October 16, 2021

5 Tips to Avoid Spoliation Claims against Insurers & TPA’s

Spoiling is not a good thing, whether we’re talking child-rearing or moldy cheese in the back of the refrigerator that needs cleaning. For insurer claim departments and claim administrators, the first-cousin of spoliation can become a stinky mess, even spawning errors and omissions claims.

Insurers and TPA’s expect to be in the claims business, but NOT as defendants in the docket box!

Risk Mgt

To avoid this scenario and manage the risk, here are five quick tips:

Tip #1 — GET THE PRODUCT or the evidence that is key to defending a claim or asserting subrogation!

Tip #2 — Document! If the evidence has gone into the possession of another party, keep documentation that the evidence has been moved into someone’s possession. Document the chain of custody! (That “someone” could be the insurer, the insured or some third-party.) Paraphrasing a popular bumper sticker, “Stuff Happens.” To avoid the operation of Murphy’s Law, though, best NOT to delegate this to a policyholder.

Tip #3 — Create a paper trail showing the mandate to hold and preserve the product.

Tip #4 – Protect it! Get it in an environment to shield it from degradation.

Tip #5 –Check in periodically to confirm. (Beware of Murphy’s Law!)

Insurers and third-party claim administrators can face liability for claims of spoliation. Such claims can be asserted by policyholders or even claimants in workers compensation cases (e.g., “You killed my viable third-party claim by mis-handling the evidence!) Part of risk management by claim operations is to avoid E&O exposures by having sound evidence preservation procedures which are followed to the letter.

That letter is far better than the one which begins, “Please be advised that we attach suit papers filed in response to your spoliation of evidence in the case of …”

Now, if you’ll excuse me, I’ve got to go clean out the fridge. There’s some funky Kung Pao Chinese takeout way back on the shelf that needs to be tossed…

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