Mitchell v. State Farm Mutual Automobile Insurance Co.

Annotate this Case

Following an automobile accident in which Tracy Mitchell was injured when the vehicle in which she was a passenger, State Farm Mutual Automobile Insurance Company, Mitchell's insurer, paid Mitchell's medical expenses, among other coverage payments, and then sought, through subrogation, reimbursement from the driver Amy Kirk's insurer, Cotton States Mutual Insurance Company. Mitchell filed a personal-injury action against Kirk, State Farm, and fictitiously named defendants, alleging as to State Farm, among other things, that State Farm's right to recover from any damages awarded its payment of Mitchell's medical expenses was subject to a reduction, pursuant to the common-fund doctrine, for attorney fees incurred by Mitchell in pursuing the personal-injury action. The circuit court granted State Farm's summary-judgment motion, holding that the common-fund doctrine did not obligate State Farm to pay a pro rata share of Mitchell's attorney fees. Mitchell appealed the circuit court's decision to the Court of Civil Appeals. The Court of Civil Appeals reversed the circuit court's summary judgment, concluding that a common fund was created requiring State Farm to contribute to Mitchell's attorney fees; that the common-fund doctrine had not been contractually abrogated; and that the common-fund doctrine was not negated by State Farm's "active participation" in pursuing subrogation recovery. The Supreme Court granted certiorari review to determine, as a matter of first impression, the narrow question whether, under the common-fund doctrine, the subrogated insurance carrier was responsible for a pro rata share of the injured insured's attorney fees incurred in the process of obtaining an award against which the carrier has asserted a right of reimbursement. The Court affirmed the Court of Civil Appeals' judgment.

Download PDF

Rel: 09/21/2012 Notice: T h i s o p i n i o n i s s u b j e c t t o formal r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e R e p o r t e r o f D e c i s i o n s , Alabama A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may be made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . SUPREME COURT OF ALABAMA SPECIAL TERM, 2012 1110088 Ex p a r t e S t a t e Farm Mutual Automobile Insurance Company PETITION FOR WRIT OF CERTIORARI TO THE COURT OF CIVIL APPEALS (In r e : Tracy M i t c h e l l v. S t a t e Farm Mutual Automobile Insurance Company) (Lauderdale C i r c u i t Court, CV-09-900191; Court o f C i v i l Appeals, 2100184) MAIN, Justice. F o l l o w i n g an a u t o m o b i l e a c c i d e n t i n w h i c h T r a c y Mitchell was i n j u r e d when t h e v e h i c l e i n w h i c h she was an o c c u p a n t was struck by a v e h i c l e being driven b y Amy Kirk, State Farm M u t u a l A u t o m o b i l e I n s u r a n c e Company ( " S t a t e F a r m " ) , M i t c h e l l ' s 1110088 insurer, paid coverage payments, reimbursement Insurance Mitchell's and from fictitiously among o t h e r then Kirk's Company personal-injury medical named sought, insurer, ("Cotton action expenses, through Cotton States"). against defendants, Kirk, alleging things, that State among subrogation, States Mitchell State as subject to a doctrine, f o r attorney fees pursuant filed a and to State Farm, to recover Farm's r i g h t reduction, Mutual Farm, from any damages a w a r d e d i t s payment o f M i t c h e l l ' s m e d i c a l was other expenses to the common-fund i n c u r r e d by M i t c h e l l i n pursuing the p e r s o n a l - i n j u r y a c t i o n . The c i r c u i t court granted State Farm's summary-judgment m o t i o n , h o l d i n g t h a t t h e common-fund d o c t r i n e d i d n o t o b l i g a t e State fees. Farm t o p a y a p r o r a t a share of M i t c h e l l ' s attorney M i t c h e l l appealed the c i r c u i t court's d e c i s i o n to the Court o f C i v i l Appeals. The C o u r t o f C i v i l A p p e a l s reversed t h e c i r c u i t c o u r t ' s summary j u d g m e n t , c o n c l u d i n g t h a t a common fund was Mitchell's not been doctrine created requiring attorney State Farm to f e e s ; t h a t t h e common-fund c o n t r a c t u a l l y a b r o g a t e d ; and t h a t was not contribute negated by 2 State the to d o c t r i n e had common-fund Farm's "active 1110088 p a r t i c i p a t i o n " i n pursuing subrogation recovery. S t a t e Farm Mut. A u t o . I n s . Co., So. 3d ___ certiorari (Ala. review Civ. to M i t c h e l l v. [Ms. 2100184, O c t . 7, 2011] App. 2011). determine, as This a Court matter granted of first i m p r e s s i o n , t h e n a r r o w q u e s t i o n w h e t h e r , u n d e r t h e common-fund d o c t r i n e , the subrogated insurance c a r r i e r i s r e s p o n s i b l e f o r a pro rata share of the injured insured's i n c u r r e d i n the process of o b t a i n i n g attorney an a w a r d a g a i n s t w h i c h t h e c a r r i e r has a s s e r t e d a r i g h t o f r e i m b u r s e m e n t . the Court of C i v i l I. The background case are s e t f o r t h We affirm A p p e a l s ' judgment. F a c t u a l Background factual fees in detail and P r o c e d u r a l H i s t o r y and procedural history i n the Court o f C i v i l of Appeals' opinion: "In the case g i v i n g r i s e t o t h i s a p p e a l , T r a c y M i t c h e l l ( ' t h e i n s u r e d ' ) , who was i n s u r e d u n d e r an a u t o m o b i l e - i n s u r a n c e p o l i c y i s s u e d by S t a t e Farm M u t u a l A u t o m o b i l e I n s u r a n c e Company ( ' S t a t e F a r m ' ) , was i n j u r e d , and h e r p r o p e r t y was damaged, i n a December 2008 a u t o m o b i l e c o l l i s i o n when t h e v e h i c l e she was o c c u p y i n g was s t r u c k by a s e c o n d a u t o m o b i l e o p e r a t e d by Amy K i r k ( ' t h e d r i v e r ' ) . The i n s u r e d t h e n r e t a i n e d c o u n s e l t o r e p r e s e n t h e r , who, after having agreed to a contingent f e e of o n e - t h i r d of any r e c o v e r y by the insured (plus expenses), i n t e r v i e w e d the i n s u r e d , i n v e s t i g a t e d the scene o f the collision, gathered the insured's medical 3 this 1110088 records, insured. and reviewed those records with the "The i n s u r e d a l s o made an i n s u r a n c e c l a i m t o S t a t e Farm, h e r own i n s u r e r , w i t h r e s p e c t t o t h e collision; pursuant to the medical-payments, c o l l i s i o n , and r e n t a l - c a r coverage p r o v i s i o n s i n i t s p o l i c y , S t a t e Farm p a i d c e r t a i n sums on b e h a l f o f the insured, including $5,000 (the p e r t i n e n t c o v e r a g e l i m i t ) i n m e d i c a l payments a n d $7,992.90 i n o t h e r p a y m e n t s . S t a t e Farm f u r t h e r a s c e r t a i n e d t h a t t h e d r i v e r was r e s p o n s i b l e f o r h a v i n g c a u s e d t h e c o l l i s i o n , a n d S t a t e Farm s e n t two l e t t e r s t o t h e d r i v e r ' s l i a b i l i t y i n s u r e r , Cotton States Mutual I n s u r a n c e Company ( ' C o t t o n S t a t e s ' ) , i n w h i c h S t a t e Farm a s s e r t e d s u b r o g a t i o n r i g h t s a r i s i n g u n d e r t h e i n s u r e d ' s p o l i c y a n d demanded f r o m C o t t o n S t a t e s a t o t a l payment