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Keathley v. Grange Insurance Company of Michigan

United States District Court, E.D. Michigan, Southern Division

March 21, 2018


          Mona K. Majzoub United States Magistrate Judge



         This is a property loss case in which Plaintiff argues that Defendant Grange Insurance Company of Michigan (“Grange”) destroyed photographs of the damage to Plaintiff's home caused by frozen and burst pipes that allegedly were taken by Grange's insurance adjuster, Jason May. In compliance with an Order of this Court issued in response to Plaintiff's first motion for spoliation sanctions, Grange produced an information technology employee from Grange for deposition regarding the allegedly missing photographs. Still unsatisfied with Grange's explanation regarding the allegedly missing photographs, Plaintiff renewed her motion for spoliation sanctions. (ECF No. 60, Amended Renewed Motion for Spoliation Sanctions.) The Court held a hearing on the spoliation motion on September 13, 2017, and ordered that Grange comply with further limited requests for additional information regarding Grange's claims handling and equipment retention policies. Grange has complied with the Court's instructions issued at the September 13, 2017 hearing, but Plaintiff remains unsatisfied with Grange's response and has filed a Second Renewed Motion for Sanctions. (ECF No. 65.) Grange responded to the renewed motion (ECF No. 66) and Plaintiff has filed a reply (ECF No. 67). For the reasons that follow, the Court DENIES the motion for spoliation sanctions.

         I. BACKGROUND

         This is an insurance loss case involving Plaintiff's claim under her Grange policy for an alleged loss suffered by claimed water damage to her home in or about late January or early February, 2014. Although discovery has closed, the parties continue to debate whether Plaintiff is entitled to spoliation sanctions based upon Grange's conduct in allegedly destroying or failing to preserve photographs allegedly taken by its insurance adjuster, Jason May. Plaintiff claims that these allegedly spoliated photographs would have established the existence of numerous “burst pipes” and would have substantiated her claim of extensive damage in her home.

         As relevant to the motion for spoliation sanctions, Jason May testified that when he first spoke to Plaintiff's public adjuster, Margie Banks, sometime in April, 2014, regarding Plaintiff's claim, Ms. Banks explained that Plaintiff had suffered water damage at her home, that the drying and mitigation of the home was complete, and that repairs were nearly complete. (ECF No. 67, Pl.'s Reply Ex. EE, March 22, 2016 Deposition of Jason May 14:13-17:5.)[1] Mr. May did visit the home on May 28, 2014 and photographed every room. He testified that he met Plaintiff at the home along with Margie Banks, Plaintiff's public adjuster, and Joe Tison, Plaintiff's contractor. They walked through every room and Tison explained the work that had already been performed on the home. The home appeared to have been remodeled and any damage allegedly relating to Plaintiff's claim had been repaired. May noted in his claim file notes that he could not do a preliminary estimate due to “no observable damage.” (May Dep. 28:11-30:5, 73:4-10, 74:1-3, 77:24-79:3.) May testified that he uploaded all of the photographs from his digital camera to Grange's claims handling system, the “CHIP” system. He testified that he would routinely upload his claim notes and any photographs he did take to the CHIP system. (May Dep. 37:23-39:14.) Mr. May recalled viewing the photographs he had taken at Plaintiff's home and uploaded to CHIP after the upload. (May Dep. 39:22-40:3.) Following his inspection at the home, Mr. May recalled that Grange was unable to verify the damage based on Mr. May's inspection and needed more information on the claim, including the mitigation documents, repair estimates, photographs of the damage and any information that Mr. Tison could provide regarding the repairs that had been performed because Grange was not given the opportunity to inspect the claim prior to the repairs. (May Dep. 40:4-41:21.) Mr. May acknowledged that he was told by Banks that pipes had burst but he testified repeatedly that he did not see evidence of burst pipes and specifically did not see a pile of burst pipes in the basement and therefore did not take any photographs of burst pipes or “a pile” of burst pipes. (May Dep. 47:12-24, 83:12-19.)

         Contrary to Mr. May's testimony, Mr. Tison, Plaintiff's contractor who performed the remediation work and gave Mr. May a history of the repairs, testified that he always left burst pipes on site and in this case he made a “big pile” of pipes in the Plaintiff's basement and covered it up “so the adjustor could see it.” (Pl.'s Reply, Ex. FF, March 16, 2016 Deposition of Joseph Tison 18:4-10.) Mr. Tison also testified that he specifically recalled Mr. May taking a lot of photographs, “doing his job, ” and specifically recalled that Mr. May took photographs of the visqueened pile of “contaminated” debris that included burst copper pipes. (Tison Dep. 53:5-55:8.) After Mr. May's visit, Mr. Tison testified, he removed the “debris” including the burst pipes and put it all in a dumpster. (Tison Dep. 55:9-18.)

