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Common Fund Doctrine
What if Common Fund Doctrine?
An injured victim is protected from being forced to pay the entire cost of attorney fees without assistance from the insurance company by a legal
principle known as the common fund doctrine. A party who recovers a common fund for the benefit of others is entitled to recover reasonable
attorney's fees from the fund as a whole.
Protecting the Client
Clients are actually protected under this doctrine, not lawyers. Injury victims are prevented from having a non-participating or non-assisting insurance company file a subrogation claim or pay legal fees without their consent.
Upon winning a settlement, the injured victim's lawyer creates a "common fund" from which the victim's attorney and the insurance company can both collect.
As a result, clients don't have to pay a lawsuit's insurance company and also attorney fees if they didn't win the lawsuit with the insurance company's help. A legal principle known as the common fund doctrine prevents an injured victim from having to bear the entire cost of legal fees without help from the insurance company.
“Common Fund” Doctrine
Insurance companies are required to pay a portion of the money they recover under the common fund doctrine.
A payment will be made to the accident victim's attorney if the insurance company doesn't have its own attorney participating in the case. A lawyer for the accident victim has put in the time and effort necessary to resolve and win the case, including the insurance company's benefits, so the insurance company should also contribute to the victim's compensation.
Clients who hire their own attorneys to pursue personal injury claims may expend costs either through billable hours or contingency agreements (in which attorneys are paid a percentage of the recovery).
An insurance company should not be forced to ask for every penny it wants from the client, and the client should not be forced to pay the attorney fees in full. In addition, the insurance company benefited from the attorney's hard work, and it should be reimbursed for a portion of the costs.
Protection By The Doctrine
Attorneys can benefit from this doctrine by handling an insurance company subrogation claim even more efficiently. Lawyers can feel at ease knowing that they will be paid fairly without harming their clients.
Attorneys want to be paid for their hard work, but they also want to protect the best interests of their clients. A common fund doctrine that requires insurance companies to pay helps create this protection for clients.
The Establishment of the Doctrine
In the United States and California, the common fund doctrine is an expression of common law, which means it is not a state statute, but rather is part of the case law of the United States generally as established by American courts. Trustees of a fund or property, as well as parties who preserve funds for the benefit of others, may recover their costs and attorney fees from the fund.
American and Californian courts have upheld the doctrine for three reasons: fairness to successful litigation whose recovery would otherwise be consumed by expenses; prevention of unfair advantage to insurance companies entitled to a share, but not sharing the burden of expenses; and directing insurance companies to play a more active role in helping to recover judgments and to prepare for litigation.
A fair subrogation claim protects both the client and his or her attorney, and it protects against greedy insurance companies who want their money back without helping pay for court costs and attorneys fees.
Subrogation And “Common Fund” Doctrine
In general, subrogation is the process by which an insurance company recovers money for damages that were paid to you by a liable party. An insurance company is entitled to the same rights as an accident victim in order to seek compensation. As a result, the insurance company assumes the rights of the accident victim. When the insurance company agrees to pay the victim, the responsible party gives the insurance company the right to take the victim's place and pay it back. Accident victims have the right to compensation.
Insurance Companies and Subrogation
Initial costs are covered by the insurance company and when the insurance company is reimbursed for the same costs it paid out, it wants a reimbursement. Subrogation is the process of making sure the insurance company pays for the medical care of the injured party. In return, the injured party pays back the insurance company when the same amount of compensation is recovered in court. Although this doctrine aims for fairness, it is abused by insurance companies.
Doctrine Applied to Cases
According to the doctrine, certain requirements must be met in order for it to apply. Applicants for attorney's fees and those from whom fees are sought must have similar interests and be able to recover from the same fund.
The doctrine will not allow a person to recover if the successful party litigant has not incurred any litigation costs, other interested parties are represented by attorneys during the same litigation, or the party seeking damages did not win the suit.
A Judge’s Ruling
Insurance companies may not be subject to the common fund doctrine if they actively participate in the lawsuit through their attorney or attorneys.
Passive beneficiaries are prohibited from recovering without paying legal costs without recourse to the common fund doctrine. The doctrine may not apply to the insurance company if they were not passive.
Occasionally, companies will participate minimally to avoid being held responsible for victim's legal fees. In cases in which there is minimal participation in the lawsuit, the court may consider this in deciding whether to award attorney's fees from the common fund and how much should be awarded.