o f $12,992.90. C o t t o n S t a t e s a c c e d e d t o S t a t e Farm's demand as t o t h e $7,992.90 s o u g h t w i t h r e s p e c t t o payments made u n d e r c o v e r a g e s o t h e r than f o r medical payments, b u t Cotton States n o t i f i e d S t a t e Farm t h a t ' [ t ] h e b a l a n c e of the s u b r o g a t i o n f o r m e d i c a l payments c o v e r a g e s r e m a i n s outstanding pending the settlem[e]nt o f the B o d i l y I n j u r y c l a i m w i t h [ t h e i n s u r e d ] and h e r a t t o r n e y . ' S t a t e Farm t h e n n o t i f i e d t h e i n s u r e d ' s a t t o r n e y b y l e t t e r that i t 'intend[ed] t o pursue a subrogation c l a i m , w i t h o u t t h e need f o r you t o r e p r e s e n t S t a t e Farm, f o r t h e ' $5,000 m e d i c a l p a y m e n t ; S t a t e Farm f u r t h e r requested t h e a t t o r n e y n o t t o ' t a k e any action which may jeopardize [ i t s ] subrogation r i g h t s ' and a d v i s e d t h a t i f i t ' r e t a i n [ e d ] an attorney to represent [ i t s ] i n t e r e s t s , ' i t would advise the insured's counsel o f that r e t e n t i o n . "The i n s u r e d ' s a t t o r n e y , i n S e p t e m b e r 2009, p r e p a r e d and s e n t a d e m a n d - f o r - s e t t l e m e n t l e t t e r t o C o t t o n S t a t e s s e e k i n g a payment o f t h e l i m i t s o f t h e d r i v e r ' s i n s u r a n c e p o l i c y . The i n s u r e d ' s a t t o r n e y ' s demand-for-settlement l e t t e r acknowledged awareness of p o t e n t i a l subrogation claims and l i e n s and assured Cotton S t a t e s t h a t i f a s e t t l e m e n t was 4 1110088 r e a c h e d , t h e i n s u r e d w o u l d s a t i s f y a l l s u c h demands. The i n s u r e d ' s a t t o r n e y a l s o s e n t a c o p y o f t h a t demand l e t t e r t o S t a t e Farm and n o t i f i e d S t a t e Farm o f t h e i n s u r e d ' s i n t e n t t o make a c l a i m u n d e r t h e underinsured-motorist c o v e r a g e o f t h e S t a t e Farm policy. "In O c t o b e r 2009, t h e i n s u r e d i n i t i a t e d h e r multicount c i v i l a c t i o n against the d r i v e r , State Farm, and v a r i o u s f i c t i t i o u s l y named defendants, s t a t i n g t o r t c l a i m s stemming f r o m t h e c o l l i s i o n against the d r i v e r and t h e f i c t i t i o u s l y named defendants, asserting claims f o r underinsured-motorists ('UIM') b e n e f i t s against S t a t e Farm, and, i n a t o r t c o u n t a g a i n s t S t a t e Farm, alleging the existence of both a fraudulent, b a d - f a i t h r e f u s a l t o p a y an i n s u r a n c e c l a i m and a conversion o f funds stemming from S t a t e Farm's r e j e c t i o n of the p r o p o s i t i o n that i t s subrogation i n t e r e s t was s u b j e c t t o a r e d u c t i o n under the common-fund d o c t r i n e . S t a t e Farm moved t o d i s m i s s t h e c l a i m s a g a i n s t i t ; as t o t h e t o r t c o u n t , S t a t e Farm a v e r r e d b o t h t h a t t h e common-fund d o c t r i n e was inapplicable and that the i n d i v i d u a l theories pleaded ( i . e . , c o n v e r s i o n , b a d - f a i t h r e f u s a l , and f r a u d ) d i d n o t s t a t e v a l i d c l a i m s . The t r i a l c o u r t denied t h a t motion a f t e r a hearing. "The i n s u r e d and C o t t o n S t a t e s , on b e h a l f o f t h e driver, reached a t e n t a t i v e agreement w i t h the i n s u r e d r e g a r d i n g a s e t t l e m e n t o f a l l a c t u a l and p o t e n t i a l c l a i m s a g a i n s t t h e d r i v e r i n exchange f o r a payment o f $35,000. The i n s u r e d n o t i f i e d S t a t e Farm o f t h e p r o p o s e d s e t t l e m e n t , and S t a t e Farm, t h r o u g h i t s c o u n s e l , gave t h e i n s u r e d i t s c o n s e n t t o enter i n t o the settlement, but i t requested full reimbursement of i t s $5,000 payment f o r the insured's medical expenses. T h e r e a f t e r , the d r i v e r filed an u n o p p o s e d m o t i o n seeking t o pay t h e d i s p u t e d $5,000 i n t o c o u r t p u r s u a n t t o R u l e 22, A l a . R. C i v . P., governing interpleader, and to t h e r e a f t e r be d i s m i s s e d as a p a r t y ; t h e t r i a l c o u r t 5 1110088 g r a n t e d t h a t m o t i o n , l e a v i n g S t a t e Farm as t h e o n l y named d e f e n d a n t . " I n J u n e 2010, t h e i n s u r e d f i l e d a m o t i o n f o r a p a r t i a l summary j u d g m e n t , c o n t e n d i n g t h a t , as a m a t t e r o f l a w , S t a t e Farm's r i g h t t o r e c o v e r i t s $5,000 m e d i c a l - e x p e n s e payment was s u b j e c t t o a p r o r a t a r e d u c t i o n f o r a t t o r n e y f e e s b a s e d upon t h e common-fund d o c t r i n e , S t a t e Farm f i l e d a r e s p o n s e i n o p p o s i t i o n t o the insured's motion, a cross-motion s e e k i n g a p a r t i a l summary j u d g m e n t i n i t s f a v o r on t h e t o r t c o u n t a s s e r t e d a g a i n s t S t a t e Farm, and a motion to sever the insured's UIM-benefits claims a g a i n s t S t a t e Farm f r o m t h e a c t i o n p u r s u a n t t o R u l e 21, A l a . R. C i v . P. A f t e r a h e a r i n g , t h e t r i a l c o u r t d e n i e d t h e i n s u r e d ' s m o t i o n and g r a n t e d S t a t e Farm's c r o s s - m o t i o n on t h e b a s i s o f t h a t c o u r t ' s c o n c l u s i o n t h a t t h e common-fund d o c t r i n e d i d n o t a p p l y ; i n t h e v i e w o f t h a t c o u r t , S t a t e Farm t o o k sufficient a f f i r m a t i v e a c t i o n on i t s own b e h a l f t o a v o i d t h e application o f t h e d o c t r i n e by v i r t u e of i t s s t a t e m e n t t o c o u n s e l f o r t h e i n s u r e d t h a t S t a t e Farm w o u l d p r o t e c t i t s own i n t e r e s t s . The t r i a l court f u r t h e r d i r e c t e d the e n t r y of a f i n a l judgment p u r s u a n t t o R u l e 5 4 ( b ) , A l a . R. C i v . P.; i t d i d n o t r u l e on t h e m o t i o n t o s e v e r . " Mitchell, So. 3d a t II. (footnote omitted). Standard of Review "'"Alabama f o l l o w s t h e ' A m e r i c a n r u l e , ' w h e r e b y a t t o r n e y f e e s may be r e c o v e r e d i f they are provided f o r by s t a t u t e or by c o n t r a c t o r i f t h e y a r e c a l l e d f o r by s p e c i a l e q u i t y , as i n proceedings 'common f u n d ' where the out of which attorney's fees R e g i o n s Bank, 25 So. 3d 427, 441 6 may such efforts create a be p a i d . " ' " Jones v. ( A l a . 2009) (quoting C i t y of 1110088 Bessemer quoting v. M c C l a i n , 957 So. 2d 1 0 6 1 , 1078 (Ala. 2006), i n t u r n B a t t l e v . C i t y o f B i r m i n g h a m , 656 So. 2 d 344, 347 (Ala. 1995)). the development The C o u r t o f C i v i l o f t h e common-fund Appeals a p t l y s e t out doctrine i n insurance- s u b r o g a t i o n c a s e s i n A l a b a m a i n Government E m p l o y e e s I n s u r a n c e Co. v. C a p u l l i , 859 So. 2 d 1115 ( A l a . C i v . A p p . 