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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Nichols v. State Farm Fire and Casualty Company (8/11/00) sp-5304

Nichols v. State Farm Fire and Casualty Company (8/11/00) sp-5304

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.



             THE SUPREME COURT OF THE STATE OF ALASKA
                                 


DALLAS E. NICHOLS,            )
                              )    Supreme Court No. S-8969
             Appellant,       )
                              )    Superior Court No.
     v.                       )    3AN-97-6430 CI
                              )
STATE FARM FIRE AND           )    O P I N I O N
CASUALTY COMPANY,             )
                              )
             Appellee.        )    [No. 5304 - August 11, 2000]
______________________________)



          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                        John Reese, Judge.


          Appearances:  Donna C. Willard, Law Offices of
Donna C. Willard, Anchorage, for Appellant.  Rod R. Sisson, Sisson
& Knutson, P.C., Anchorage, for Appellee.


          Before:   Matthews, Chief Justice, Eastaugh,
Fabe, Bryner, and Carpeneti, Justices.  


          MATTHEWS, Chief Justice.



I.   INTRODUCTION
          Dallas Nichols sued his neighbor's insurance company for
intentional and negligent spoliation based on the insurance
company's failure to secure critical evidence in Nichols's case
against the neighbor.  The superior court granted summary judgment
to the insurance company, and Nichols appealed.  We affirm.
II.  FACTS AND PROCEEDINGS
     A.   Facts
          On September 1, 1996, Dallas Nichols was assisting his
neighbor, Richard Gittlein, with roof repairs when the ladder
Nichols was standing on collapsed beneath him.  Nichols fell eight
or nine feet, tearing a rotator cuff.  It is uncontested that the
ladder was "old," "beat-up" and "had a lot of cracks in it." 
Gittlein left the broken ladder under the deck of his house.
          Two months later, on December 5, 1996, a fire heavily
damaged Gittlein's house.  Nichols claims that the ladder was not
destroyed in the fire. [Fn. 1]  Shortly after the fire, on December
18, 1996, Nichols filed a claim with Gittlein's insurance company,
State Farm, for his injuries suffered in the ladder accident.  The
claim was assigned to State Farm agent Janet Sperbeck.  She
contacted Gittlein on December 20th, who reported that he was not
sure if he still had the ladder and that it may have been destroyed
in the fire.
          On January 2, 1997, Sperbeck met with Nichols for the
first time.  He told her that the ladder was still in existence on
the property and that it should be preserved.  Sperbeck went to
Gittlein's premises on January 2, hoping to find him and ask about
the ladder.  When she arrived, she discovered that the house had
been destroyed and all that was left was a shed.  Sperbeck left
without finding Gittlein or the ladder.
          After this visit, Sperbeck wrote to Gittlein, asking
whether he had found the ladder.  She called him twice, without
reaching him.  But she did not contact the State Farm agent who was
handling Gittlein's fire claim and who was in communication with
Gittlein.
          On January 15 Sperbeck called Nichols and spoke with
Nichols's wife, Judy.  Judy expressed concern that, if Sperbeck
failed to collect the ladder, it would soon be too late.  Sperbeck
traveled to the premises on that date but did not find Gittlein
there.
          On January 27 Gittlein made contact with Sperbeck.  He
told her that he could not find the ladder and that it must have
been thrown out with the fire debris.
          Subsequently, in July 1997, State Farm wrote Nichols
stating that its liability analysis was complete and that Gittlein
was not negligent.  State Farm therefore declined to make any
payments under the liability coverage of its policy.
     B.   Proceedings
          On August 6, 1997, Nichols filed suit against Gittlein
and State Farm.  Nichols alleged that Gittlein was liable for
negligently providing a ladder for use by Nichols that Gittlein
knew or should have known was defective and unsafe for use. 
Nichols also alleged that Gittlein and State Farm "acted
negligently, intentionally or recklessly in failing to preserve the
ladder."  These claims for intentional and negligent spoliation
were the only claims alleged against State Farm.
          After some discovery was conducted, State Farm moved for
summary judgment.  Initially, its motion was based on an assertion
that the ladder was destroyed in the December 5 fire, which
occurred before State Farm had any notice of a possible claim by
Nichols.  Nichols pointed out that his sworn answer to an
interrogatory attested to the existence of the ladder after the
fire and that there was a genuine issue of material fact on this
point. 
          State Farm then expanded the grounds for its motion. 
Filing a new affidavit from Janet Sperbeck detailing her activities
in the case, State Farm argued that Sperbeck committed no acts of
spoliation and that, as State Farm's agent, she had fulfilled State
Farm's duty concerning the ladder.
          After additional discovery, Nichols filed a supplemental
opposition to State Farm's summary judgment motion.  Nichols
opposed the motion on two grounds: (1) that it was not ripe because
of the pendency of Nichols's motion to compel various documents
relating to State Farm's investigation of the case; and (2) that
the ladder was not destroyed in the fire and that "State Farm had
one full month to locate and preserve the ladder but it made no
attempt to do so."
          State Farm filed a supplemental reply in support of its
motion for summary judgment.  In it, State Farm noted that
Nichols's claim had "apparently, evolved into a claim that State
Farm negligently failed to locate the ladder, as opposed to a claim
that it spoliated the ladder."  It argued that this is essentially
a claim for negligent investigation and that an insurer owes no
duty of reasonable investigation to a claimant.  State Farm cited
O.K. Lumber Co. v. Providence Washington Insurance Co. [Fn. 2] for
this proposition and sought summary judgment on this basis.
          State Farm also argued that Alaska does not recognize
negligent spoliation as a separate tort and that there was no
evidence that State Farm had intentionally spoliated the ladder.
          The superior court granted summary judgment to State
Farm.  In relevant part, the superior court wrote:
               State Farm owed no duty to Nichols to
locate or preserve the ladder.  Without a duty, a negligence claim
is barred.

