APPEAL from the Circuit Court of McLean County; the Hon.
WILLIAM D. DeCARDY, Judge, presiding.
MR. JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:
Rehearing denied October 14, 1981.
Our inquiry: Is plaintiff law firm entitled to attorney fees on the subrogation recovery paid to State Farm?
State Farm Insurance (defendant) appeals a circuit court judgment granting plaintiff's motion for summary judgment and denying State Farm's cross-motion for summary judgment. Dunn, Brady (plaintiff) — a legal partnership — sued to recover attorney's fees for services allegedly performed which were beneficial to State Farm. Dunn, Brady claims that through its representation of individuals insured by State Farm (a subrogee), it recovered monies paid to the clients under State Farm's automobile insurance policy.
The chronology of events is complex.
On June 19, 1975, at Zephyr Cove, Nevada, an automobile accident occurred. Dallas Lane, members of his family, and a family friend were passengers in Lane's Winnebago which was struck head-on by a car driven by a California resident. The Winnebago was destroyed, Lane's party suffered personal injuries, and the California resident was killed.
The California resident was insured by Commercial Union Assurance Company (Commercial). Lane, an Illinois resident, was insured by State Farm for personal injury, property damage, medical payments, lost earnings, and collision. The Lanes were ultimately paid in excess of $28,000 for physical damages, and medical and wage claims, by State Farm under the policy.
In July 1975, Lane hired plaintiff law firm to represent him in the personal injury suit, and plaintiff contacted State Farm to obtain its investigation file. State Farm referred plaintiff to a field claim representative for Commercial. Both carriers were advised that plaintiff represented the passengers in the Winnebago.
In September of 1975, State Farm began reimbursing the injured for their medical bills, and the insureds signed forms entitled "receipt for expense advance." Those payments continued through 1977, when the case was ultimately settled.
On September 26, 1975, State Farm sent Commercial its notice of subrogation lien. An interoffice memorandum, and deposition testimony in the record from Gerald Larsen, a claims adjuster for Commercial, indicate that by November of 1975 Commercial accepted liability on behalf of its deceased insured and would honor State Farm's subrogation payments upon requisite proof of loss.
On January 28, 1976, plaintiff asked defendant if it could represent State Farm on its subrogation claim. State Farm refused, telling plaintiff that it intended to pursue the subrogation claim directly with Commercial. On April 1, 1976, Commercial began making payments ...