Richard Waris, Brendan Nelligan, and Donald Patrick Eckler recently secured a significant victory for an insurance client that was directly sued for spoliation and, in the process, made new law regarding the applicable statute of limitations for such claims.
The underlying dispute arose out of an automobile accident in which the client's insured is alleged to have caused the death of a mother and injury to her minor child. After four and a half years of litigation against the insured, the plaintiff filed a spoliation claim against the insurer for destruction of the insured vehicle. The Pretzel & Stouffer lawyers filed a motion to dismiss based upon 1) the absence of a duty and 2) breach of the applicable statute of limitations. They argued that the applicable statute of limitations was the two year personal injury statute and not the five year catch-all/property damage statute.
The trial court dismissed the case with prejudice, finding that no duty was owed by the insurer to the plaintiff, whom it did not insure. However, the court rejected the statute of limitations argument and held that the five year statute of limitations applied.
The plaintiff appealed to the Illinois Appellate Court, Second District, which affirmed the dismissal by finding that the applicable statute of limitations was the two year statute. The court held that a claim for spoliation is derivative of the claims that underlie it. In so holding, the court found that, because the two year statute of limitations applied to all of the plaintiffs injury claims brought by the plaintiff against the other defendants, the plaintiff's claim against the insurer was not timely. The court further held that the discovery rule applied, but since the plaintiff had not pled any facts to show that she could not have filed the case timely, the dismissal was affirmed.
This case was a significant victory for the firm's client as well as for all insurers in Illinois. First, it rejected a holding from the Illinois Appellate Court, First District, that held that the five year statute of limitations applied to spoliation claims. Second, this decision held that the discovery rule applied, which was entirely new in Illinois. Finally, and most importantly, a decision against the insurer might have required insurers to preserve vehicles in nearly every accident claim. Such a result may have greatly increased claim handling expense, and raised insurance rates by preventing insurers from selling vehicles for scrap and incurring significant vehicle storage fees.