Subsequent Remedial Contract Measures: The Case for Applying Rule 407's Bar on Subsequent Remedial Measures in Breach of Contract Claims

Abstract

Imagine you are preparing a new insurance coverage agreement for 2020 effective April 1, 2020. One exclusion provision from the 2019 policy in particular stands out to you. It is the microorganism exclusion, which bars coverage for losses “directly or indirectly arising out of or relating to: mold, mildew, fungus, spores, or other microorganisms of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health.” Reviewing this exclusion provision, you believe in light of the COVID-19 pandemic it should be made crystal-clear that it includes viruses. Therefore, you add an exclusion for “losses attributable to any communicable disease, including viruses,” to the new 2020 policy.

As you weather the COVID-19 pandemic, your business begins to experience litigation over your insurance policy. Your policyholders expect the 2019 agreement to cover losses attributable to the COVID-19 pandemic. To support said position, one plaintiff argues your addition of the communicable diseases exclusion in the 2020 policy supports their position that the 2019 policy covers losses attributable to the COVID-19 pandemic. Yet, you know this added language was only meant to clarify future policies, not show that the 2019 policy covered losses attributable to the COVID-19 pandemic. Whether a federal court will admit this evidence depends on the circuit in which it sits.

Federal courts are divided on whether Rule 407, which bars evidence of subsequent remedial measures, applies to modified language in contractual agreements.The majority approach applies Rule 407 to contract cases because such disputes apply under the plain-meaning of Rule 407 and implicate its policy goals. On the other hand, a minority of circuits do not apply Rule 407 to contract cases because Rule 407 is written with tort-based language and the policy goals of Rule 407, such as preventing future injuries, are in their opinion not implicated in contract disputes.

This article argues the majority approach, that Rule 407 applies in breach of contract cases, is the correct application for future courts to apply when tasked with this matter. Following this introductory Part I, this paper proceeds in four parts. Part II introduces the reader to Rule 407 by explaining the Rule’s history, application, and policy goals. Part III explores the split among federal courts regarding Rule 407’s applicability to contract cases. This portion articulates the rationale for both the majority and minority approaches to Rule 407 in breach of contract disputes. Part IV argues for the majority approach. The majority approach applies the plain-meaning approach to Rule 407’s text and fulfills the Rule’s policy objective. Part V displays how the Federal Rules of Evidence could be amended to conclusively adopt the majority approach for all future contract cases in the federal court system.