Court Opinion

ID: 6530648
Source: CourtListenerOpinion
Date Created: 2022-07-19 20:17:05.156525+00
Date Added: 2024-06-11T15:55:21.259422
License: Public Domain

MOORE, Judge,
dissenting.
I respectfully dissent.
In Ex parte State Farm Mutual Automobile Insurance Co., 108 So.3d 1008 (Ala. 2012), Charles Baggett, who was insured by State Farm Mutual Automobile Insurance Company (“State Farm”) for underin-sured-motorist (“UIM”) benefits, obtained a judgment for $181,046 in a civil action against Diana Morris. Sagamore Insurance Company, an automobile-liability-insurance carrier, insured Morris for $25,000, which amount State Farm had advanced to Baggett in accordance with the procedures set out in Lambert v. State Farm Mutual Automobile Insurance Co., 576 So.2d 160 (Ala.1991). After the entry of the judgment, Sagamore paid Baggett $25,000, and State Farm mistakenly paid Baggett its UIM policy limits of $60,000, in addition to the $25,000 that it had already advanced to Baggett, instead of taking a credit for the $25,000 advance and correctly paying Baggett $35,000. The trial court ordered Baggett to refund $25,000 to State Farm but also ordered State Farm to pay Baggett an attorney’s fee under the common-fund doctrine. After this court affirmed that judgment, our supreme court, on certiorari review, reversed this court’s judgment, holding that Baggett was not entitled to any attorney’s fee on the mistaken overpayment. The court went on to say:
“If an attorney fee was due Baggett’s attorney with respect to all or part of the $85,000 actually owed in the aggregate by Sagamore and State Farm, then the fee should be taken from the $85,000, not from the $25,000 State Farm overpaid and as to which it is entitled to be reimbursed.”
108 So.3d at 1009 (emphasis added).
In this case, James Ross Pritchard, Jr., who was insured by State Farm for UIM benefits, obtained a judgment for $400,000 in a civil action against Broderick McCants. GEICO Insurance Company, an automobile-liability-insurance carrier, insured McCants for $50,000, which amount State Farm had advanced to Pritchard in accordance with the procedures set out in Lambert, supra. After the entry of the judgment, GEICO ten*731dered payment of its policy limits of $50,000 and State Farm tendered payment of $50,000, the remainder of its UIM policy limits of $100,000, correctly taking credit for its $50,000 advance. According to Ex parte State Farm, “[i]f an attorney fee was due [Pritchard’s] attorney[s] with respect to all or part of the [$150,000] actually owed in the aggregate by [GEICO] and State Farm, then the fee should be taken from the $150,000_”5108 So.Bd at 1009. It is undisputed that Pritchard’s attorneys are, in fact, entitled to recover a fee from the $150,000 it received in the aggregate from GEICO and State Farm; however, State Farm objects to paying Pritchard’s attorneys an additional $20,000 fee awarded by the trial court. In its final order, the trial court basically reasoned that Pritchard’s attorneys, by recovering $50,000 from GEICO, created a common fund that conferred a direct benefit on State Farm and for which State Farm was obligated to pay a 40% fee. The trial court erred in that regard.
In its order, the trial court relied on Alston v. State Farm Mutual Automobile Insurance Co., 660 So.2d 1314 (Ala.Civ. App.1995), and Eiland v. Meherin, 854 So.2d 1134 (Ala.Civ.App.2002), to support its attorney-fee award. Alston is not on point because, based on the concessions of the UIM carrier in that case, see 660 So.2d at 1316, this court did not address the basic issue whether the common-fund doctrine applies to the recovery of a payment that was advanced pursuant to Lambert (“a Lambert payment”). Eiland is not directly on point, either, because the insured in that case recovered only part of the Lambert payment. Nevertheless, Ei-land does stand for the general proposition that the common-fund doctrine applies to the recovery of a Lambert payment. In my opinion, Eiland was wrongly decided.
In Eiland, this court started off with the proposition that insurance-subrogation principles apply to the recovery of a Lambert payment. This court stated:
“The common-fund doctrine in insurance-subrogation cases is based on the equitable notion that, because an insurer is entitled to share, to the extent of its subrogation interest, in any recovery its insured achieves against a tortfeasor, the insurer should bear a proportionate share of the burden of achieving that recovery—including a pro rata share of the insured’s attorney fee.”