2 0 0 2 ) , as follows: " Th e c o mmo n - f u n d doc t r i n e in insurance-subrogation cases i s based on t h e equitable notion that, because an i n s u r e r i s e n t i t l e d t o share, t o the extent of i t s subrogation interest, i n any r e c o v e r y i t s insured achieves against a t o r t f e a s o r , the i n s u r e r should bear a p r o p o r t i o n a t e share o f t h e burden o f a c h i e v i n g t h a t recovery--including a pro rata share of the insured's attorney fee. See g e n e r a l l y Johnny P a r k e r , The Common F u n d D o c t r i n e : Coming o f Age i n t h e Law o f I n s u r a n c e S u b r o g a t i o n , 31 I n d . L. Rev. 313, 320-25 ( 1 9 9 8 ) ; A n n o t . , R i g h t o f A t t o r n e y f o r H o l d e r o f P r o p e r t y I n s u r a n c e t o Fee o u t o f I n s u r e r ' s S h a r e o f R e c o v e r y f r o m T o r t f e a s o r , 2 A.L.R.3d 1441 (1965). "The U n i t e d S t a t e s Supreme C o u r t c r e a t e d t h e common-fund d o c t r i n e o v e r 100 y e a r s ago i n two decisions that d i d not involve insurance s u b r o g a t i o n , s e e T r u s t e e s v . G r e e n o u g h , 105 U.S. 527, 26 L . E d . 1157 ( 1 8 8 1 ) , a n d C e n t r a l R.R. & B a n k i n g Co. v . P e t t u s , 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 ( 1 8 8 5 ) . The l a n d m a r k d e c i s i o n e x t e n d i n g the doctrine t o insurance-subrogation cases i s U n i t e d S e r v i c e s A u t o m o b i l e A s s o c i a t i o n v . H i l l s , 172 Neb. 128, 109 N.W.2d 174 ( 1 9 6 1 ) . See J o h n P. Dawson, L a w y e r s a n d I n v o l u n t a r y C l i e n t s : Attorney Fees From F u n d s , 87 H a r v . L. Rev. 1597, 1622-23 7 1110088 (1974). I n 1983, t h i s c o u r t , c i t i n g t h e N e b r a s k a d e c i s i o n i n H i l l s , a p p l i e d t h e common-fund d o c t r i n e t o an i n s u r a n c e - s u b r o g a t i o n c a s e f o r t h e f i r s t t i m e i n A l a b a m a . See B l u e C r o s s & B l u e S h i e l d o f A l a b a m a v. Freeman, 447 So. 2d 757 ( A l a . C i v . App. 1 9 8 3 ) . " 859 So. 2d at 1119. "Because the facts applicable to the i s s u e p r e s e n t e d are u n d i s p u t e d , our r e v i e w of the a p p l i c a t i o n of t h e l a w t o t h e f a c t s o f t h i s c a s e i s de novo. C o l o n i a l Bank, 874 So. 2d 497 ( A l a . 2003)." Cedar B l u f f , 779 965 So. 2d 773, R e y n o l d s v. G r e e n e v. Town o f ( A l a . 2007). Although m a t t e r i n v o l v e s an award o f a t t o r n e y f e e s , w h i c h we review to determine whether the trial court this generally exceeded i t s d i s c r e t i o n , w h e t h e r t h e common-fund d o c t r i n e a p p l i e s i n a c a s e where t h e w h i c h we facts are u n d i s p u t e d p r e s e n t s a q u e s t i o n of r e v i e w de novo. See, Watson , 995 So. 2d 161, 170 So. 2d 166-67 ( A l a . 1992). e.g., M a n c i v. B a l l , law, Koons & ( A l a . 2 0 0 8 ) ; Putman v. Womack, 607 Additionally, "[w]hen a c o u r t i n t e r p r e t s an i n s u r a n c e p o l i c y as a m a t t e r o f l a w , trial that i n t e r p r e t a t i o n i s s u b j e c t t o a de novo r e v i e w . " H a r t f o r d Cas. Ins. 2d 1006, 1009 T h i s case i n v o l v e s s u b r o g a t i o n f o r m e d i c a l expenses paid (Ala. Co. v. M e r c h a n t s & Farmers Bank, 928 So. 2005). III. Analysis u n d e r an a u t o m o b i l e - i n s u r a n c e c o n t r a c t by t h e i n s u r e r t o t h e 8 1110088 i n j u r e d i n s u r e d f o l l o w i n g an a u t o m o b i l e a c c i d e n t and t h e issue whether the i n s u r e r i s r e s p o n s i b l e f o r a pro r a t a share of the insured's the attorney tortfeasor. of which Subrogation i s to Liao, impose 548 Id. the See So. ultimate p a r t y who, to enforcement payment 163 and i n the two right i n s u r e r , by The of for a Subrogation wrong good c o n s c i e n c e , reimbursement the allocation ( A l a . 1989). in effect, of reimbursed. for a proper responsibility There a r e , creates 2d purpose International Underwriters/Brokers, in equity right i s an e q u i t a b l e d o c t r i n e t h e provide responsibility. v. fees i n c o l l e c t i n g those expenses from features and to (2) or Inc. seeks loss on to the ought t o bear i t . to subrogation: the mechanism reimbursement. for (1) the Subrogation c o n t r a c t or e q u i t y , a r i g h t to be enforcement of the reimbursement i n t e r e s t i s t e m p e r e d by t h e p r i n c i p l e t h a t t h e i n s u r e d a n d / o r a t o r t f e a s o r may not knowingly prejudice reimbursed. See, v. W i l l i a m s , 365 that e.g., So. the c l a i m but recovery an 2d 315 ( A l a . C i v . App. impermissible merely of the i n s u r e r to A l a b a m a Farm B u r e a u Mut. a medical-expenses-payment constitute right impressed subrogation assignment of a 1978) lien a upon t h e Cas. Ins. be Co. (recognizing clause did not personal-injury proceeds of any o b t a i n e d by t h e i n s u r e d f r o m t h e t o r t f e a s o r ) ; A l a b a m a 9 1110088 Farm B u r e a u Mut. C a s . I n s . Co. v. A n d e r s o n , 263 So. 2d 149 receive (1972) the b e n e f i t attorney, (same). Thus, i f t h e i n s u r e r w i s h e s t o o f the funds the i n s u r e r 4 8 A l a . App. 172, must r e c o v e r e d by t h e i n s u r e d ' s share i n the attorney fees of r e c o v e r i n g those funds from the t o r t f e a s o r o r the t o r t f e a s o r ' s insured. See, e.g., Government Emps. I n s . Co. v. Capulli, s u p r a , a n d B l u e C r o s s & B l u e S h i e l d o f A l a b a m a v. Freeman, 447 So. 2d 757 State ( A l a . C i v . App. Farm c o n t e n d s 1983). that i t h a s no l i a b i l i t y f o r a pro r a t a s h a r e o f t h e a t t o r n e y f e e s on t h e $5,000 m e d i c a l - e x p e n s e s payment due i t ; the that i t s "active p a r t i c i p a t i o n " i n recovering medical-expenses payment have had t o pay a p r o r a t a that, regardless, even negated any o b l i g a t i o n share of the a t t o r n e y fees; i f t h e common-fund doctrine the p o l i c y language abrogated i t s a p p l i c a t i o n here. contends State that Farm, she i s e n t i t l e d representing m e d i c a l expenses, i t may t o deduct State a pro rata Farm's and applies, Mitchell f r o m t h e $5,000 due payment to her f o r s h a r e o f t h e a t t o r n e y f e e s she i n c u r r e d i n r e c o v e r i n g t h a t money. A. Common-Fund D o c t r i n e The C o u r t o f C i v i l A p p e a l s f o u n d t h a t , u n d e r t h e f a c t s o f this c a s e , a common f u n d e x i s t e d " t h a t w o u l d u l t i m a t e l y have 10 1110088 the c a p a c i t y t o b e n e f i t t h e i n t e r e s t s o f b o t h t h e i n s u r e d and State Farm concluding, Mitchell, So. the court reasoned 3d at . I n so that "(a) t h e i n s u r e d r e t a i n e d c o u n s e l t o r e p r e s e n t h e r i n t e r e s t s i n o b t a i n i n g compensation from the d r i v e r f o r t h e i n s u r e d ' s i n j u r i e s and l o s s e s stemming from t h e a u t o m o b i l e c o l l i s i o n a t i s s u e ; (b) c o u n s e l f o r the i n s u r e d d i l i g e n t l y i n v e s t i g a t e d the m e r i t s of t h e i n s u r e d ' s c a s e a g a i n s t t h e d r i v e r , s e n t a demand l e t t e r to the d r i v e r ' s l i a b i l i t y - i n s u r a n c e c a r r i e r ( C o t t o n S t a t e s ) , and b r o u g h t a c i v i l action to r e c o v e r damages on t h e i n s u r e d ' s b e h a l f ; a n d (c) c o u n s e l f o r t h e i n s u r e d u l t i m a t e l y s e c u r e d a $35,000 s e t t l e m e n t f r o m C o t t o n S t a t e s ( o f w h i c h $5,000 was later paid into court t o be s u b j e c t e d to the competing claims of the p a r t i e s t o t h i s a p p e a l ) . " So. 3d a t . In a d d i t i o n , the Court of C i v i l e x p l a i n e d t h a t t h e r e c o r d showed t h a t " C o t t o n to meet S t a t e Farm's d i r e c t s u b r o g a t i o n Appeals States declined demand a g a i n s t Cotton S t a t e s t o t h e e x t e n t t h a t S t a t e Farm s o u g h t r e p a y m e n t f o r i t s $5,000 m e d i c a l - b e n e f i t payment on b e h a l f o f t h e i n s u r e d . " So. 3d a t . We f i r s t n o t e t h a t , a l t h o u g h c a s e o f Freeman, s u p r a , the Court of C i v i l and i t s p r o g e n y , Appeals' including Capulli, a r e n o t d i r e c t l y on p o i n t w i t h t h e f a c t s i t u a t i o n now us, t h e e q u i t a b l e c o n s i d e r a t i o n s expressed e q u a l l y a p p l i c a b l e here. i n those before cases are As t h e C o u r t o f C i v i l A p p e a l s s t a t e d 11 1110088 in Capulli, Alabama Court t h e common-fund i n Freeman. of Civil 859 Appeals common-fund d o c t r i n e d o c t r i n e was So. first 2d a t 1119. discussed the So. Insurance 2d 1314 Co., i n i n s u r a n c e - s u b r o g a t i o n cases ( A l a . C i v . App. 689 In C a p u l l i , development Freeman, A l s t o n v. S t a t e Farm M u t u a l A u t o m o b i l e 660 applied i n So. 2d 182 1995), a p p l i e d t h e common-fund d o c t r i n e as of a n d L y o n s v. GEICO follows: " I n Freeman, t h e p l a i n t i f f s were i n j u r e d i n an automobile c o l l i s i o n w i t h S t a t e Farm's i n s u r e d . Blue C r o s s , the p l a i n t i f f s ' m e d i c a l i n s u r e r , had p a i d t h e p l a i n t i f f s ' m e d i c a l e x p e n s e s o f $1,550.20. The p l a i n t i f f s sued S t a t e Farm's insured, the a l l e g e d t o r t f e a s o r , s e e k i n g c o m p e n s a t i o n f o r , among other t h i n g s , t h e i r medical expenses. Blue Cross notified the p l a i n t i f f s ' a t t o r n e y t h a t i t was subrogated to the p l a i n t i f f s ' r i g h t to recover t h e i r m e d i c a l e x p e n s e s f r o m t h e t o r t f e a s o r and t h a t i t e x p e c t e d t o be p a i d f r o m any r e c o v e r y f r o m t h e tortfeasor. B l u e C r o s s a l s o n o t i f i e d S t a t e Farm o f i t s s u b r o g a t i o n c l a i m and demanded payment. State Farm s u g g e s t e d t h a t Blue Cross i n t e r v e n e i n the p l a i n t i f f s ' l a w s u i t . The p l a i n t i f f s ' a t t o r n e y w r o t e t o B l u e C r o s s , s t a t i n g t h a t he assumed B l u e C r o s s was a b a n d o n i n g t h e c l a i m t o be p a i d i t s s u b r o g a t i o n i n t e r e s t from the p l a i n t i f f s ' r e c o v e r y a n d was, instead, pursuing i t ssubrogation interest d i r e c t l y w i t h S t a t e Farm. Blue Cross i n t e r v e n e d i n the l a w s u i t , and t h e t r i a l c o u r t e n t e r e d a c o n d i t i o n a l summary j u d g m e n t i n i t s f a v o r . 12 as Co., 1997), "'The c o n d i t i o n a l j u d g m e n t was n o t a g a i n s t t h e [ t o r t f e a s o r ] , n o r was i t b a s e d upon a determination of liability of [the the such Insurance ( A l a . C i v . App. the and 1110088 t o r t f e a s o r ] n o r upon t h e amount o f damages plaintiffs were due to recover. The j u d g m e n t was s o l e l y i n f a v o r o f B l u e C r o s s f o r t h e amount o f $1,585.40 and a g a i n s t any f u n d s r e c o v e r e d by p l a i n t i f f s from [the tortfeasor].' "Freeman, 447 So. 2d a t 758. "The p l a i n t i f f s and t h e t o r t f e a s o r s e t t l e d on t h e day o f t r i a l . The p l a i n t i f f s moved t o a s s e s s Blue Cross a pro r a t a share of t h e i r a t t o r n e y fee, and t h e t r i a l c o u r t g r a n t e d t h e m o t i o n . Blue Cross appealed, arguing that its intervention and o b t a i n i n g of a c o n d i t i o n a l judgment p r e c l u d e d the a p p l i c a t i o n o f t h e common-fund d o c t r i n e , p u r s u a n t t o the ' a c t i v e - p a r t i c i p a t i o n ' e x c e p t i o n or defense to the d o c t r i n e . This court affirmed, s t a t i n g the following: "'As has b e e n p r e v i o u s l y shown, B l u e Cross appeared after pleadings and p r i n c i p a l d i s c o v e r y had b e e n c o m p l e t e d . I t d i d n o t j o i n as a s u b r o g e e o f a p a r t o f plaintiffs' cause of action to aid p l a i n t i f f s i n the p r o s e c u t i o n of the s u i t . I t a p p e a r e d o n l y t o s e c u r e judgment a g a i n s t the i n s u r e d f o r r e t u r n of funds p a i d t o i t s i n s u r e d i n t h e e v e n t t h e i n s u r e d s were s u c c e s s f u l i n t h e i r p r o s e c u t i o n of the e n t i r e cause of a c t i o n . I t then r e t i r e d from the f i e l d of b a t t l e , d e c l i n i n g t o a s s i s t o r g i v e a i d a t t r i a l . The e f f e c t o f t h e summary j u d g m e n t a g a i n s t p l a i n t i f f s ' r e c o v e r y was to f o r c e the insured to r e p r e s e n t the i n t e r e s t of Blue Cross at t r i a l or i n settlement a f t e r having t o l d Blue Cross they would not do so. T h e r e a f t e r , r e c o v e r y of the fund, i n c l u d i n g t h e amount due B l u e C r o s s , was obtained s o l e l y through the e f f o r t of counsel f o r 13 1110088 [ p l a i n t i f f s ] w i t h o u t the a c t i v e or p a s s i v e p a r t i c i p a t i o n of Blue Cross. " ' I t i s the o p i n i o n of t h i s c o u r t t h a t t h e mere a p p e a r a n c e o r i n t e r v e n t i o n i n t h e c a s e by c o u n s e l f o r B l u e C r o s s s o l e l y f o r the purpose of r e d u c i n g i t s c l a i m f o r s u b r o g a t i o n t o a judgment or l i e n a g a i n s t the recovery of the plaintiff-insureds, does n o t s a t i s f y t h e r e q u i r e m e n t o f a c t i v e participation or assistance in the p r o s e c u t i o n [ o f ] t h e c a s e . The f a c t s i n t h e case are c l e a r t h a t Blue Cross d i d n o t h i n g t o a s s i s t i n t h e r e c o v e r y o f t h e common fund from which i t c l a i m e d $1,585.20. R a t h e r t h a n a i d and a s s i s t p l a i n t i f f s , B l u e Cross e l e c t e d to c o l l e c t i t s subrogation c l a i m f r o m t h e a v a i l s o f t h e l i t i g a t i o n and s e t t l e m e n t s e c u r e d s o l e l y by t h e e f f o r t s and e x p e n s e o f c o u n s e l f o r p l a i n t i f f s . E q u i t y and j u s t i c e r e q u i r e i t t o pay i t s p r o p o r t i o n a t e s h a r e o f a t t o r n e y f e e s and e x p e n s e s i n c u r r e d by p l a i n t i f f . ' "Freeman, 447 So. 2d a t 759-60. "Since 1983, this court has applied the c o mmo n - f u n d do c t r i n e in t wo o t he r insurance-subrogation cases. See A l s t o n v. S t a t e Farm Mut. A u t o . I n s . Co., 660 So. 2d 1314 ( A l a . C i v . App. 1 9 9 5 ) , and L y o n s v. GEICO I n s . Co., 689 So. 2d 182 ( A l a . C i v . App. 1997) . In a l l t h r e e cases-¬ Freeman, A l s t o n , and Lyons--we held that the i n s u r e r - s u b r o g e e was o b l i g a t e d t o pay a p r o r a t a share of i t s i n s u r e d ' s a t t o r n e y fee because the e f f o r t s o f t h e i n s u r e d ' s a t t o r n e y had c r e a t e d a f u n d from which the i n s u r e r d i r e c t l y b e n e f i t e d . " 859 So. 2d a t 1119-20. 