, JJ. concur.
Goff, J., concurs in part and dissents in part with separate opinion.
ATTORNEYS FOR APPELLANT SAFECO INSURANCE COMPANY
OF INDIANA
Crystal G. Rowe
KIGHTLINGER & GRAY, LLP
New Albany, IN
ATTORNEYS FOR APPELLEES BASS PRO OUTDOOR WORLD,
L.L.C., CABELA’S RETAIL MO, L.L.C., BASS PRO GROUP, LLC,
TMBC, L.L.C. OF MISSOURI, BLUE SKY INNOVATION GROUP,
INC., CABELA’S WHOLESALE, L.L.C., AND BASS PRO, L.L.C.
Richard R. Skiles
Joseph A. Samreta
SKILES DETRUDE
Indianapolis, IN
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 12 of 13
ATTORNEYS FOR APPELLEES MICHAELIS CORPORATION
Alex M. Beeman
Joseph A. Zumpano
REMINGER CO., L.P.A.
Indianapolis, IN
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 13 of 13
Goff, J., concurring in part and dissenting in part.
The Court declines to extend the duty to preserve evidence to a fire-
remediation company that undertook to preserve the scene of a house fire.
In my view, the complaint supports reasonable inferences that the
remediation company knew it was supposed to preserve the scene on the
insurer’s behalf for foreseeable litigation purposes. I would therefore
reinstate the insurer’s third-party spoliation claim.
I. The law imposes a duty to preserve on those
who, in conducting their business, retain
material that may foreseeably be evidence.
Since Indiana courts first recognized the tort in 1998, our common law
of third-party spoliation has evolved with a primary focus on the scope of
the duty to preserve evidence.
In Thompson ex rel. Thompson v. Owensby, a dog had broken free of its
cable and attacked a child. 704 N.E.2d 134, 135 (Ind. Ct. App. 1998). The
child’s family sought compensation from the landlords of the dog’s
owners. Id. The landlords’ insurance company investigated and took
possession of the cable, which it then lost. Id. The Court of Appeals
explained that, at the motion-to-dismiss stage, the family had to allege “a
cognizable relationship” with the insurance company, “foreseeable harm
from the loss of evidence,” and “sufficient supporting facts” to show that
recognition of a duty “would promote Indiana’s policy goals.” Id. at 136–
37. The court found each of these requirements satisfied. First, a
relationship existed because the insurance company, carrying on “the
business of providing liability insurance,” took possession of the cable
knowing that the family had made a claim for which the cable would be
evidence. Id. at 137. Second, it “strain[ed] credulity” to imagine that the
insurance company, having collected the cable, “could be unaware of the
potential importance” of this “physical evidence.” Id. Finally, public
policy supported imposing a duty on insurance companies that take
possession of evidence central to a claim. Insurers needed “some
mechanism for collecting and preserving evidence” and could “adopt
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 1 of 5
business practices that lead to resolution of claims at the lowest possible
cost to the carrier.” Id. at 138, 139. This Court regards Thompson as
standing for the recognition of a “cause of action for third-party
spoliation.” See Glotzbach v. Froman, 854 N.E.2d 337, 339 (Ind. 2006); see also
ante, at 5.
In Glotzbach, this Court focused on the same three factors as Thompson,
namely a “special relationship,” “the foreseeability of harm,” and, most
importantly, “policy considerations.” 854 N.E.2d at 340–41. We declined,
however, to extend the duty to preserve evidence to the wholly different
context of an employer who had collected and disposed of its own
industrial equipment after that equipment exploded and killed an
employee. Id. at 338, 342. The employer had not collected the material as
evidence for a claim, we reasoned, and there were “other remedies” for
deterring spoliation: sanctions under the criminal law and, for attorneys,
the Rules of Professional Conduct; contempt of court; and an employer’s
ability to recoup worker’s compensation benefits if it establishes product
liability. Id. at 341 (citations omitted). We deemed it contrary to public
policy to allow “highly speculative” satellite litigation that the worker’s
compensation statute is “designed to foreclose.” Id. Finally, we declined to
“impose an obligation to retain useless equipment indefinitely.” Id. at 342.
In American National Property and Casualty Company v. Wilmoth, the
Court of Appeals analyzed another insurance-company case but
distinguished the facts from Thompson. 893 N.E.2d 1068 (Ind. Ct. App.
2008). In Wilmoth, there was a fatal house fire, after which the landlords
discarded a couch that firefighters had thrown outside. Id. at 1069–70. The
plaintiffs’ experts later determined that the fire started with electrical
wiring near the couch. Id. at 1070. The plaintiffs sued the insurance
company for failing to preserve the couch. Id. But the court refused to
impose such a duty on the insurance company, noting that it “never had
possession” of the couch and that, at the time the couch was discarded,
there was no lawsuit and no indication that the couch was involved in the
matter. Id. at 1071. What’s more, the court explained, it would be
practically impossible to require insurers “to preserve any potentially
relevant evidence available after any potentially covered event.” Id. at
1073.