854 So.2d at 1136-37 (emphasis added). This court then went on to state that an insured’s attorney, who pursues a civil action against a tortfeasor under Lambert, acts, in part, “to protect [the UIM carrier’s] subrogation interest.” 854 So.2d at 1137 (emphasis added). However, unlike as incorrectly stated in the main opinion, 576 So.3d at 161 n. 1, in a Lambert situation the UIM insurer does not, by advancing funds to the insured, obtain any subro-gation rights against the proceeds of the tortfeasor’s automobile-liability-insurance policy. Lambert, itself, provides otherwise:
“ ‘Underinsured motorist coverage provides compensation to the extent of the insured’s injury, subject to the insured’s policy limits. It is an umbrella coverage that does not require the insurer to pay to its insured the amount of the tort-feasor’s bodily injury policy limits, as those limits pertain to the in*732sured. Therefore, the insurer has no right to subrogation insofar as the tort-feasor’s limits of liability are concerned. Its right of subrogation would be for sums paid by the insurer in excess of the tort-feasor’s limits of liability.’ ”
Lambert, 576 So.2d at 165 (quoting Hardy v. Progressive Ins. Co., 531 So.2d 885, 887 (Ala.1988)) (emphasis added); see also Star Freight, Inc. v. Sheffield, 587 So.2d 946, 955 (Ala.1991) (explaining that, under Hardy, “an underinsured motorist insurance carrier had no right of subrogation as to payments that were within a tort-fea-sor’s limits of liability, but did have a right of subrogation for sums paid by the insurer in excess of the tort-feasor’s limits of liability”).
This court then holds in Eiland that the common-fund doctrine applies when one party, through active litigation, creates, reserves, or increases a fund “in which more than one party has, at the outset of the controversy, a potential interest.” 854 So.2d at 1137 (emphasis added). However, in a Lambert situation, the insured has no interest, potential or otherwise, in the recovery of the tortfeasor’s automobile-liability-insurance-policy limits. As explained in River Gas Corp. v. Sutton, 701 So.2d 35, 39 (Ala.Civ.App.1997), a Lambert payment acts as a substitute for the tortfeasor’s automobile-liability-insurance-policy limits. The insured has already been “guaranteed” that payment through the Lambert procedure. Lambert, 576 So.2d at 166. In a Lambert situation, the insured prosecutes a civil action against the tortfeasor solely to obtain UIM benefits from its own UIM insurer and additional damages against the tortfeasor. An insured must recover a judgment exceeding the Lambert payment in order to create a fund to which he or she has any interest at all.
Furthermore, in Eiland, this court erred in considering that an insured’s attorney acts for the benefit of the UIM carrier when recovering a judgment against the tortfeasor. In prosecuting a civil action against a tortfeasor, the insured is, in actuality, attempting to fix the liability of the tortfeasor and the measure of the insured’s damages primarily to establish the insured’s right to UIM benefits, which is, obviously,' directly against the interests of the UIM carrier. As our supreme court noted in Driver v. National Security Fire & Casualty Co., 658 So.2d 390, 395 (Ala. 1995), when a UIM insurer opts out of the litigation under Lowe v. Nationwide Insurance Co., 521 So.2d 1309 (Ala.1988), as State Farm did in this case, it is the attorney for the tortfeasor, not the attorney for the insured, who defends the interests of the UIM carrier by acting to limit the damages awarded.6 See also Ex parte Littrell, 73 So.3d 1213 (Ala.2011) (relying on Driver to hold that a UIM carrier has no right to retain additional counsel to represent a tortfeasor because its interests are protected by counsel for the tortfeasor furnished by tortfeasor’s automobile-liability insurer); and Miller v. Thompson, 844 So.2d 1229, 1235 (Ala.Civ.App.2002) (construing Driver as holding that a UIM carrier’s interests “will be protected by the attorney for the underinsured motorist’s carrier”). Throughout the litigation, the attorney for the insured remains in an adversarial relationship to the UIM carrier.
