Illinois Appellate Court Dismisses Appeal on Underinsured Motorist Common Fund Lawsuit

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.

The trial judge decided that the Common Fund Doctrine did not apply in this case. An appeal was taken to the Illinois Appellate Court, which acknowledged that there was a “possibility” that the Common Fund Doctrine might apply, depending on what happens in arbitration. However, the 4th District dismissed the appeal because there was no justiciable controversy.

Under Article VI, Section 9, of the Illinois Constitution of 1970, “the existence of a ‘justiciable matter’ is a prerequisite to the Circuit Court’s subject-matter jurisdiction.” Ferguson v. Patton, 2013 IL 112488.

The Illinois Supreme Court has held “justiciability encompasses a range of concepts, such as advisory opinions, feigned and collusive cases, standing, ripeness, mootness, political questions and administrative questions.” Ferguson, ¶ 23.

The doctrine of justiciability aims “to reserve the exercise of judicial authority for situations where a natural controversy exists.” Ferguson, ¶ 23. In this context, the word actual “does not mean that a wrong must have been committed and injury inflicted.  Rather, it requires a showing that the underlying facts and issues of the case are not moot or premature, so as to require the court to pass judgment on mere abstract propositions of law, render an advisory opinion or give legal advice as to future events. The case must, therefore, present a concrete dispute admitting of an immediate and definitive determination of the parties’ rights, the resolution which will aid in the termination of the controversy or some part thereof.”

“The Common Fund Doctrine is an exception to the general American rule that, absent a statutory provision or an agreement between the parties, each party to litigation bears its own attorney fees and may not recover those fees from an adversary.” Wendling v. Southern Illinois Hospital Services, 242 Ill.2d. 261 (2011).

In another Illinois Appellate Court case, it was found that when the insurance company benefited from the common fund created solely by the insured’s attorney, the fact the insured’s policy allowed the insurance company to recover medical payments made through its underinsured-motorist coverage, did not negate its obligation to pay the insured’s attorney for his services in creating the common fund.  Stevens v. Country Mutual Insurance Co., 387 Ill.App.3d 796 (2008).

Accordingly, in this case, the appeals panel found the plaintiff’s attorney has a potential Common Fund Doctrine claim for her work on the $50,000 settlement, which depends on the resolution of the plaintiff’s underinsured-motorist claim. While the court disagreed with State Farm’s assertion, plaintiff’s Common Fund Doctrine claim is completely foreclosed by its waiver of its subrogation rights to the tort settlement, we agree with State Farm’s suggestion plaintiff’s Common Fund Doctrine claim is premature at this time. Therefore, the appeals panel found that the plaintiff’s Common Fund Doctrine claim did not present a justiciable matter, and thus the Circuit Court should have dismissed plaintiff’s motion to adjudicate liens based on the lack of subject-matter jurisdiction.

Waterhouse v. Robinson, 2017 IL App (4th) 160433.

Kreisman Law Offices has been handling automobile accident cases, truck crash cases, wrongful death lawsuits, motorcycle accidents, bicycle accidents, pedestrian accidents and catastrophic injury lawsuits for individuals, families and the loved ones who have been injured, harmed or killed by the negligence of another for more than 40 years, in and around Chicago, Cook County and its surrounding areas, including Chicago (Hegewisch, Lake Calumet, East Side, Ashburn, North Lawndale, Englewood, Austin, Riverdale), Wheaton, Hinsdale, Cary, Crystal Lake, Gurnee, Lake Bluff, Zion, Lake Forest, Lake Zurich, Bensenville and Schaumburg, Ill.

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