14 1110088 In Capulli, the Court of C i v i l Appeals c a s e s t h a t were n o t i n s u r a n c e - s u b r o g a t i o n had also cases, discussed i n which i t f o u n d t h a t t h e common-fund d o c t r i n e d i d n o t a p p l y : "In three other d e c i s i o n s , w h i c h were n o t insurance-subrogation cases, we held that the common-fund d o c t r i n e d i d n o t a p p l y a n d t h a t no a t t o r n e y f e e was due f r o m t h e e n t i t y s o u g h t t o be c h a r g e d . See C o l l i n s v. Taco B e l l C o r p . , 689 So. 2d 863 ( A l a . C i v . App. 1 9 9 6 ) ; Day v. Ramada I n n S o u t h , 527 So. 2d 130 ( A l a . C i v . App. 1 9 8 7 ) ; H e n l e y & C l a r k e v. B l u e C r o s s - B l u e S h i e l d o f A l a b a m a , 434 So. 2d 274 ( A l a . C i v . App. 1 9 8 3 ) . " I n e a c h o f t h e f o r e g o i n g c a s e s - - C o l l i n s , Day, and H e n l e y & C l a r k e - - a n a t t o r n e y s u c c e e d e d i n h a v i n g h i s c l i e n t ' s m e d i c a l b i l l s p a i d by a t h i r d - p a r t y o b l i g o r a n d t h e n s o u g h t t o c h a r g e a f e e t o an e n t i t y t h a t h a d b e n e f i t e d f r o m t h e payment o r r e i m b u r s e m e n t of the m e d i c a l expenses. In C o l l i n s , the o b l i g o r was t h e c l i e n t ' s e m p l o y e r b e c a u s e t h e m e d i c a l b i l l s were properly covered under the Workers' C o m p e n s a t i o n A c t ; t h e b e n e f i c i a r y who was s o u g h t t o be c h a r g e d w i t h t h e a t t o r n e y f e e was t h e h e a l t h - c a r e p r o v i d e r t h a t h a d gone u n p a i d . I n Day, t h e o b l i g o r was A e t n a , t h e w o r k e r s ' c o m p e n s a t i o n c a r r i e r ; t h e b e n e f i c i a r i e s were T r a v e l e r s , a p r i v a t e i n s u r e r t h a t had m i s t a k e n l y p a i d p a r t o f t h e c l i e n t ' s medical b i l l s , a n d t h e h e a l t h - c a r e p r o v i d e r s whose c l a i m s were u n p a i d . I n H e n l e y & C l a r k e , t h e o b l i g o r was M e d i c a r e and t h e b e n e f i c i a r y was B l u e C r o s s , a p r i v a t e i n s u r e r t h a t had i n i t i a l l y p a i d the c l i e n t ' s medical expenses. "In a l l three cases, t h i s court a f f i r m e d the t r i a l c o u r t ' s d e t e r m i n a t i o n t h a t t h e a t t o r n e y was not e n t i t l e d t o a f e e from the b e n e f i c i a r y under the common-fund d o c t r i n e . In a l l three cases, this c o u r t d i s c u s s e d v a r i o u s a s p e c t s o f t h e common-fund d o c t r i n e and c o n c l u d e d t h a t one o r more e l e m e n t s o f 15 1110088 the t e s t f o r a p p l y i n g t h e d o c t r i n e d i d n o t e x i s t . S p e c i f i c a l l y , we d e t e r m i n e d t h a t t h e b e n e f i c i a r i e s were 'incidental' rather than 'direct,' a d e t e r m i n a t i o n t h a t was c o r r e c t b u t i n c o m p l e t e a n d perhaps m i s l e a d i n g . I n C o l l i n s , Day, a n d H e n l e y & C l a r k e , t h i s c o u r t f a i l e d t o e x p l a i n t h a t what removed the cases from the operation of the common-fund doctrine was the existence of a debtor-creditor relationship rather than a subrogor-subrogee r e l a t i o n s h i p . " 859 So. 2d a t 1120-21. applied held The C o u r t o f C i v i l A p p e a l s i n C a p u l l i t h e common-fund e x c e p t i o n that a passenger who t o the American was injured i n an r u l e and automobile a c c i d e n t a n d who o b t a i n e d a s e t t l e m e n t from t h e other d r i v e r ' s insurer one-third was insurer's attorney entitled subrogation fee. Since withhold claim as a the Court of C i v i l her share own of the Appeals has decided c a s e s i n v o l v i n g t h e a p p l i c a t i o n o f t h e common- fund d o c t r i n e i n i n s u r a n c e - s u b r o g a t i o n Eiland pro rata of 859 So. 2d a t 1127. Capulli, several other to v. M e h e r i n , cases. F o r example, i n 854 So. 2d 1134, 1139 ( A l a . C i v . App. 2002), t h e C o u r t o f C i v i l A p p e a l s h e l d t h a t E i l a n d ' s judgment a g a i n s t t h e t o r t f e a s o r c r e a t e d a common f u n d , e v e n t h o u g h t h e i n s u r e d was t h e o n l y b e n e f i c i a r y o f t h e $50,000 j u d g m e n t , a n d t h a t t h e i n s u r e r was r e q u i r e d t o p a y a p r o r a t a s h a r e o f t h e insured's attorney fees under 16 t h e common-fund doctrine. 1110088 Subsequently, 2d 1163, i n W o l f e v. A l f a M u t u a l 1166 ( A l a . C i v . App. I n s u r a n c e Co., 880 So. 2003), the Court of Civil A p p e a l s h e l d t h a t an i n s u r e r who makes p a y m e n t s t o i t s i n s u r e d under the medical-payment was entitled to p r o v i s i o n of i t s automobile subrogation from a recovery policy from the t o r t f e a s o r ' s i n s u r e r a n d was o b l i g a t e d u n d e r t h e common-fund doctrine fees. t o pay a p r o r a t a share of the insured's attorney 1 This Court impression, must whether now determine, t h e common-fund as a matter doctrine of applies first i n an i n s u r a n c e - s u b r o g a t i o n c a s e s u c h as t h e one b e f o r e us i n w h i c h the i n s u r e r has p a i d t h e i n s u r e d ' s m e d i c a l expenses and t h e i n s u r e d s e e k s payment f r o m t h e i n s u r e r o f a p r o r a t a s h a r e o f the i n s u r e r ' s a t t o r n e y fees. out by the Court of Civil We a d o p t t h e r e q u i r e m e n t s as s e t of Appeals involved subrogation f o r payment conclude t h a t a common f u n d a r i s e s coverage i n Capulli, c o n t e x t where: (1) t h e r e i s a f u n d a t t o r n e y ; and from The made-whole d o c t r i n e i s s u e i n the case b e f o r e t h i s 1 of medical i n the which and medical-payments- t o compensate t h e addressed Court. 17 expenses which i n Wolfe i s n o t an 1110088 (2) t h e s e r v i c e s o f t h e b e n e f i t e d the fund. See Capulli, 859 So. insured's 2d at attorney in other j u r i s d i c t i o n s have a l s o h e l d i n c a s e s s u c h as t h i s , and i n the a b s e n c e o f an a g r e e m e n t t o t h e is successful i n recovering 1122. actually Courts contrary, t h a t the i n s u r e d who f u n d s , w h i c h i n c l u d e money p a y a b l e by t h e i n s u r e d t o an i n s u r a n c e company, i s e n t i t l e d t o d e d u c t attorney such a f e e s r e a s o n a b l y and n e c e s s a r i l y i n c u r r e d i n recovery. Court, 47 Cal. 2 4th See 21st 511, Century 213 P.3d Ins. 972, 98 Co. procuring v. Superior Cal. Rptr. 3d 516 (2009) ( h o l d i n g t h a t , i n t h e n o - f a u l t m e d i c a l - p a y m e n t - c o v e r a g e context, the a t t o r n e y - f e e between the Auto. Ins. that the i n s u r e r and Co., 140 automobile l i a b i l i t y was the insured); I d a h o 334, of attorney subrogated i n t e r e s t See Dec. 679 payments attorney doctrine, t o pay a 2 B o l l v. S t a t e P.3d 1081 (2004) had paid expenses for was insureds' required Mut. (stating under t o pay recovery f r o m t o r t f e a s o r where t h e rata Farm that insurer fees shared pro 92 medical-payments-coverage p r o v i s i o n share t o be of e f f o r t s of its its the a l s o W a j n b e r g v. W u n g l u e c k , 963 N.E.2d 1077, 357 I l l . ( I l l . App. C t . 