Insurance companies, third-party adjusting companies, and subrogation vendors are increasingly undertaking subrogation investigation at an early stage of a claim’s life.

Understanding that early recognition and action on third-party recovery potential is often won or lost in the first few days following an insurance claim or loss, companies are learning to obtain and retain key evidence necessary for proof of its subrogation case against a third party.

However, if companies are going to undertake the role of safekeeping key evidence in large losses, it is important to remember the law regarding spoliation and do everything in its power to avoid committing losing, damaging, or compromising evidence necessary to win.

‘Spoliation’ of evidence occurs when someone with an obligation to preserve evidence with regard to a legal claim (including a subrogation action) neglects to do so or intentionally fails to do so.

Such a failure to preserve or protect evidence can take place by destruction of the evidence, damage to the evidence, or losing the evidence altogether. When spoliation occurs, the party responsible may be held accountable in court through a variety of different sanctions.