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Lawyers Recover Legal Fees Under A Common Fund Theory

The case at issue here, Tuggle Schiro & Lichtenberger, P.C., v. Country Preferred Insurance Company, 2015 IL App (4th) 141036-U is an unpublished opinion of the Illinois Appellate Court for the Fourth District.

The fee dispute arose out of an automobile accident case. The plaintiff, Carroll Watson, who was insured by County Preferred suffered injuries as a result of an automobile accident. Watson hired Tuggle Schiro & Lichtenberger (Tuggle) to represent him in the litigation. Watson also submitted medical bills to County Preferred, which made payments directly to medical providers. The medical payments made by County Preferred exhausted the policy’s $50,000 limit of medical payments.

The Tuggle firm obtained a settlement of $100,000 from the party that caused the auto accident. Additionally, the Tuggle firm obtained a payment of $150,000 from County Preferred on Watson’s uninsured motorist coverage. County Preferred asserted its right to take a credit of $50,000 for payments it made for medical payments for Watson.

The Tuggle firm then argued that it was entitled to a payment of $16,666.66 from County Preferred. The firm’s theory is that is obtained a recovery of $150,000 on the uninsured motorist coverage. County Preferred subtracted the medical payments it had already made ($50,000) and argued that the firm’s “recovery” for the client was $100,000, not $150,000.

The Tuggle firm then filed a petition to obtain $16,666.66 as it was solely responsible for “creating the entire $150,000 fund, payable through Watson’s underinsured motorist-coverage.”

The Court agreed and the Appellate Court affirmed. The Appellate Court held that the law firm created a common fund for the benefit of its client, Watson, and the insurance company. The court held that the Tuggle firm proved (a) the fund ($150,000) was created as a result of its legal work; (b) County Preferred did not participate in the creation of the fund; and (c) County Preferred benefitted from the work of the attorneys. The court found that the insurance company benefitted because it was not required to file suit or hire a lawyer to recoup its out-of-pocket costs.

This argument must have annoyed County Preferred because the fund that was created came from the insurance company (through its uninsured motorist coverage). County Preferred might be frustrated that the common fund that was created for its benefit was its own money.

In sum, this is a classic common fund doctrine case where a lawyer can recover a legal fee without an engagement letter from a party that benefits from its legal services.

Edward X. Clinton, Jr.