2011) ( s e t t i n g out, i n the medicalcontext, what must be shown t o be e n t i t l e d to f e e s u n d e r t h e common-fund d o c t r i n e , a p p l y i n g the and h o l d i n g t h a t an a u t o m o b i l e i n s u r e r was required p o r t i o n of the a t t o r n e y f e e s ) . 18 1110088 i n s u r e d o r i n s u r e d ' s a t t o r n e y r e s u l t e d i n an a c t u a l b e n e f i t t o the insurer); 125, B a i e r v. S t a t e Farm I n s . Co., 66 I l l . 361 N.E.2d 1100, 1102, I l l . also, 2d 119, Dec. 572, 574 (1977) (same; c a s e s c i t e d t h e r e i n ) ; S t a t e Farm Mut. A u t o . I n s . Co. v. Clinton, 267 O r . 653, 518 P.2d 645 (1974) Applying the two-part test (same). s e t o u t a b o v e , we must now d e t e r m i n e w h e t h e r a common f u n d was c r e a t e d i n t h i s c a s e . As t o t h e f i r s t p a r t o f t h e t e s t , t h e r e was c l e a r l y a f u n d . The f u n d was t h e $35,000 s e t t l e m e n t M i t c h e l l r e c e i v e d f r o m S t a t e s on b e h a l f o f t h e t o r t f e a s o r , K i r k . wrote l e t t e r s , obtained medical Cotton M i t c h e l l ' s attorney r e c o r d s , f i l e d a l a w s u i t , and n e g o t i a t e d the s e t t l e m e n t o f M i t c h e l l ' s p e r s o n a l - i n j u r y c l a i m . The fund subrogee, was a $5,000 Mitchell fund because, r e s p e c t i v e l y , both M i t c h e l l interest i n i t . the "common" In p a r t i c u l a r , payment that Cotton and S t a t e subrogor and Farm h a d an S t a t e Farm h a d an i n t e r e s t i n f o r medical States as expenses i t h a d made t o d e c l i n e d t o pay u n t i l Mitchell brought a l a w s u i t against i t s insured, K i r k . As t o t h e s e c o n d part State o f t h e t e s t - - t h a t t h e fund, a n d hence Farm, h a s b e n e f i t e d from t h e s e r v i c e s o f M i t c h e l l ' s a t t o r n e y t h e r e i s no question that State Farm, M i t c h e l l ' s i n s u r e r , 19 benefited 1110088 from M i t c h e l l ' s l i t i g a t i o n State Farm h a s c i t e d apply t h e common-fund cases, 3 holdings we b e l i e v e decisions doctrine that o f Freeman, efforts. by other courts we n o t e that refusing to i n medical-expense-payment the equitable Capulli, Although considerations and t h e i r progeny ofthe are well r e a s o n e d ; we t h e r e f o r e a d o p t t h e r u l e s e t o u t i n C a p u l l i f o r a p p l i c a t i o n i n medical-payments-insurance-subrogation cases, S e e O ' D o n n e l l v . J o h n s o n , 209 P.3d 128, 135 ( A l a s k a 2009) ( h o l d i n g t h a t t h e common-fund d o c t r i n e d i d n o t a p p l y when t h e " i n s u r e r [ c h o s e ] n o t t o r e l y on t h e s e r v i c e s o f p l a i n t i f f ' s c o u n s e l a n d p r o v i d e [ d ] n o t i c e " ) ; O s b o r n e v . S t a t e Farm Mut. A u t o . I n s . Co., 923 P.2d 304, 305-06 ( C o l o . C t . App. 1996) ( r e f u s i n g t o a p p l y common-fund d o c t r i n e b e c a u s e i n s u r e d d i d not g i v e i n s u r e r o p p o r t u n i t y t o p a r t i c i p a t e i n s e t t l e m e n t n e g o t i a t i o n s ; i n s u r e r expressed i n t e n t t o pursue i t s c l a i m independently i n arbitration proceedings; and i n s u r e r e x p r e s s e d no i n t e n t i o n t o s h a r e i n f u n d s g e n e r a t e d b y i n s u r e d ' s s u i t ) ; Cockman v . S t a t e Farm A u t o . I n s . Co., 313 A r k . 340, 3 4 3 , 854 S.W.2d 343, 345 (1993) ( s t a t i n g t h a t t h e common-fund d o c t r i n e d i d n o t a p p l y b e c a u s e an a r b i t r a t i o n agreement r e q u i r e d the i n s u r e r s t o f o r g o l i t i g a t i o n , e v i d e n c e c l e a r l y demonstrated t h a t t h e i n s u r e r had not r e f u s e d t o pursue i t s independent subrogation c l a i m , and t h e i n s u r e d warranted i n subrogation r e c e i p t t h a t s h e w o u l d make no settlement or release regarding subrogated r i g h t s without the i n s u r e r ' s w r i t t e n c o n s e n t ) ; C o u r t n e y v . B i r d s o n g , 246 A r k . 162, 169, 437 S.W.2d 238, 242 (1969) ( f i n d i n g no e q u i t a b l e r e a s o n t h e i n s u r e r s h o u l d p a y an a t t o r n e y f e e b e c a u s e t h e i n s u r e r " d i d n o t agree t o pay any p a r t o f [ t h e i n s u r e d ' s ] a t t o r n e y f e e " ) ; a n d T r a v e l e r s I n s . Co. v . W i l l i a m s , 541 S.W.2d 587, 590-91 (Tenn. 1976) ( r e f u s i n g t o a p p l y t h e common-fund d o c t r i n e b e c a u s e t h e r e was no r e l a t i o n b e t w e e n t h e a t t o r n e y and t h e i n s u r e r , a n d , t h u s , t h e a t t o r n e y s i m p l y a c t e d a s a volunteer). 3 20 1110088 in t h e absence o f an a g r e e m e n t t o t h e c o n t r a r y i n s u r e d and t h e i n s u r a n c e of the insurance application this pay between t h e company, as s e t f o r t h b y t h e t e r m s policy. Accordingly, we conclude that o f t h e common-fund d o c t r i n e , u n d e r t h e f a c t s o f c a s e , was w a r r a n t e d a n d t h a t S t a t e Farm was r e q u i r e d t o a p r o r a t a share o f M i t c h e l l ' s attorney f e e s b a s e d on t h e $5,000 m e d i c a l - e x p e n s e s payment. B. Active Participation H a v i n g d e t e r m i n e d t h a t t h e common-fund d o c t r i n e in this argues, thereby case, we must n e x t i t actively negating consider participated whether, as S t a t e i n producing a p p l i c a t i o n of the doctrine. the insurance exception, i n c r e a s e , o r p r e s e r v a t i o n o f t h e common Freeman, 447 So. 2 d a t 7 5 9 - 6 0 . Appeals fund, company must a c t i v e l y a s s i s t i t s i n s u r e d i n t h e creation, discovery, fund. Farm To a v o i d t h e a p p l i c a t i o n o f t h e common-fund d o c t r i n e u n d e r t h i s an applies concluded that State Farm's 4 The C o u r t o f C i v i l actions here did not amount t o " a c t i v e p a r t i c i p a t i o n " : S e e a l s o Texas F a r m e r s I n s . Co. v. S e a l s , 948 S.W.2d 532, 533 (Tex. C t . App. 1997) ( p r o v i d i n g t h a t an i n s u r e r t h a t does n o t a s s i s t i n t h e i n s u r e d ' s c o l l e c t i o n o f damages f r o m a t h i r d p a r t y must p a y i t s s h a r e o f t h e c o s t s a n d e x p e n s e s i n c u r r e d i n obtaining the recovery from t h e t h i r d p a r t y , including attorney fees). 