               In O.K. Lumber v. Providence Washington
Ins. an injured claimant claimed damages against the insurer for
the insurer's negligent investigation and adjustment of the claim. 
759 P.2d 523 (Alaska 1988).  O.K. Lumber held that an insurer owes
no such duty to the claimant.  Id.  In the same manner, State Farm
owes no duty to Nichols.

          A week after the superior court granted summary judgment
to State Farm, the court granted Nichols's motion to compel against
State Farm.  The court ordered State Farm to produce Nichols's
claim file, Gittlein's fire claim file, and the entire underwriting
file.
          State Farm did not respond to the order.  Instead,
Gittlein produced all of the requested documents with the exception
of Nichols's file.  Gittlein redacted portions of the file that
related to the insurance adjuster's assessment of Gittlein's
liability and Nichols's comparative liability.  He then moved for
a protective order to preserve those redactions.
          On December 7, 1998, the superior court entered final
judgment for State Farm and awarded State Farm twenty percent of
its attorney fees, for a total of $4,000, under Civil Rule
82(b)(2). [Fn. 3] 
          After the entry of final judgment, on December 23, 1998,
the superior court reviewed Gittlein's redactions in camera.  The
court granted Gittlein's motion for a protective order and held
that the redacted portions were "irrelevant and prejudicial."
          Nichols appeals the grant of summary judgment, the
issuance of the protective order, and the award of attorney's fees.
III. STANDARD OF REVIEW
          We review a grant of summary judgment de novo. [Fn. 4] 
Drawing all reasonable inferences in favor of the nonmoving party,
we will uphold summary judgment if no genuine issue of material
fact exists and the moving party is entitled to judgment as a
matter of law. [Fn. 5]
          We review discovery rulings for abuse of discretion. [Fn.
6]  "We will find an abuse of discretion when we are left with a
definite and firm conviction after reviewing the whole record that
the trial court erred in its ruling." [Fn. 7] 
          Attorney's fee awards are similarly reviewed for abuse of
discretion. [Fn. 8]  We will reverse an award of attorney's fees
only if the award is "arbitrary, capricious, manifestly
unreasonable, or stems from improper motive." [Fn. 9]
IV.  DISCUSSION
     A.   Spoliation
          In Hazen v. Municipality of Anchorage [Fn. 10] we
recognized that acts of intentional spoliation of evidence can give
rise to independent tort claims for intentional interference with
a prospective civil action.  In Hazen, one of the alleged
spoliators, Bailey, was not a party to the original tort lawsuit
against the Municipality of Anchorage. [Fn. 11]  Hazen permitted an
intentional spoliation tort claim to be maintained against Bailey
and against the Municipality.  It therefore recognized that
intentional spoliation claims can be made against parties to the
original action (called "first-party spoliators") and non-parties
to the original action (called "third-party spoliators").
          We have not recognized an independent tort for negligent
spoliation of evidence.  In Sweet v. Sisters of Providence in
Washington [Fn. 12] we were presented with a first-party negligent
spoliation claim.  The plaintiffs alleged that a hospital had
negligently lost medical records that were critical to plaintiffs'
medical malpractice claim against the hospital and others. [Fn. 13] 
