Understanding the Made Whole and Common Fund Doctrines
When you are a victim of a tort in Los Angeles, your physical injury is only one part of your suffering. You may experience mental distress and other emotional or psychological trauma. What’s more: you may also face the pain of financial insecurity. Even if you have good health insurance, you can still face financial stress. Some of you may have had to miss work. Some of you may never be able to work again! Whatever it is, you deserve to be compensated for all that you have lost or paid and for all that you anticipate losing or paying in the future.
When you win a claim or lawsuit, though, your insurance company may try to get reimbursed before you have received full compensation. Sometimes, too, an insurance company may try to obtain reimbursement before your attorney––who worked diligently to win your personal injury claim or lawsuit––is paid. Insurance companies are big and intimidating, and they think they can get away with it. Fortunately, there are laws to prevent them from reimbursement before you and/or your attorney has been properly paid.
Here’s what you need to know about the made whole doctrine and the common fund doctrine in California. Your attorney will know all about these rules, but we believe that informed clients make the best decisions for themselves and are able to make sure, along with their attorney, that payment goes to who is lawfully owed it first before payments are disbursed elsewhere. Here’s an overview of these rules, but if you have more specific questions, always feel free to ask your personal injury attorney.
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When is the Made Whole Doctrine Applied?
The made whole doctrine applies when the liable party does not have adequate insurance or assets to fully compensate the victim for their bodily injuries or property damage. In these cases, the victim is not made whole and the victim’s own insurance will not be reimbursed.
For example, let’s assume you are involved in a serious car accident and suffer serious bodily injuries that will require extensive medical treatment now and in the future. The at-fault party only had the minimum auto insurance requirements ($15,000 for personal injury to one person). You sustain economic and non-economic damages in the amount of $24,000. The at-fault party has no assets but his own car he totaled, and you are only able to receive the $15,000 policy limits. Your own auto insurance had paid $5,000 under the medical payments coverage of your insurance policy, and now claims subrogation from you (namely reimbursement of their $5,000 after you have been paid $15,000 from the liable party). You can make an argument against your insurance company’s subrogation claims that you were not made whole, and you will be protected against paying the insurance company the subrogation amount they request.
Now, if your injuries were less extensive, the insurance company may be able to recover reimbursement. Imagine your damages total $14,000, your own insurance already paid $5,000 for your medical bills, and you recover the full policy limit $15,000 from the liable party. Here, your insurance company can be justified to claim that they have the right to be reimbursed because you were “made whole.” Nevertheless, this position may also be disputed if you have hired a knowledgeable attorney.
Exceptions to the Made Whole Doctrine
There is an exception if it can be called that, and the exception is this: your agreement with the insurance company has a clause overruling this doctrine. Typically, the language will state that the insurer is entitled to recover what it pays out on a claim when the insured recovers from the liable party.
Though your attorney could fight this language as insufficient, chances are the insurance company has inserted tried and true language. Making it worse is this: you may never have known it was there because it’s slipped in among other language that most of us never read when we purchase insurance.
What is the Common Fund Doctrine in California?
Remember that attorneys’ fees are not part of the whole made doctrine? That gap is somewhat filled by the common fund doctrine. This doctrine states that a plaintiff’s insurance company should put part of the money it recovers from the insured’s compensation award toward the plaintiff’s attorney fees when the insurance company did not represent or actively provide its own attorney. Basically, it’s as though a common fund is established from which the insurance company and the attorney can recover costs.
The reason behind this doctrine is fairly simple. The injured party’s attorney put the resources, time, and effort into settling or winning the case and that, in turn, benefited the injured party’s insurance company. As such, the insurance company should have to pay for some of it.
When is the Common Fund Doctrine Applied?
The common fund doctrine applies when the party seeking attorney fees and the party who is to pay the attorney fees must be similarly situated with mutual interests to recover from the common fund. The doctrine is not applied when any of the following are present:
- The injured party did not incur attorney’s fees;
- The attorney represented other interested parties in the same litigation;
- The injured party did not win the personal injury case; or
- The insurance company actively participated in the trial with its own lawyer.
It all depends on the facts and circumstances of your case, and your lawyer will do the best to determine when the common fund doctrine applies and to obtain the highest possible reimbursement for the law firm and for you.
Examples of the Common Fund Doctrine
You are in a car accident and hire your own personal injury attorney in Los Angeles. Your attorney works hard without the help of your insurance company, which provided no attorney. You win your case, but your insurance company files a subrogation claim for reimbursement. Your attorney can effectively argue that the common fund doctrine applies.
In another example, imagine you slip and fall at your nursing home and sue for negligence. Your treatment totaled $25,000, and your health insurance paid for all of it. You win your case, receiving the full $25,000 in damages. Your health insurance company provided an attorney, but the attorney was not active and only came to one or two hearings without putting in much research, time, or effort. Your attorney worked hard on your behalf, and the health insurance company benefited from it. Your personal injury attorney has not yet been paid and so when your health insurance company files a subrogation claim, arguing it provided an attorney, your attorney challenges it. The judge may find that the insurance lawyer’s participation was so minimal that the common fund doctrine applies.
Resourceful, Strategic Personal Injury Attorneys in Los Angeles
You deserve full and fair compensation for injuries resulting from the wrongful acts of another person or entity. Getting full compensation, however, can sometimes be a real legal battle. It takes commitment, experience, and knowledge to get it done. You should be made whole, and a committed, experienced, and knowledgeable personal injury attorney in Los Angeles can help you be made whole again. Contact us to find the right personal injury lawyer for you in Los Angeles.