         Plaintiff's theory of spoliation appears to be that Mr. Tison's testimony establishes that Mr. May did indeed photograph a pile of burst pipes and that those photographs were uploaded to the Grange claims handling system by Mr. May and later deleted by Grange in an effort to sabotage Plaintiff's claim. The Court has supported Plaintiff's attempt to develop this theory, giving Plaintiff an opportunity (despite the fact that discovery had closed) to depose an information technology representative from Grange and subsequently requiring Grange to provide additional information requested by Plaintiff that appeared not to have been conclusively established to Plaintiff's satisfaction by the information technology representative's deposition testimony. The matter is now ready for resolution by the Court.


         Spoliation of evidence is an evidentiary issue and is governed by federal law in this Circuit. Adkins v. Wolever, 554 F.3d 650, 652 (6th Cir. 2009) (en banc). “[T]he authority to impose sanctions for spoliated evidence arises not from substantive law but, rather, from a court's inherent power to control the judicial process.” Id. (internal quotation marks and citation omitted). To be entitled to an adverse inference instruction based on the destruction of evidence, Plaintiffs “must establish: (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed with a culpable state of mind; and (3) that the destroyed evidence was relevant to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense.” Beaven v. United States DOJ, 622 F.3d 540, 553 (6th Cir. 2010) (quoting Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002)). “‘The test prescribed in Beaven is conjunctive; thus, so long as the district court did not err in determining that [the party seeking an adverse inference instruction] had not satisfied at least one of the prongs, its determination that a spoliation sanction was not warranted should not be upset.'” Ross v. American Red Cross, 567 F. App'x 296, 302 (6th Cir. 2014) (quoting Adkins v. Wolever, 692 F.3d 499, 504 (6th Cir. 2012)). Where material is destroyed in the normal course of business and without evidence of a culpable motive, spoliation sanctions generally are not appropriate. Parrish v. Dollar Gen'l Corp., 680 F. App'x 423, 427 (6th Cir. 2017).

         III. ANALYSIS

         As Ordered by this Court, Grange produced an information technology administrator for deposition. (ECF No. 58, March 30, 2017 Order Requiring Discovery.) Grange produced Mr. James Stewart, Grange's lead programmer analyst, for a deposition on April 24, 2017. (ECF No. 59-2, April 24, 2017 Deposition of James W. Stewart.) Mr. Stewart testified about Grange's Claims Handling Information Program (the “CHIP” system) onto which Grange adjusters upload data, including photographs, related to claims investigation and processing. (Stewart Dep. 9:20-10:10.) CHIP is a client server technology that is present on individual employees's work stations, either their laptops or their desktops. Entries made into CHIP by a claims adjuster like Jason May, the Grange employee assigned to investigate Plaintiff's claim, are stored on a central server that is backed up nightly and weekly. Data that is stored on the central server is only retained for about 30 days, so something that was placed on the central server through CHIP by Mr. May in 2014 would no longer be in existence on CHIP. (Stewart Dep. 14:7-16:2, 18:1-19:11.)

         Once data is logged into CHIP by a claims adjuster, it cannot be deleted from CHIP. Photographs that are inputted into CHIP are not stored in CHIP. Photographs are stored in a product called a Content Manager. (Stewart Dep. 21:13-23:18.) The Content Manager which stores the photographs is maintained on a server running an IBM software database. Every photograph that is placed into the Content Manager through CHIP creates a “pointer” - which is like a hyperlink to that photograph. A claims adjuster like Jason May would upload a photograph from their digital camera or their phone, then drag and drop that photograph wherever they want it to appear in their claim file on CHIP, click “save, ” and then CHIP will commit the photograph to the Content Manager and save a pointer to that photograph on CHIP. (Stewart Dep. 23:19-24:13.) A photograph that is uploaded to the Content Manager remains there for a period of eight years, unless it is deleted. (Stewart Dep. 58:25-59:15.)

         The Content Manager is an imaging system and once a photograph is put into the Content Manager, only one individual at Grange, Richard Gruly, the Content Manager Administrator, is able to delete material from the Content Manager. (Stewart Dep. 22:25-23:12.) While Mr. Gruly has the ability to delete a photograph from the Content Manager, he does not have the ability to delete the pointer to that photograph in CHIP that was created when it was logged. (Stewart Dep. 23:13-22.) If a photograph is deleted from the Content Manager, a pointer will still exist in CHIP but will no longer be an operable link - i.e. if clicked on the pointer will give an error message indicating that the pointed-to photograph no longer exists in the Content Manager. A pointer that is created in the CHIP system cannot be deleted from the CHIP system without the deletion appearing in a file called “logical deletes, ” ...

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