Illinois Appellate Court Issues Decision Interpreting Applicability of Common Fund Doctrine in Motor Vehicle Accident Lawsuit

In a recent opinion from the Fourth District Appellate Court of Illinois, the plaintiff alleged that he suffered injuries as a result of another motorist’s negligence during a collision that occurred in January 2014. In November 2015, the plaintiff filed a motion seeking to adjudicate liens for medical expenses that had been paid related to the plaintiff’s injuries from the accident. In the motion, the plaintiff alleged that according to the common fund doctrine, the lienholders were required to reduce their liens by one-third and to assume a pro rata portion of the costs associated with the litigation. The plaintiff eventually settled with one of the lienholders. Regarding the second lienholder, the trial court denied the plaintiff’s motion.

In May 2016, after the plaintiff and the defendant in the negligence lawsuit entered into a settlement, the defendant filed a motion to enforce the settlement agreement and to dismiss the lawsuit with prejudice. The court granted the motion, and in July 2015, the trial court entered an amended judgment. The plaintiff promptly filed an appeal regarding the lower court’s denial of his motion to adjudicate the second lienholder’s liens. More specifically, the plaintiff argued that the lower court erred in concluding that the common fund doctrine did not apply to the liens, due to payments it made to the plaintiff pursuant to the medical payments coverage portion of the plaintiff’s insurance policy.

The appellate court began its analysis by reviewing the record. First, it noted that the lienholder’s lien was based on payments it made pursuant to the medical coverage clause in the plaintiff’s policy. It also noted that during the litigation, the lienholder had waived its right to subrogation for the $50,000 settlement between the plaintiff and the defendant. The record showed, however, that the lienholder preserved the right to take $27,463.04 as an offset for the medical payments in the event the matter went to arbitration, along with a $50,000 credit that was paid under the defendant’s insurance policy. The appellate court also noted that the parties were still adjudicating the issue of underinsured motorist coverage.

Next, the court defined the common fund doctrine as an exception to the standard rule that, absent a statute or an agreement between the parties, each party is required to bear their expenses of litigation, including attorney’s fees, and may not recover those fees from another party. Conversely, the common fund doctrine permits a lawyer who preserves, creates, or increases the value of a fund in which other persons may have an ownership interest to be reimbursed for the expenses he or she incurred related to the litigation, including attorney’s fees. The attorney must prove three factors to be entitled to compensation under this doctrine. The attorney’s legal services must have resulted in the creation of the fund, the subrogee must have not been involved in creating the fund, and the subrogee must benefit or have benefited from the fund.

Ultimately, the court concluded that the plaintiff’s common fund claim was premature and depended on the outcome of the underinsured motorist coverage dispute. If the lienholder was able to reduce its total liability by the settlement amount or offset its medical payments, it would benefit from the settlement. At the time of the appeal, however, the potential benefit was too attenuated to support the plaintiff’s claim under the common fund doctrine. Accordingly, the appellate court vacated the lower court’s judgment denying the plaintiff’s motion to adjudicate the liens.

Understanding your legal rights and dealing with insurance companies after an unexpected and devastating motor vehicle accident can be very stressful. At Therman Law Offices, we have guided many victims and their families through the legal process and are prepared to help you ensure that your rights are protected at all times. We offer a free consultation to help you learn more about your situation and how we may be able to assist you. Call us now at 312-588-1900 or contact us online to get started.

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