Great American Insurance Co. of New York v. Lowry Development, LLC, Case No. 1:06-CV-097 (S.D. Miss. November 30, 2007)

Judge L.T. Senter, Jr., Senior District Judge for the Southern District of Mississippi, who is hearing virtually all Katrina related insurance cases in Mississippi, has granted Great American’s motion for sanctions against Danny Groves of Groves & Associates insurance agency for destruction of a computer which may have contained information relevant to disputed issues in the insurance coverage lawsuit. At issue in the case is whether the policy in question covers wind damage, and more specifically, whether Groves believed wind damage was covered when he sold the policy.

Great American sought two documents, an invoice supposedly faxed to the insured showing the premium due on the policy, and a letter supposedly sent by Groves to the insured, a copy of which was found in the insured’s files. The letter acknowledges an exclusion for flood damage, but makes no mention of wind damage. No original of the letter has been found, and Great American sought the date when the letter was prepared.

Groves originally testified that his computer had been damaged by lightning in the summer of 2006, at which time he took it to a computer repair shop. There he was told that the computer was beyond repair and he left it with the repair service. Great American obtained a subsequent affidavit from the computer repair technician disclosing that in fact the computer had been repaired and returned in good working condition to Groves. The hard drive had been unharmed and there was no loss of data.

When confronted with the affidavit, Groves acknowledged that the computer had been returned to him, that he used it for several days, but when it malfunctioned a second time, he discarded it. Grove argued that his misstatements were not intentional, but rather the product of his emotional distress due to his son’s suicide shortly after Katrina.

The court ruled that Great American had established by clear and convincing evidence that the destruction of the computer had deprived the parties and the court of the benefit of any records that may have been contained in the computer hard drive, that the data stored on the computer was relevant evidence that Groves was under a duty to preserve during the pendency of the litigation, and that the destruction of the computer was not a result of simple negligence. The court further ruled that Groves’ untruthful testimony relating to the manner in which the computer was handled is sufficient to infer the necessary element of bad faith.

Accordingly, the court will permit Great American to introduce evidence at the trial concerning the disposition of the computer and Groves’ untruthful testimony on the matter. The Court also lowered Great American’s burden of proof on the issue of mutual mistake of fact to one of preponderance of the evidence in order to ameliorate the loss of evidence.

Read the Court’s Opinion