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Is an Insurance Company Liable for Losing an Accident Victim’s Car?

Many single-car accidents are the result of a defective part. If that is the case, the driver may have a personal injury claim under Georgia product liability law. Specifically, O.C.G.A. § 51-1-11 states that a court may order a manufacturer to pay damages to any person “who suffers injury to his person or property” as the result of merchandise that “was not merchantable and reasonably suited to the use intended.”

Phillips v. Owners Insurance Company

Given that product liability cases are highly fact-specific and by their very nature revolve around a particular item, it is critical to preserve any and all physical evidence from a car accident. It may take several months or years to fully investigate the cause of the accident and the potential liability of the numerous manufacturers involved. When evidence is lost or destroyed, it can adversely affect a victim’s case.

The Georgia Court of Appeals recently addressed a situation in which evidence was lost due to the purported negligence of the victim’s insurance company. The plaintiff was in a car accident in 2013 allegedly caused by a defective tire. The tire suffered a “blow out,” according to the plaintiff, which in turn caused the car to overturn, seriously injuring him.

The car itself was declared a total loss by the plaintiff’s insurance company, which is the defendant here. The insurance company took possession of the wrecked vehicle and placed it a storage garage. Shortly thereafter, the plaintiff’s personal injury attorney informed the insurance company that there was an ongoing investigation into the cause of the accident and advised them to continue holding the vehicle.

Eventually, the plaintiff signed title to the vehicle over to the insurer in exchange for a settlement of his property damage claims. The insurer agreed to continue storing the vehicle as evidence in the plaintiff’s potential product liability case against the manufacturer of the defective tires. But approximately 18 months later, the insurer sold the vehicle without informing the plaintiff or his attorney.

A few months after that, the plaintiff sued the tire manufacturer. At this point, the plaintiff and his attorney learned of the insurer’s actions. Although the plaintiff reached a negotiated settlement with the tire company, he claimed he did not receive the “full damages” he could have due to the lost evidence from the car. He then sued the insurer, alleging “third-party spoliation of evidence.”

In personal injury litigation, if one side commits spoliation, the judge may impose sanctions, including awarding default judgment to the other side. But the issue here was whether the plaintiff could seek spoliation damages against the insurer, which was not a party to the prior lawsuit against the tire company. The Court of Appeals, affirming a trial court’s earlier ruling, said that “[w]While a number of states have recognized causes of action for third-party spoliation of evidence … neither a statute nor any ruling of the Georgia Supreme Court has established third-party negligent spoliation of evidence as an independent tort in this state.”

The Court of Appeals noted, however, that the plaintiff might still have a claim against the insurer for ordinary negligence or breach of contract.