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Taylor v. American Family Insurance Group

March 03, 2000


Appeal from the Circuit Court of St. Clair County. No. 97-MR-20 Honorable Scott Mansfield, Judge, presiding.

The opinion of the court was delivered by: Presiding Justice Goldenhersh

This appeal arises out of a dispute between defendant American Family Insurance Group (American Family), as subrogee, and its insureds, Emma Taylor and Billy Taylor, and the Taylors' attorney, Rhonda D. Fiss, plaintiffs herein. The Taylors were insured by American Family. Emma Taylor was involved in an automobile accident, and defendant State Farm Mutual Automobile Insurance Company (State Farm) was the liability carrier of the vehicle driven by the tortfeasor, Danny Gibbs. The Taylors' policy with American Family included medical-payments coverage with a $10,000 limit per occurrence. American Family paid that amount to Emma Taylor. The Taylors retained attorney Rhonda Fiss to represent them in an action against Gibbs. Ultimately, Fiss reached a settlement agreement with State Farm for $55,000, of which $10,000 was paid by a separate check from State Farm made payable to Emma Taylor, Fiss, and American Family. American Family refused to pay Fiss a one-third portion of the $10,000, claiming that it pursued its subrogation claim separately through arbitration. Plaintiffs filed a petition for adjudication of attorney's lien, claiming that Fiss was entitled to one- third of the $10,000 under the fund doctrine. The trial court granted plaintiffs' petition and entered judgment in favor of plaintiffs and against American Family on count I, in the amount of $3,300 for attorney fees and $246 for costs, and in favor of State Farm and against plaintiffs on count II. On appeal, American Family contends that the trial court erred in entering judgment in favor of plaintiffs on count I by awarding Fiss attorney fees with regard to American Family's $10,000 medical-payments subrogation interests. No appeal was taken with regard to count II; however, State Farm filed a brief and participated in oral argument. We affirm.


Emma Taylor was involved in an automobile accident on January 5, 1994, at approximately 6:10 p.m., at the intersection of Route 157 and the Interstate 55/70 entrance ramp in Collinsville, with a vehicle driven by Danny Gibbs. Gibbs attempted to make a left turn in front of Emma Taylor in order to get onto the entrance ramp. Taylor retained Rhonda Fiss to represent her in a personal injury action against Gibbs.

The Taylors were insured by American Family, and the vehicle operated by Gibbs was insured through State Farm. The Taylors' insurance policy with American Family included, inter alia, medical- payments coverage with a $10,000 limit per occurrence. As a result of the accident with Gibbs, Taylor claimed benefits under the medical- payments portion of her policy and was paid the coverage limit of $10,000.

The American Family policy also contained the following subrogation provision:

"5. Our Recovery Rights. If we pay under this policy, we are entitled to all the rights of recovery of the person to whom payment was made against another. That person must sign and deliver to us any legal papers relating to that recovery, do whatever else is necessary to help us exercise those rights[,] and do nothing after loss to harm our rights. When we pay damages under this policy to a person who also collects from another, the amount collected from the other shall be repaid to us to the extent of our payment."

In a letter dated February 3, 1994, American Family advised Fiss that pursuant to Tenney v. American Family Mutual Insurance Co., 128 Ill. App. 3d 121, 470 N.E.2d 6 (1984), it planned to "represent its own subrogation interests as to medical payments advanced or to be advanced to the insured."

The letter further stated:

"This Company, therefore, neither solicits your services to represent it in this regard[,] nor will it recognize any lien upon the subrogation amount claimed under the 'Fund Doctrine' for services gratuitously given.

Please be informed that we are also advising the tortfeasor's carrier, pursuant to the Tenney Case, to issue a separate draft representing this Company's subrogation interest only and naming the Company as sole payee as subrogee of the insured as per the rights accorded under the insured's contract of insurance. This separate draft will most likely be coming from the amount of the settlement between our insured and State Farm Insurance."

An identical letter was sent to Fiss by American Family on April 22, 1994. On that same date, American Family sent State Farm a letter in which it advised State Farm that it would be representing its own subrogation interests in the matter. The letter also explained that Fiss did not have the authority to represent American Family in the matter and that Fiss had been so advised.

On June 29, 1994, American Family sent letters to Fiss and State Farm notifying both that the $10,000 medical-expense limit of the policy had been reached and that American Family was seeking 100% reimbursement. On July 6, 1994, Fiss filed a lawsuit against Gibbs. On August 11, 1994, American Family sent Fiss another letter in which it requested a copy of any lawsuit filed by her on behalf of Emma Taylor. Fiss did not reply to the letter. On November 17, 1995, American Family filed a petition for the arbitration of its subrogation claim with an arbitration forum. On November 20, 1995, Larry Hellwig, outside counsel for American Family, sent Fiss a letter explaining that American Family elected to pursue its $10,000 medical-pay subrogation interests through arbitration because both American Family and State Farm are members of the Conference of Casualty Insurance Companies, Inc., arbitration forum (CCIC). State Farm did not receive the arbitration petition until December 11, 1995. After receiving the petition, State Farm notified CCIC that it was not contesting liability, but it requested that the arbitration matter be deferred because of pending litigation.

Attorney Hellwig sent Fiss another letter, dated December 14, 1995, in which he again advised Fiss that American Family retained him to represent its medical-pay subrogation interest and that the matter was being handled through arbitration. The letter reiterated that American Family's medical-payment interest should not be included in the personal injury lawsuit. On January 24, 1996, the CCIC notified State ...

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