We held that the jury should be instructed that the loss of the
medical records raises a rebuttable presumption of negligence on
the part of the hospital. [Fn. 14]  This shifts the burden of proof
to the hospital to prove that it was not negligent. [Fn. 15]  We
noted that the court should first determine whether the missing
evidence "sufficiently hinders plaintiff's ability to proceed."
[Fn. 16]  If the spoliated evidence is important enough to meet
this standard then the rebuttable presumption/burden-shifting
remedy can be applied.
          We concluded in Sweet that the burden-shifting remedy was
a sufficient response to the problem of missing evidence under the
circumstances presented. [Fn. 17]  We did not decide whether
negligent spoliation could ever form the basis for an independent
suit and implicitly recognized that in cases of third-party
spoliation the burden-shifting remedy might not be effective:  "We
need not decide in this case whether the recognition of a separate
tort of negligent destruction of evidence would ever be
appropriate, for example, against a third party not associated with
the underlying lawsuit." [Fn. 18]  
          1.   Nichols's claim for negligent spoliation cannot be
maintained separately against State Farm.

          Nichols ignores an important aspect of his claim for
negligent spoliation by failing to focus on whether it is a claim
of first-party or third-party spoliation.  State Farm argues that
this is a first-party claim. [Fn. 19]  We agree.  State Farm is
not, to use the language of Sweet, a "third party not associated
with the underlying lawsuit." [Fn. 20]  Instead, State Farm has
assumed Gittlein's defense.  We see no reason why the Sweet remedy
would not be a sufficient response to negligent spoliation of the
ladder, whether by Gittlein or State Farm, assuming the ladder's
disappearance was found to be a sufficient hindrance to the
prosecution of Nichols's claim.  If the absence of the ladder were
found not to be a sufficient hindrance, then no tort remedy would
be needed.  Thus here, as in Sweet, we conclude that a separate
tort remedy for negligent spoliation may not be maintained.   
          For this reason, we uphold summary judgment dismissing
the negligent spoliation claim against State Farm.  In reaching
this conclusion, we do not reach the issue as to whether Gittlein,
and State Farm as Gittlein's agent, had an obligation --
potentially enforceable with a Sweet remedy -- to preserve the
ladder once Nichols's claim was known.  We view the question before
us as whether a separate claim for negligent spoliation can be
maintained against State Farm.  That question we answer in the
negative based on Sweet.  Further questions as to what a defendant
should do with respect to important evidence in the defendant's
possession or control once a claim is asserted are beyond the scope
of this appeal.
          2.   State Farm was entitled to summary judgment of the
claims of reckless or intentional spoliation.

          Nichols has also pled intentional and reckless
spoliation.  But Nichols offers no evidence to support this
allegation.  In fact, at his deposition he was asked what facts
would indicate that State Farm acted negligently, intentionally, or
recklessly in failing to preserve the ladder.  He admitted he knew
of none and opined only that State Farm acted negligently. 
Accordingly, we conclude that Nichols's claims based on intentional
or reckless conduct were properly dismissed.
     B.   Nichols's Appeal of the Protective Order Is Untimely.