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 2 of 5
Finally, in Shirey v. Flenar, the Court of Appeals imposed on a physician
a duty to preserve his patient’s medical records. 89 N.E.3d 1102, 1111 (Ind.
Ct. App. 2017). The court noted that the physician was “responsible” for
the patient’s care and “the presumptive safekeeper” of the records of that
care. Id. at 1108. He was “aware,” the court added, that the patient wanted
her records, which stemmed from injuries sustained in a car accident. Id.
at 1103, 1109. Finally, the court explained, no “alternative sanctions” for
the loss of evidence were viable and physicians “generally maintain
medical records anyway.” Id. at 1110.
In sum, a common thread in our common law is that defendants whose
business practices involve the retention of material or records (e.g.,
insurers and physicians) can be held liable for losing what may
foreseeably be pertinent evidence in a lawsuit.
II. We should extend the duty to preserve to a fire-
remediation firm.
This case reaches us on de novo review of a successful motion to
dismiss. Ante, at 2–3. We should affirm only if it “appears to a certainty on
the face of the complaint that the complaining party is not entitled to any
relief.” Bellwether Props., LLC v. Duke Energy Indiana, Inc., 87 N.E.3d 462,
466 (Ind. 2017) (internal quotation marks and citation omitted). In making
this assessment, we draw “every reasonable inference in that party’s
favor.” Id. (citation omitted).
Admittedly, SafeCo Insurance Company’s complaint alleges a rather
bare-bones set of facts to support its third-party spoliation claim against
Michaelis Corporation. Nevertheless, in my view, it contains sufficient
facts to infer that SafeCo may be entitled to relief.
The Court concludes that there is no “special relationship” between
SafeCo and Michaelis, noting that there was no contract between them.
Ante, at 8. But SafeCo’s complaint alleges that “the need to preserve the
kitchen was verbally communicated” to Michaelis and that Michaelis then
“constructed a temporary structure to provide better weather protection
and tarping over the area of fire origin.” App. Vol. II, p. 32. Common
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 3 of 5
sense suggests that Michaelis did not undertake this work without
reaching an understanding with somebody that it was going to preserve
the kitchen. Reasonable inferences lead to the conclusion that Michaelis
agreed to preserve the scene of the fire on behalf of either SafeCo or the
homeowner (and thus SafeCo as her insurance subrogee). That might be
enough of a relationship to support a duty. See Glotzbach, 854 N.E.2d at 339(explaining that the duty to preserve evidence must rest on “‘an
independent tort, contract, agreement, or special relationship’”) (quoting
Murphy v. Target Products, 580 N.E.2d 687, 690 (Ind. Ct. App. 1991))
(emphasis added).
The clincher, though, is that Michaelis is concededly a “remediation
company.” Tr. Vol. II, p. 8. While the record discloses little about its
business, I understand that such companies typically clean up and make
repairs after accidents like fires and water leaks—incidents in which
insurance claims and litigation are often involved, as here. Moreover, the
complaint tells us that Michaelis representatives attended a meeting at the
scene of the fire with SafeCo’s “representatives and consultants,” who
determined that “the fire likely originated on the kitchen countertop,”
where the dehydrator “was located.” App. Vol. II, p. 31. These allegations
imply that Michaelis knew the dehydrator was of interest to SafeCo and
thus probably relevant to potential litigation. There is enough in the
complaint to infer that Michaelis agreed to preserve the scene, which
included the dehydrator, on behalf of SafeCo or its insured for litigation
purposes.
For the reasons just stated, I also find that SafeCo sufficiently alleged
that it was foreseeable to Michaelis that discarding the dehydrator would
hamper litigation.
Finally, and most importantly, public policy supports extending the
duty to preserve to remediation companies. Just as the insurance company
in Thompson and the physician in Shirey were in the business of preserving
material and records, so it is reasonable at this stage to infer that
remediation companies are in the business of preserving the scenes of
accidents. The meeting at the scene of the fire in this case is illustrative.
Remediation companies, together with insurers, are well placed to ensure
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 4 of 5
preservation measures are taken efficiently and effectively. And there is
no viable remedy for the loss of evidence in cases of fires and water leaks
other than a third-party spoliation claim.
In sum, the face of the complaint does not demonstrate that SafeCo has
no claim for relief. Rather, reasonable inferences suggest that this case
may fall within the principles of our common-law third-party spoliation
tort.
III. Conclusions.
For the reasons given, I would reinstate SafeCo’s spoliation claim and
remand for further factual development. I would affirm, however,
dismissal of SafeCo’s negligence claim because, as the Court explains, “it
is substantively a third-party spoliation claim.” Ante, at 11. Spoliation is a
specialized area of the law requiring policy considerations which the
regular law of negligence does not account for. See Bart S. Wilhoit,
Spoliation of Evidence: The Viability of Four Emerging Torts, 46 UCLA L. Rev.
631, 637 (1998) (noting that spoliation law is “unclear and has many
ambiguities”).
Accordingly, I dissent from the Court’s decision on the spoliation claim
and concur with the Court’s decision on the negligence claim.
Indiana Supreme Court | Case No. 23S-CT-272 | April 2, 2024 Page 5 of 5