July 16, 2009 – If a party has a legitimate reason to destroy relevant evidence, he or she may do so by giving notice to the party opponent of a claim and an opportunity to test or inspect the evidence.

The Wisconsin Supreme Court considered this issue of first impression in American Family Mut. Ins. v. Golke, 2009 WI 81. The justices further held that this notice can be properly made by first-class mail and that dismissal of a claim is an appropriate sanction for egregious disregard of these duties.

In concurrence, Chief Justice Shirley Abrahamson and Justice Ann Walsh Bradley raised concerns with how the majority applied these rules to the particular facts of this case.

House fire

American Family Mutual Insurance Co. insured a home that its investigators believed caught fire because of the negligent roof repairs performed by David, Charles, and Joseph Golke. The company sent notice of its claim by first-class mail to the Golkes on March 13, 2000.

David Golke received the letter and forwarded it to his insurer which acknowledged receipt on March 17, 2000.  Six days later, American Family told David Golke and his insurer they could investigate the fire scene before the scheduled April 1 demolition of the house.

American Family’s letter to Charles and Joseph Golke went unanswered. On April 6, American Family sent a second letter reciting the details of the claim by certified mail went to all the Golke brothers. Charles Golke tried to call American Family’s field examiner, but could only leave a message. The field examiner unsuccessfully tried to reach Charles after hours, and no other efforts at contact occurred.

Demolition of the house began April 11, 2000. Neither American Family nor its experts preserved any physical evidence of the roof, chimney, or any other part of the fire scene. However, American Family did retain many photographs and drawings of the fire scene produced by its experts who inspected the home.

After American Family filed suit in March 2003, the circuit court dismissed the claims for spoliation of evidence. Spoliation is the intentional destruction, mutilation, alteration, or concealment of evidence.

Duty to preserve evidence

Before the supreme court, the Golkes argued that evidence must be preserved until all parties consent to its destruction. The justices said such a rule would be “neither practical nor fair.”

Instead, the court held that the duty to preserve evidence is discharged once the party in possession has given reasonable notice of a possible claim, the basis for that claim, the existence of evidence relevant to the claim, and a reasonable opportunity for inspection of the evidence.

The justices said the trial court may use its discretion, guided by the totality of the circumstances, to judge the sufficiency of the content of the notice. Among the relevant factors to consider, the court listed:

• Length of time evidence can be preserved
• Ownership of the evidence
• Prejudice posed to possible adversaries by destruction of the evidence
• Form of the notice
• Sophistication of the parties
• Ability of the party in possession to bear the burden and expense of preserving the evidence

First class mail is appropriate

The court approved of first-class mail to deliver notice. “The legislature has long recognized that first-class mail service is an efficient mechanism that is reasonably calculated to provide actual notice of possible or pending litigation,” the court remarked.

Notice of mail is usually considered complete upon mailing, not proof of receipt, the court added. Additionally, habit evidence is admissible to show a letter was mailed, the court said.

  The court said that evidence of mailing a letter raises a rebuttable presumption that the addressee received the letter. This presumption cannot be overcome without a denial of receipt, the court said. “Mere non-remembering of receipt is not enough,” the court stated.

Sanctions for spoliation

  Dismissal is an extreme sanction only justified in cases of egregious conduct, the court said.

“Egregious” conduct is “a conscious attempt to affect the outcome of the litigation or a flagrant, knowing disregard of the judicial process,” the court explained. Lesser sanctions for other behavior causing spoliation include pre-trial discovery sanctions and negative inference instructions, the court said.

As applied to this case

In this case, the justices declared American Family’s actions to discharge its preservation duty were reasonable, as a matter of law.

But Abrahamson disagreed, arguing that a reasonable judge could conclude from the circuit court’s factual findings that American Family did not give the Golkes a reasonable opportunity to inspect the evidence. She did not believe American Family deserved dismissal of its claims, but advocated for a lesser sanction.

Abrahamson charged that the majority was ignoring factors it listed in its own spoliation analysis, specifically  those related to the ability of the party in possession to preserve the evidence and the prejudice to the other party by its loss.

She observed that the circuit court had accepted expert testimony that key parts of the roof could be easily removed and would have “fit easily in a garage stall.” Further, the circuit court found that American Family’s photographs were of “very small areas on or in the house,” preventing the defense expert from placing them in relation to the fire scene as a whole. The defense expert had said that without the physical evidence, he could not form opinions about the cause or origin of the fire.

American Family’s letters failed to give the Golkes a reasonable opportunity to inspect the evidence before it was destroyed, Abrahamson continued. She noted that American Family’s letter from March 13, 2000, stated the house would be destroyed within just 19 days.

“During the 19 days between March 13 and April 1, the Golkes needed to contact and work things out with their insurers, to find and retain a fire scene investigator, and to make arrangements for the investigation,” Abrahamson wrote. “A lot to expect from the owners of a local roofing outfit!”

In David Golke’s case, Abrahamson commented, the timeframe for action was even shorter.

“Upon receiving American Family’s March 13 letter, David Golke did exactly what the letter told him to do: He promptly forwarded the letter to his insurance carrier,” she wrote.

“David Golke did not know that he, rather than his insurance carrier, would be responsible for dealing with American Family until he received a second letter from American Family, dated March 23, 2000, informing him that his insurance carrier had denied coverage. The March 23 letter reiterated that the house would be demolished on April 1, 2000,” she wrote.

“The majority opinion apparently concludes that as a matter of law it is reasonable to give a small businessman nine days to locate and hire an expert witness before losing the opportunity to inspect evidence that is critically relevant to a potential lawsuit against him,” Abrahamson stated.

In rebuttal, the majority said Abrahamson ignored “the unrebutted testimony” that the April 1 demolition deadline would have been extended upon request.

“Moreover, the concurrence forgets that, had Jospeh and Charles Golke responded, their insurer surely could have arranged an inspection within the relevant timeframe,” the majority wrote. “As for David Golke, his insurer initially denied coverage. This put the responsibility on David Golke to protect his rights, which he did not do.”