Donald Waterhouse made a claim for $100,000 in underinsured motorist coverage from State Farm Mutual Automobile Insurance Co. for the injuries he suffered in a car crash caused by George D. Robinson. Robinson was insured by State Farm, which settled Waterhouse’s negligence case for his $50,000 policy limit. The common fund doctrine might apply to the offset State Farm declared it would take (totaling $27,463) for the money Waterhouse received under his policy’s medical payments coverage.
When State Farm settled on behalf of Robinson, it sent a letter waiving its subrogation rights. But the correspondence to Waterhouse’s lawyer continued, “As of today, we have paid $27,463 under your client’s medical payments coverage. In the event that your client’s case goes into underinsured motorist arbitration, we will be taking this amount as an offset along with a credit of $50,000, which is deemed paid under Robinson’s liability coverage.”
In a motion to adjudicate State Farm’s alleged lien, Waterhouse claimed he was entitled to a credit under the Common Fund Doctrine – against the offset claimed by State Farm – for a proportional share of the fees and costs he incurred in obtaining the tort recovery.