4 21 1110088 " H e r e , as we have n o t e d , t h e p e r t i n e n t ' f u n d ' i s t h e g r o s s $35,000 r e c o v e r y o b t a i n e d b y t h e i n s u r e d , through her counsel, pursuant to the settlement reached w i t h the d r i v e r ' s i n s u r e r , Cotton States. As t o t h a t r e c o v e r y , S t a t e Farm d i d n o t h i n g t o a i d the i n s u r e d or i t s a t t o r n e y ; f o r a l l t h a t appears i n t h e r e c o r d , S t a t e Farm d i d n o t a s s i s t t h e i n s u r e d ' s counsel i n i n v e s t i g a t i n g the insured's p o t e n t i a l t o r t c l a i m against the d r i v e r or i n prosecuting the action against t h e d r i v e r once i t was filed. A l t h o u g h S t a t e Farm n o t i f i e d c o u n s e l f o r t h e i n s u r e d t h a t i t i n t e n d e d t o p u r s u e i t s own s u b r o g a t i o n c l a i m and i n d i c a t e d t h a t c o u n s e l ' s s e r v i c e s on i t s b e h a l f w o u l d n o t be n e c e s s a r y b e f o r e s u i t h a d b e e n f i l e d and C o t t o n S t a t e s h a d a g r e e d t o s e t t l e t h e i n s u r e d ' s c l a i m s a g a i n s t t h e d r i v e r , S t a t e Farm was c o n t e n t t o a s s e r t a c l a i m f o r f u l l reimbursement a g a i n s t the recovery obtained after the recovery became a r e a l i t y r a t h e r than a contingency. State Farm's i n s i s t e n c e that i t s separate e x t r a j u d i c i a l dealings w i t h C o t t o n S t a t e s t o o b t a i n r e i m b u r s e m e n t , and i t s declarations of i t s intent to seek full reimbursement, amount to 'active p a r t i c i p a t i o n ' s i m p l y does n o t c o m p o r t w i t h t h e n e c e s s i t y t h a t t h e d o c t r i n e y i e l d o n l y t o a s h o w i n g t h a t an i n s u r e r has helped c r e a t e or preserve a subrogated fund; r a t h e r , i t appears from the r e c o r d i n t h i s case t h a t S t a t e Farm, as o c c u r r e d i n A l s t o n v. S t a t e Farm M u t u a l A u t o m o b i l e I n s u r a n c e Co., 660 So. 2d 1314, 1316 ( A l a . C i v . App. 1 9 9 5 ) , d i d n o t h i n g more o f n o t e t h a n ' r e l [ y ] on [an i n s u r e d ' s ] a t t o r n e y t o g e n e r a t e t h e b e n e f i t s t h a t i t r e c e i v e d f r o m t h e common f u n d . ' " Mitchell, We Farm to So. 3d a t (footnote l i k e w i s e do n o t c o n s i d e r constitute communication w i t h "active Cotton omitted). the a c t i o n s taken participation." States State State Farm's and M i t c h e l l ' s a t t o r n e y n o t amount t o " a c t i v e p a r t i c i p a t i o n . " 22 by do Instead, the e f f o r t s of 1110088 M i t c h e l l ' s a t t o r n e y r e s u l t e d i n t h e $35,000 s e t t l e m e n t and t h e r e i m b u r s e m e n t t o S t a t e Farm o f $5,000 f o r i t s m e d i c a l - e x p e n s e s payment t o M i t c h e l l . The C o u r t o f C i v i l A p p e a l s and c o u r t s i n other have jurisdictions held that an insurance l i m i t e d appearance t o p r o t e c t i t s s u b r o g a t i o n more will not shield the insurance a p p l i c a t i o n o f t h e common-fund d o c t r i n e . Farm Mut. App. Auto. 1995) I n s . Co., 660 (determining So. that, company's i n t e r e s t and no company from See A l s t o n v. 2d 1314, 1316 although the State (Ala. Civ. the insurer p a r t i c i p a t e d i n p r e t r i a l d i s c o v e r y , i t d i d not " p a r t i c i p a t e i n the cost of l i t i g a t i o n u n t i l the j u r y r e t u r n e d i t s v e r d i c t " ) ; Freeman, 447 So. 2d a t 759 ( c o n c l u d i n g t h a t b e c a u s e t h e "mere a p p e a r a n c e as an i n t e r v e n o r by an i n s u r e r f o r t h e p u r p o s e o f securing against a c o n d i t i o n a l judgment t h e amount r e c o v e r e d f o r i t s subrogation by i t s i n s u r e d does claim not a i d or a s s i s t i n t h e r e c o v e r y o f t h e common f u n d , " s u c h an a p p e a r a n c e did not defeat active-participation a common-fund exception). claim under the 5 S e e D r a p e r v. A c e t o , 26 C a l . 4 t h 1086, 33 P.3d 479, 484, 113 C a l . R p t r . 2d 61 (2007) ( n o t i n g t h a t t h e mere r e t e n t i o n o f an a t t o r n e y i s i n s u f f i c i e n t t o d e f e a t a r e c o v e r y u n d e r t h e common-fund d o c t r i n e b e c a u s e t h e c r i t i c a l q u e s t i o n i s w h e t h e r the p a r t y c o n t r i b u t e d toward s e c u r i n g or p r e s e r v i n g the fund); A m i c a Mut. I n s . Co. v. M a l o n e y , 120 N.M. 523, 529, 903 P.2d 5 23 1110088 To the extent that State Farm a r g u e s that i t d i d not c o n s e n t t o r e p r e s e n t a t i o n b y t h e i n s u r e d ' s a t t o r n e y , we, like 834, 840 (1995) ( p r o v i d i n g t h a t t h e a u t o m o b i l e i n s u r e r s ' a c t i o n s i n sending standard l e t t e r s to the t o r t f e a s o r s ' i n s u r e r s t a t i n g t h a t they had s u b r o g a t i o n i n t e r e s t i n t h e i r i n s u r e d s ' r e c o v e r i e s a g a i n s t t h e t o r t f e a s o r s and a s k i n g f o r repayment after settlement d i d n o t amount to "active p a r t i c i p a t i o n " i n insureds' settlements with t o r t f e a s o r s ' i n s u r e r , f o r purposes of " a c t i v e p a r t i c i p a t i o n " exception t o common-fund d o c t r i n e ) ; a n d C a s t e l l a r i v. P a r t n e r s H e a l t h P l a n o f C o l o . , I n c . , 860 P.2d 593, 595 ( C o l o . C t . App. 1993) (holding t h a t the i n s u r e r t h a t had a subrogated c l a i m f o r m e d i c a l b e n e f i t s was r e q u i r e d t o p a y a p r o p o r t i o n a t e s h a r e o f a t t o r n e y f e e s and c o s t s i n c u r r e d i n t h e l i t i g a t i o n p r o d u c i n g a r e c o v e r y f r o m w h i c h t h e c l a i m was p a i d where i t s i n v o l v e m e n t i n l i t i g a t i o n was " l i m i t e d t o f i l i n g a m o t i o n t o i n t e r v e n e a n d o b t a i n i n g a s t i p u l a t i o n o f t h e amount o f i t s c l a i m f o r s u b r o g a t i o n " ) ; see a l s o P r i n c i p a l Mut. L i f e I n s . Co. v. B a r o n , 964 F. Supp. 1221, 1224 (N.D. I l l . 1997) ( a p p l y i n g I l l i n o i s law and f i n d i n g t h a t t h e i n s u r e d c o u l d charge a t t o r n e y f e e s a g a i n s t a fund recovered from which the subrogated i n s u r e r b e n e f i t e d because, even though t h e i n s u r e r h i r e d a t t o r n e y s , t h e y "were c o n c e r n e d m e r e l y w i t h p r o t e c t i n g t h e i r c l i e n t ' s r i g h t t o reimbursement, not c r e a t i n g the fund"). C f . Dunn, B r a d y , G o e b e l , U l b r i c h , M o r e l , K o m b r i n k & Hundman v. S t a t e Farm I n s . Co., 100 I l l . App. 3d 93, 97, 426 N.E.2d 315, 318, 55 I l l . Dec. 340, 343 (1981) ( f i n d i n g a c t i v e p a r t i c i p a t i o n when the insurance carrier rejected the plaintiff's r e p r e s e n t a t i o n o f f e r and n e g o t i a t e d w i t h t h e t h i r d - p a r t y ' s carrier). L i k e w i s e , an i n s u r a n c e company's i n s i s t e n c e t h a t i t i n t e n d s t o p r o t e c t i t s s u b r o g a t i o n i n t e r e s t , w i t h o u t more, w i l l n o t d e f e a t t h e a p p l i c a t i o n o f t h e common-fund d o c t r i n e . See F o r s y t h v. S o u t h e r n B e l l T e l . & T e l . Co., 162 So. 2d 916, 920-21 ( F l a . D i s t . C t . App. 1 9 6 4 ) ; T a y l o r v. A m e r i c a n F a m i l y I n s . Group , 311 I l l . App. 3d 1034, 1039, 725 N.E.2d 816, 820, 244 I l l . Dec. 343, 347 ( 2 0 0 0 ) ; a n d L a n c e r C o r p . v. M u r i l l o , 909 S.W.2d 122, 128-29 (Tex. C t . App. 1 9 9 5 ) . 