Many states allow insurers to pursue subrogation to recover amounts paid to or on behalf of an insured. Alabama is no different, permitting both contractual and equitable subrogation. What is more controversial is whether the common fund doctrine requires an insurer to give up a portion of its recovery to compensate the insured’s attorney, even after directing the insured and her attorney to take no action on its behalf. In a recent opinion from the Alabama Court of Civil Appeals, the court, contrary to long-standing Alabama law, imposed a new rule of involuntary application of the common-fund doctrine to a party that expressly rejected representation by the attorney claiming to be entitled to collect a pro rata share of attorney’s fees. Mitchell v. State Farm Mutual Automobile Insurance Company, 2011 WL 4790636 (Ala. Civ. App. Oct. 7, 2011). This new opinion allows an attorney to force unwanted and unauthorized services on an insurer and requires the insurer to pay a fee for those services. To apply the common-fund doctrine in a manner that forces a party to accept and pay for legal representation that it has expressly rejected is not only inconsistent with, but completely eviscerates, the equitable foundation of the common fund doctrine. Such a rule was certainly not what was intended by the common fund doctrine, and turns the notion of equity on its head. Fortunately, on January 19, 2012, the Alabama Supreme Court granted a petition for writ of certiorari to review the Mitchell opinion. More to follow as this case continues to wind its way through the courts.
Can a lawyer force unwanted legal services on an insurer? Under the common fund doctrine in Alabama, apparently so (at least for now).
April 4, 2012 | by David Fawal
Can a lawyer force unwanted legal services on an insurer? Under the common fund doctrine in Alabama, apparently so (at least for now).April 4, 2012 By David Fawal |
Many states allow insurers to pursue subrogation to recover amounts paid to or on behalf of an insured. Alabama is no different, permitting both contractual and equitable subrogation. What is more controversial is whether the common fund doctrine requires an insurer to give up a portion of its recovery to compensate the insured’s attorney, even after directing the insured and her attorney to take no action on its behalf. In a recent opinion from the Alabama Court of Civil Appeals, the court, contrary to long-standing Alabama law, imposed a new rule of involuntary application of the common-fund doctrine to a party that expressly rejected representation by the attorney claiming to be entitled to collect a pro rata share of attorney’s fees. Mitchell v. State Farm Mutual Automobile Insurance Company, 2011 WL 4790636 (Ala. Civ. App. Oct. 7, 2011). This new opinion allows an attorney to force unwanted and unauthorized services on an insurer and requires the insurer to pay a fee for those services. To apply the common-fund doctrine in a manner that forces a party to accept and pay for legal representation that it has expressly rejected is not only inconsistent with, but completely eviscerates, the equitable foundation of the common fund doctrine. Such a rule was certainly not what was intended by the common fund doctrine, and turns the notion of equity on its head. Fortunately, on January 19, 2012, the Alabama Supreme Court granted a petition for writ of certiorari to review the Mitchell opinion. More to follow as this case continues to wind its way through the courts.
