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Tenney v. American Family Mut. Ins. Co.

OPINION FILED SEPTEMBER 28, 1984.

HAROLD F. TENNEY, PLAINTIFF-APPELLEE,

v.

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Macon County; the Hon. Paul M. Francis, Judge, presiding.

JUSTICE MILLER DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 16, 1984.

On January 21, 1983, plaintiff, Harold F. Tenney, filed this action against American Family Mutual Insurance Company for legal fees and expenses incurred in the recovery of a subrogation claim. Following a bench trial, the trial court entered judgment for plaintiff in the amount of $694.31. Defendant, American Family Mutual Insurance Company, appeals.

The basic facts of the case are uncontroverted. On May 13, 1981, a vehicle driven by Robin Moore was struck in the rear by a vehicle driven by Barbara Spencer. Defendant, Moore's insurer, paid him $2,042.50 under its medical payments coverage. On January 14, 1982, Moore retained the plaintiff to represent him in his claim against Spencer.

By letter dated October 29, 1981, defendant notified Moore that it had a subrogated claim against Spencer to the extent of the medical payments it had advanced. The letter advised that defendant would deal directly with Spencer's insurer, State Farm Insurance Company, regarding the subrogation claim. Defendant also informed Spencer and State Farm of its subrogation claim, and of the company's determination to collect.

On February 25, 1982, defendant expressly notified plaintiff that he was not to collect the subrogation claim. Plaintiff replied by letter, stating in part:

"I am aware of your subrogation rights but nonetheless want you to make payment [of Moore's medical bills]. We will have to see what is involved in Robin's claim against State Farm before we know whether you should contribute to his legal expenses. However, I acknowledge that you are denying responsibility at this time."

At trial, plaintiff admitted that soon after he began representing Moore, he became aware that defendant did not wish him to collect the subrogation claim and would not pay him if he did so.

On November 24, 1982, plaintiff filed suit on behalf of Moore against Spencer. Shortly thereafter, a settlement was reached in the amount of $2,625 for bodily injury and $517.36 for damages to Moore's automobile.

State Farm tendered a check made payable to Moore, plaintiff, and defendant. Plaintiff offered to endorse the check if defendant would agree that an endorsement would not constitute a waiver of plaintiff's claim for attorney's fees and expenses in connection with the recovery of the subrogation claim. Defendant refused to assent, demanded that plaintiff endorse the check, and threatened to file suit if he refused to do so. Plaintiff then filed the present claim against the defendant for legal fees and expenses.

The trial court ruled in favor of plaintiff by applying the "fund doctrine." The "fund doctrine" is based on the equitable concept that an attorney who performs services in creating a fund should in equity and good conscience be allowed compensation out of the whole fund from those who seek to benefit from it. (Baier v. State Farm Insurance Co. (1977), 66 Ill.2d 119, 361 N.E.2d 1100.)

"In order to recover under the doctrine it is necessary for a plaintiff seeking recovery from a subrogee to show (1) that the fund was created as a result of legal services performed by an attorney * * * (2) that the subrogee did not participate in the creation of the fund, and (3) that the subrogee benefited out of the fund that was created." Smith v. Marzolf (1980), 81 Ill. App.3d 59, 64, 400 N.E.2d 949, 953.

Defendant argues that the fund doctrine does not apply because: (1) plaintiff was informed that he was not representing defendant, (2) yet plaintiff forced his services on defendant, and (3) defendant assisted in creation of the fund.

Defendant claims that its efforts, and not plaintiff's, created the fund. The record does not support this argument. Plaintiff filed suit on Moore's behalf, prepared interrogatories, took other preliminary steps for discovery, and arranged for Moore to be examined by a medical expert in preparation for litigation. The ...


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