The extent to which a loss scene can be altered before adversaries can legitimately cry spoliation has long been a mysterious battleground in the world of subrogation. In the case of In re Xterra Constr., LLC, No. 10-16-00420-CV, 2019 Tex. App. LEXIS 3927 (Tex. App. – Waco, May 15, 2019), the Court of Appeals of Texas, Tenth District, addressed the question of when a party has a duty to preserve evidence. The court found that the trial court abused its discretion in imposing sanctions on the defendants for the spoliation of evidence as the evidence at issue was already gone by the time the defendants knew or reasonably should have known there was a substantial chance a claim would be filed against them.
In this matter, Xterra Construction, LLC, Venturi Capital, Inc. d/b/a Artisan Cabinets and Keith D. Richbourg (collectively, Xterra) leased a commercial space from building owners Daniel Hull and William H. Beazley, Jr. (collectively, Hull) to be used as a woodworking and cabinet making warehouse. On October 18, 2014, there was a fire at the warehouse. By October 20, 2014, Xterra informed its insurance carrier, Cincinnati Insurances Companies (“Cincinnati”) of the loss and Cincinnati’s adjuster, Leann Williams (Williams), met with Keith D. Richbourg (Richbourg) at the site. Williams also hired expert Jim Reil (Reil) to inspect the fire scene to perform a cause and origin investigation. The next day, Williams informed Hull’s attorney that Reil would inspect the scene on October 23, 2014. Hulls attorney, however, did not send anyone to the scene to participate in the inspection.