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Allis-Chalmers Corp. Product Liability Trust v. Liberty Mut. Ins. Co.

November 26, 1997


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.

Approved for Publication November 26, 1997.

Before Judges Shebell, A.a. Rodriguez and Coburn. The opinion of the court was delivered by Shebell, P.j.a.d.

The opinion of the court was delivered by: Shebell

The opinion of the court was delivered by


On March 29, 1990, Marisa Dalfonzo, the wife of the decedent, Peter Dalfonzo, filed a wrongful death action in the Law Division naming Foley Towlift, Inc., Lift Trucks, Inc., and Nichols Engineering & Research Co. as defendants. The complaint was subsequently amended to name Allis-Chalmers Corporation Product Liability Trust (Allis-Chalmers) and Kalmar A.C. Handling Systems, Inc., as additional defendants. Dalfonzo was represented in those proceedings by the law firm of Levinson, Azelrod, Wheaton and Grayzel, P.C. (Levinson Firm).

On September 25, 1992, Allis-Chalmers moved to file a third-party complaint against Liberty Mutual Insurance Company (Liberty), alleging that Liberty committed the tort of spoliation of evidence by consenting to the destruction of the forklift, manufactured by Allis-Chalmers, that overturned causing decedent's death. Liberty was the Workers' Compensation insurance carrier for decedent's employer, Able Fab Company (Able Fab), and was paying worker's compensation benefits to decedent's family. Allis-Chalmers alleged that Liberty was an interested party in the wrongful death action by virtue of its right to reimbursement of the workers' compensation benefits already paid to the decedent's family if decedent's estate recovered damages. Allis-Chalmers' motion was denied on October 13, 1992.

On November 10, 1992, Allis-Chalmers filed a separate action against Liberty alleging essentially the same cause of action as its previously unsuccessful motion. Liberty answered Allis-Chalmers' complaint and filed a third-party complaint against the Levinson Firm. Thereafter, the Levinson Firm moved to dismiss the third-party complaint for failure to state a cause of action. Levinson's motion was granted on June 25, 1993. At about that same time, the wrongful death claim was settled on behalf of Allis-Chalmers. On August 24, 1995, Liberty moved for summary judgment in the spoliation action. Allis-Chalmers opposed Liberty's motion and filed a motion to relax the burden of proof as to causation and damages at trial. Oral argument was heard on September 29, 1995 and Liberty was granted summary judgment.

Allis-Chalmers appeals and Liberty cross-appeals from the dismissal of its third-party complaint against the Levinson Firm. We affirm the grant of summary judgment as to Allis-Chalmers and dismiss the cross-appeal as moot.

Decedent was an employee of Able Fab. His death occurred while he was operating an allegedly defective forklift manufactured by Allis-Chalmers. The forklift was ultimately destroyed and its destruction is the subject of this spoliation action. Nichols Engineering & Research Corporation sold the forklift to Able Fab; Foley Towlift, Inc. and Lift Truck, Inc. were responsible for the forklift's maintenance.

According to Mary Ann Matthiessen, an employee in Liberty's claims department, Liberty became aware of the fatal accident on December 7, 1989, the day after it occurred. Matthiessen was assigned on February 26, 1990 to investigate any potential third-party claims. On March 1, 1990, she stated she was present, at the request of Able Fab, Liberty's insured, when an engineer inspected the forklift to determine the viability of a third-party claim. Liberty and the Levinson Firm were to share the cost of the inspection. After the inspection, the engineer opined that there was a defect in the forklift that had probably led to the accident. Matthiessen had been instructed to cooperate with the Levinson Firm because Liberty "had a lot to gain ... in recovery."

Matthiessen admitted that the forklift was "an integral aspect of [her] determination of a potential third-party claim" because it was a "product-based third-party claim." Part of her duties as a Liberty representative was to ensure that Able Fab cooperated with the investigation of the third-party claim. Although she coordinated the examination of the forklift as well as the Levinson Firm's interview of Able Fab employees, she never directed Able Fab to preserve the forklift for the litigation.

In May 1990, DeMott of Able Fab contacted Matthiessen wanting to sell the forklift to Liberty for $6,000. Although they did not discuss anything about a duty to preserve the forklift, Matthiessen may have advised DeMott that it was in Able Fab's best interest to keep the forklift. Able Fab apparently had personal counsel at this time. Liberty considered purchasing the forklift, but eventually decided against it. Matthiessen said Liberty was aware "that the [forklift] could be a vital part of a third-party action" and that Able Fab was going to scrap the forklift if it was not bought. She did not recall if Liberty discussed with the Levinson Firm that the forklift should be preserved.

Before Matthiessen rejected Able Fab's offer to buy the forklift, she spoke to Liberty's house counsel. Specifically, she told counsel "that we were the Workers' Compensation carrier for Able Fab, that there was a potential third-party claim, and Able Fab owned the product that was in question." She explained that Able Fab wanted to "get rid" of the forklift and she asked counsel whether Able Fab had a duty to retain the forklift. According to Matthiessen, she was advised that the Levinson Firm could get a ...

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