Proper Notice for the Common Fund

 

Al Wajnberg and Dayna L. Wunglueck were involved in a car accident in 2007.  Wajnberg's insurer, Erie Insurance Co.www.erieinsurance.com, paid $10,000 toward Wajnberg's medical expenses.  Erie then filed a subrogation claim against Wunglueck’s insurer, Farmers, seeking recovery of the $10,000 through arbitration reimbursement.   Erie sent Farmers a letter stating “[p]lease protect the interest of Erie insurance at the time of settlement with our insured.” 

During the subrogation claim, Wajnberg filed a personal injury claim against Wunglueck.  Wajnberg and Wunglueck ultimately settled their lawsuit for $40,000, which included Erie’s medical payment subrogation claim. Wajnberg and his attorney first became aware of Erie's lien during settlement negotiations after Famer’s provided a copy of Erie’s letter. After the settlement, Wajnberg filed a motion to adjudicate Erie's lien. The court ultimately reduced the $10,000 lien by one-third, pursuant to the “common fund doctrine.”  Erie appealed.

The appellate court affirmed. Wajnberg v. Wunglueck. 2011 IL App (2d) 110190 (Dec. 2011). The court explained that the prevailing party (in the personal injury case) bears the cost of attorney’s fees.  One exception to this rule is the equitable “common fund doctrine,” which protects attorneys who deal with nonparticipating insurance companies (Erie).  If an attorney performs legal services and a nonparticipating subrogee (Erie) benefits, a fund is created.  If Erie benefits then Erie should absorb its share of attorney's expenses (from the personal injury case).

The “common fund doctrine” does not apply if an insurer “promptly and unequivocally” advises the plaintiffs and /or their attorneys of its intention to pursue its own subrogation claim and disclaims any intention to employ the plaintiff’s attorney. This is called a Tenney letter. Tenney v. American Family Mut. Ins. Co., 128 Ill. App. 3d 121 (1984). Erie’s letter to Farmers may be reasonably interpreted as Erie’s desire to assert a lien for medical payments. Further, after Erie found out about the personal injury case, Erie could have sent a Tenney letter to Wajnberg or his attorney. Because Erie did not participate in the personal injury case or the fund, never sent a Tenney letter to Wajnberg or his attorney, and ultimately benefited from the settlement, the common fund doctrine applied and Erie’s lien was reduced. 

 

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