“[I]f the attorney is simply acting on behalf of his or her client, and a benefit only incidentally comes to others, the *733attorney is not entitled to a fee from those receiving the incidental benefit.... In this regard, a benefit can be an incidental, rather than an intended, result of an attorney’s efforts, if the relationship between the attorney and the ‘nonclient’ person receiving the benefit is an adversarial one.”
CNA Ins. Cos. v. Johnson Galleries of Opelika, Inc., 639 So.2d 1355, 1359 (Ala. 1994).
Finally, I disagree with Eiland and Mathews v. Bankers Life & Casualty Co., 690 F.Supp. 984, 987 (M.D.Ala.1988), to the extent that they imply that it would be unfair to the insured’s attorney not to impose an attorney’s fee. In a Lambert situation, the attorney is entitled to a fee on the Lambert payment. To award the attorney an additional fee for recovering the same payment from the tortfeasor actually amounts to a double recovery for the attorney. For example, in this case, Pritch-ard’s attorneys received attorney’s fees of 33 1/3% on the $50,000 advanced by State Farm before the litigation. After the litigation, Pritchard’s attorneys received additional attorney’s fees of 40% on the $50,000 GEICO paid. Although Pritchard did not receive any additional benefit, his attorneys received an additional $20,000 on what is essentially the same $50,000.
Finally, I note that, in the typical insurance-subrogation case, the attorney-fee award is justified on the theory that the repayment from the common fund decreases the liability of the insurer. See, e.g., Government Emps. Ins. Co. v. Capulli, 859 So.2d 1115, 1119 (AIa.Civ.App.2002). Thus, if State Farm would have owed Pritchard $150,000, but its liability was reduced to $100,000 based on the $50,000 recovered from GEICO, then the trial court would have been correct in awarding the additional $20,000 fee. However, by following the advance-payment procedure established in Lambert and fronting Pritchard $50,000, State Farm did not thereby incur any liability for an additional $50,000 beyond its policy limits. In no event would State Farm have ever been liable for $150,000 in this case under Lambert or any other legal authority. In fact, State Farm has a contractual obligation only to pay Pritchard up to $100,000, its UIM policy limits. The trial court’s judgment requires State Farm to pay not only the $100,000, but an additional $20,000 beyond its UIM policy limits. The $20,000 does not come out of any common fund to which State Farm has access, but comes directly from State Farm; thus, the award of attorney’s fees actually increases State Farm’s liability to Pritchard. I have not located any case in which any court has determined that the common-fund doctrine should apply to increase the liability of a party.
In summary, State Farm was not subro-gated to Pritchard’s right to recover $50,000 from GEICO and, therefore, the proceeds of the GEICO policy cannot be considered a subrogation fund benefiting State Farm and from which it must pay attorney’s fees. Moreover, Pritchard’s attorneys, in prosecuting the action against McCants, did not act to protect any interest of State Farm, but assumed an adversarial position to State Farm. In obtaining the $400,000 judgment, Pritchard’s attorneys directly served Pritchard’s interest in collecting UIM benefits from State Farm, and their actions only incidentally benefited State Farm. In the end, Pritchard’s attorneys should have recovered fees based solely on the $150,000 inuring to the benefit of Pritchard; instead, they received an additional $20,000 windfall at the increased expense of State Farm. In my opinion, the judgment ordering State Farm to pay Pritchard’s attorneys $20,000 cannot be justified under the common-fund *734doctrine or any other legal or equitable theory. Therefore, I believe the judgment is due to be reversed.

. I recognize that Ex parte State Farm involved a mistaken overpayment of UIM benefits, which did not occur in this case, but the supreme court set out exactly how attorney’s fees are calculated in cases in which an insured obtains a judgment exceeding the combined policy limits of the tortfeasor’s automobile-liability insurance and the UIM insurance. Hence, I find that opinion authoritative on this point.

. For that reason, perhaps an argument could be made that a UIM insurer that opts out should, in fairness, pay the defense costs of the tortfeasor, but see Miller, infra (rejecting that argument), but, in no event, should a UIM carrier be forced to pay the attorney's fees of its insured who is actually pursuing a claim against the UIM carrier.