Common Fund Doctrine and Attorneys Fees
In Scheppler v. Pyle, Peggy Scheppler was involved in an automobile accident with a vehicle driven by Tom Pyle. At the time of the accident, Scheppler and her husband had an automobile insurance policy issued by Country Mutual Insurance. The policy contained a medical payment limit of $50,000 and an underinsured motorist coverage limit of $250,000. On January 5, 2010, through counsel, the Scheppler filed a complaint against Pyle for personal injuries and loss of consortium arising out of the accident. American Family, the insured for Pyle, offered to settle. Settlement offer included payment of its policy limit of $100,000 in exchange for a release of Pyle’s liability.
Scheppler’s counsel wrote a letter to Country informing it of the settlement offer from American Family. In the letter, counsel demanded that Country either: (1) protect Country’s subrogation rights by advancing payment to Peggy Scheppler in the full amount of American Family’s policy limit within 30 days, or (2) approve the execution of a release in favor of Pyle, thereby waiving Country’s subrogation rights against Pyle. In response to counsel’s letter, a liability specialist at Country, wrote a letter that stated that Country will waive its subrogated rights to its $50,000 medical payments and take it as a setoff from its underinsured motorist bodily injury policy limits. Scheppler’s attorneys also received a form letter asking them if they would be willing to represent Country’s subrogation interests in the medical payments for a one-third contingency fee. Scheppler’s counsel did not sign the letter. On March 1, 2011, the Scheppler’s counsel received the settlement checks from American Family’s counsel.
On March 4, 2011, Scheppler’s attorneys filed a Motion to Adjudicate Subrogation Claim of Country Financial. In their motion, Scheppler’s attorneys argued that they recovered a common fund of $100,000, which benefited Country since it allowed Country to: (1) recover amounts it paid under the medical payments provision of the policy; and (2) limit its liability for Scheppler’s underinsured motorist claim by deducting the amount of the common fund from its underinsured motorist liability. Scheppler’s attorneys argued that Country had received these benefits thanks to the efforts of the attorneys without having to expend any of its own administrative or legal resources. Moreover, they argued that at no time did Country instruct the attorneys to retain them from taking action to recover its subrogation lien. In fact, prior to the settlement of the bodily injury claim, Country sent correspondence to the attorneys requesting that they represent Country for medical payment interests at resolution of the case for a third contingency fee.
The court reviewed whether under the common funds doctrine, a lawyer who recovers an amount of money for the benefit of a person other than his client is entitled to reasonable attorney fees from the fund. The court held that the efforts of Scheppler’s attorneys resulted in a $100,000 settlement from American Family. Country did not participate in the creation of that settlement fund in any way. Nor did it intervene in Scheppler’s tort suit against Pyle. Nor did it participate in the settlement negotiations, or file an arbitration demand against American Family to recover the medical payments it made to Scheppler. Moreover, the creation of the settlement fund benefited Country by allowing it to deduct the full amount of the settlement and the $50,000 in medical payments from its underinsured motorist liability. The court held that the common fund doctrine applies, and Scheppler’s attorneys are entitled to recover a reasonable fee from Country.
Scheppler v. Pyle 2013 IL App (3d) 110380-U, Not Reported in N.E.2d, 2013 WL 2146435 (Ill.App. 3 Dist.,2013). (Filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).).
