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Illinois Quarterly Review Newsletter Summer 2015: Subrogation

Settlement Of Property Damage Subrogation Case Did Not Bar Insured From Proceeding With Separate Personal Injury Case Against The Same Defendants

The insured was involved in an auto accident injuring him and causing damage to his auto. His insurance carrier paid for the property damage, except for a $500 deductible, and then filed a subrogation action in the name of the insured against the adverse driver and his employer. While that case was pending, the insured filed his own personal injury action against the same defendants. After the subrogation was settled, the defendants moved to dismiss the personal injury case claiming it was barred by res judicata. The trial court agreed and dismissed the personal injury case.

The First District reversed. The doctrine of res judicata requires that all claims arising out of a specific incident be litigated at one time. However, a statute protects an insured from having a claim for personal injury barred by res judicata where his insurance carrier has previously litigated a subrogated property damage claim arising out of the accident. It made no difference that the underlying subrogation action named only the insured and did not specify it was a subrogation claim on behalf of the insurer. Gadson v. Among Friends Adult Day Care, Inc., 2015 IL App (1st) 141967.

ERISA Does Not Preempt Illinois Law Concerning Common Fund Doctrine

A worker fell from a ladder and was injured. He received benefits from the defendant Trust Fund of $86,709.73. The fund document included a subrogation agreement requiring the worker to repay 100% of any payments received from third parties without any deduction. The worker then settled his case for $500,000 and tendered the full subrogated amount to the fund. His attorneys then filed the present suit seeking one-third of the amount recovered of $28,903.25 plus costs of $3,020.09. The trial court ruled in favor of the law firm holding it was entitled to the fees pursuant to the Common Fund Doctrine.

The Fifth District affirmed. In Illinois, an attorney's claim pursuant to the Common Fund Doctrine is not preempted by the terms of a self-funded ERISA plan. An action by an attorney under the doctrine is an independent action invoking the attorney's right to the payment of fees for services rendered and is wholly unrelated to the plan. The plan's contractual provisions does not govern an independent attorney whose efforts created the common fund. Schrempf, Kelly, Napp & Darr, Ltd. v. The Carpenters' Health & Welfare Trust Fund, 2015 IL App (5th) 130413.

© 2019 Heyl, Royster, Voelker & Allen, P.C

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