          Nichols argues that the trial court should have required
State Farm to obey the October motion to compel.  But this issue is
now moot because State Farm is no longer a party to the case and
the materials requested would not have undercut State Farm's
entitlement to summary judgment. 
          Nichols also argues that the trial court should not have
granted the protective order.  But this point is not properly part
of this appeal.  The protective order was granted to Gittlein, not
State Farm.  Gittlein is not a party to this appeal.  Nor has there
been any final judgment in Nichols's case against Gittlein. 
Therefore, we decline to rule on the trial court's granting of the
protective order. 
     C.   The Trial Court Did Not Err in Its Award of Attorney's
Fees.

          Under Civil Rule 82(b) a trial court is obligated to
award the prevailing party in a suit resolved before trial twenty
percent of its actual attorney's fees.  If the trial court deviates
from this formula, it must provide a written explanation for doing
so. [Fn. 21] 
          Here, the trial court's award was consistent with Rule
82(b)(2) and was supported by numerous affidavits and billing
records.  Nichols appeals the award, claiming that State Farm's
billing was excessive and that the trial court should have given
reasons for its finding that the billing was not excessive.
          But the trial court is under no obligation to give
reasons for an award that complies with the percentages expressed
in Rule 82(b)(2).  We will reverse an award of attorney's fees only
if the award is "arbitrary, capricious, manifestly unreasonable, or
stems from improper motive." [Fn. 22]  Nichols has not made a
sufficient showing to support reversal under this standard. 
V.   CONCLUSION
          AFFIRMED.


                            FOOTNOTES


Footnote 1:

     This is contested, as Gittlein claims that the ladder was
destroyed in the fire. 


Footnote 2:

     759 P.2d 523 (Alaska 1988).


Footnote 3:

     The court found that there was no just reason to delay entry
of a final judgment and expressly directed entry of judgment as
allowed by Civil Rule 54(b) in cases where a judgment does not
apply to all claims or parties.


Footnote 4:

     See Arctic Tug & Barge, Inc. v. Raleigh, Schwarz & Powell, 956
P.2d 1199, 1200 (Alaska 1998).


Footnote 5:

     See Shade v. Co & Anglos Alaska Serv. Corp., 901 P.2d 434, 437
(Alaska 1995). 


Footnote 6:

     See Christensen v. NCH Corp., 956 P.2d 468, 473 (Alaska 1998).


Footnote 7:

     Id.


Footnote 8:

     See Jones v. Jones, 925 P.2d 1339, 1340 (Alaska 1996).


Footnote 9:

     Id. (quoting Zimin v. Zimin, 837 P.2d 113, 124 (Alaska 1992)). 


Footnote 10:

     718 P.2d 456, 463 (Alaska 1986).


Footnote 11:

     See id. at 459.


Footnote 12:

     895 P.2d 484 (Alaska 1995).


Footnote 13:

     See id. at 487.


Footnote 14:

     See id. at 491-92.


Footnote 15:

     See id. at 492.


Footnote 16:

     Id. at 491 (citation omitted).


Footnote 17:

     See id.


Footnote 18:

     Id.


Footnote 19:

     State Farm argues: 

          There is no reason why burden shifting should
not be applied where the evidence is lost or destroyed by the
investigator (insurance agent, lawyer, paralegal, forensic expert,
etc.) of a party as opposed to being lost or destroyed by the party
himself.  If a plaintiff's lawyer loses or destroys evidence,
burden shifting can be applied to the plaintiff and there is no
need to create a cause of action allowing defendants to sue
plaintiff's lawyer.  The same can be said when the tables are
turned and evidence is destroyed or lost by a defendant's insurance
adjuster.


Footnote 20:

     Sweet, 895 P.2d at 493.


Footnote 21:

     See Alaska R. Civ. P. 82(b)(3) ("If the court varies an award,
the court shall explain the reasons for the variation.").


Footnote 22:

     Jones v. Jones, 925 P.2d 1339, 1340 (Alaska 1996) (quoting
Zimin v. Zimin, 837 P.2d 118, 124 (Alaska 1992)).