24 1110088 the C o u r t o f C i v i l A p p e a l s and c o u r t s i n o t h e r f i n d t h a t a r g u m e n t t o be w i t h o u t m e r i t . So. 3d a t jurisdictions, See, e.g., M i t c h e l l , ; M a h l e r v. S z u c s , 135 Wash. 2d 398, 427, 957 P.2d 632, 648 (1998) ( p r o v i d i n g t h a t c o n s e n t t o c o u n s e l b y the benefited because the Therefore, party i s not required proper we focus conclude is on t h a t , under i n common-fund the benefited cases party). the f a c t s of t h i s case, S t a t e Farm d i d n o t a c t i v e l y p a r t i c i p a t e i n t h e l i t i g a t i o n t o the extent necessary to justify negation o f t h e common-fund doctrine. C. Lastly, Abrogation by P o l i c y Language we must c o n s i d e r whether the language Farm's a u t o m o b i l e - i n s u r a n c e policy effect doctrine. Appeals of t h e common-fund determined that the p o l i c y entitled The language of State i t to avoid the Court of relied Civil upon b y S t a t e Farm d i d n o t a b r o g a t e t h e common-fund d o c t r i n e b e c a u s e "the S t a t e Farm p o l i c y d o e s n o t e x p r e s s l y r e f e r t o p o t e n t i a l attorney-fee . claims i n any way." Mitchell, So. 3d a t We a g r e e a n d c o n c l u d e t h a t t h e l a n g u a g e i n S t a t e Farm's p o l i c y d o e s n o t e x p r e s s l y a b r o g a t e t h e common-fund d o c t r i n e . 25 1110088 The policy language relied on b y S t a t e Farm reads as follows: "GENERAL TERMS "12. Our R i g h t t o R e c o v e r Our Payments " "a. Subrogation " I f we a r e o b l i g a t e d u n d e r t h i s p o l i c y t o make payment t o or f o r a person or o r g a n i z a t i o n who h a s a l e g a l r i g h t t o collect from another person or o r g a n i z a t i o n , t h e n we w i l l be s u b r o g a t e d t o t h a t r i g h t t o t h e e x t e n t o f o u r payment. This a p p l i e s r e g a r d l e s s o f whether o r n o t t h e p e r s o n o r o r g a n i z a t i o n t o o r f o r whom we make payment i s f u l l y c o m p e n s a t e d f o r damages s u s t a i n e d i n t h e a c c i d e n t . "The p e r s o n o r o r g a n i z a t i o n t o o r f o r whom we make payment must h e l p us r e c o v e r o u r payments b y : "(1) d o i n g right nothing to impair that legal "(2) e x e c u t i n g a n y documents we may n e e d t o a s s e r t t h a t l e g a l r i g h t ; and "(3) taking legal action r e p r e s e n t a t i v e s when we a s k . "b. through our Reimbursement " I f we make payment u n d e r t h i s p o l i c y a n d t h e p e r s o n o r o r g a n i z a t i o n t o o r f o r whom we make payment r e c o v e r s o r h a s r e c o v e r e d from another person o r o r g a n i z a t i o n , then 26 1110088 t h e p e r s o n o r o r g a n i z a t i o n t o o r f o r whom we make payment must: "(1) h o l d i n t r u s t any r e c o v e r y ; a n d "(2) r e i m b u r s e payment. f o r us t h e p r o c e e d s o f us t o t h e e x t e n t of our "This a p p l i e s r e g a r d l e s s o f whether o r n o t t h e p e r s o n o r o r g a n i z a t i o n t o o r f o r whom we make payment i s f u l l y c o m p e n s a t e d f o r damages s u s t a i n e d i n t h e a c c i d e n t . " "INSURED'S DUTIES " "3. I n s u r e d ' s D u t y t o C o o p e r a t e W i t h Us " "b. The i n s u r e d must n o t , e x c e p t a t h i s o r h e r own c o s t s , v o l u n t a r i l y : "(1) make a n y payment t o o t h e r s ; o r "(2) assume a n y o b l i g a t i o n t o o t h e r s u n l e s s a u t h o r i z e d by t h e terms o f t h i s p o l i c y . " (Emphasis added.) In p a r t i c u l a r , the extent subrogation State Farm a r g u e s t h a t o f o u r payment" provides and reimbursement t h e language " t o i twith and p r e c l u d e s the right of Mitchell from c o n t r a c t i n g t o pay a t t o r n e y fees out o f i t s medical-payments- 27 1110088 coverage recovery without i t s express consent. In L i a o , this Court s t a t e d that "equitable p r i n c i p l e s apply to a l l instances of subrogation otherwise." parte except 548 So. when t h e 2d a t 165 S t a t e Farm F i r e & Cas. contract expressly (emphasis added). Co., 764 So. 2d 543 provides See also ( A l a . 2000) ( r e a f f i r m i n g the r u l e of Liao) . S t a t e Farm c o n t e n d s t h a t above-quoted insurance modifies such language of the policy the e s t a b l i s h e d e q u i t a b l e p r i n c i p l e s of that the common-fund Mitchell's case. disagree. Because 6 We, the doctrine like the is Court p o l i c y language not Ex the expressly subrogation applicable of Civil cited by to Appeals, State Farm We s i m p l y n o t e t h a t o t h e r j u r i s d i c t i o n s have i n t e r p r e t e d similar language and held that such language did not u n a m b i g u o u s l y a b r o g a t e t h e common-fund d o c t r i n e . See, e.g., Y o r k I n s . Group o f M a i n e v. Van H a l l , 704 A.2d 366, 369 (Me. 1997) (holding, in a medical-expenses-payment-insurances u b r o g a t i o n c a s e , t h a t t h e "common f u n d d o c t r i n e i s a v a i l a b l e i n M a i n e i n c a s e s where an i n s u r e d i n c u r s a t t o r n e y f e e s and expenses i n r e c o v e r i n g a judgment or s e t t l e m e n t t h a t b e n e f i t s a s u b r o g a t e d i n s u r e r " and e x p l a i n i n g t h a t t h e p h r a s e " t o t h e e x t e n t o f o u r payment" c o n t a i n e d i n i n s u r a n c e c o n t r a c t "does not c l e a r l y address the q u e s t i o n whether the i n s u r e d i s p e r m i t t e d to r e t a i n a p r o r a t e d p o r t i o n of the c o s t of r e c o v e r y from i t s o b l i g a t i o n under the c o n t r a c t ' s s u b r o g a t i o n c l a u s e " ) ; S t a t e Farm Mut. A u t o . I n s . Co. v. C l i n t o n , 267 Or. 653, 661¬ 62, 518 P.2d 645, 649 (1974) ( f i n d i n g , i n a m e d i c a l - e x p e n s e s p a y m e n t - i n s u r a n c e - s u b r o g a t i o n m a t t e r , t h a t t h e common-fund d o c t r i n e was n o t c o n t r a c t u a l l y a b r o g a t e d where S t a t e Farm sought to a v o i d paying an a t t o r n e y f e e by a r g u i n g that language "to the extent of our payment" negated the a p p l i c a t i o n o f t h e common-fund d o c t r i n e ) . 6 28 1110088 does not e x p r e s s l y abrogate that facts pro rata t h e common-fund d o c t r i n e under o f t h i s c a s e , we h o l d t h a t S t a t e Farm must p a y a share of M i t c h e l l ' s IV. attorney fees. Conclusion We c o n c l u d e t h a t a common f u n d was c r e a t e d i n t h e c a s e ; that t h e common-fund doctrine applies i n medical-expenses- p a y m e n t - i n s u r a n c e - s u b r o g a t i o n m a t t e r s s u c h as t h i s ; t h a t S t a t e Farm d i d n o t a c t i v e l y p a r t i c i p a t e i n t h e c a s e so a s t o n e g a t e t h e common f u n d ; a n d t h a t t h e p o l i c y l a n g u a g e i n t h i s c a s e d i d n o t e x p r e s s l y a b r o g a t e t h e common-fund d o c t r i n e . we a f f i r m t h e j u d g m e n t o f t h e C o u r t o f C i v i l Therefore, Appeals. AFFIRMED. M a l o n e , C . J . , a n d W o o d a l l , B o l i n , P a r k e r , M u r d o c k , Shaw, and W i s e , J J . , c o n c u r . 29

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.