COMMON RUSE

Lady and gentlemen, let us engage ourselves for a moment in a discussion on the Common Fund Doctrine. You will, at some point in your career as a small subrogation firm attorney, encounter an insured's attorney who wants some or all of your money. The opposing dirt bag will tell you that, while the defendant's insurance company has, indeed, paid the insured's counsel for the very same damages your client already covered, you have done nothing to earn this money and (s)he has done everything. (S)he has earned it, you have not. In fact, were it not for his/her tenacious, unrelenting negotiations with the opposing insurance company, there would be no money at all, and, by the way, his/her client has not been "made whole." Then (s)he will ask you if you have even heard of the Common Fund Doctrine, and don't you agree it applies in Colorado?

You may pause, your words may do a little stutter step, you may have to restart the engine a couple times, and then, as the defense mechanisms start to kick in, you will try to bullshit your way around a 'yes.' You will try to save face by offering some excuse to "get back to" him about that, but it will be too late. You are officially a chump.

However, thanks to your senior associate, you will never have to live out that kind of humiliation. Thanks to your senior associate, you will be able to tell your insured's counsel where (s)he can go and where (s)he can stick the Common Fund Doctrine. It is really quite simple. I won’t tell you that the Common Fund Doctrine doesn't apply in Colorado, but it (usually) doesn't apply in our cases.

The idea behind the common fund doctrine is that the insured's attorney shouldn't have to work for free. If he works out a deal for his client with the defendant's insurance company as to damages not covered by our client, the insurer is also going to want to make certain all other claims relating to the incident are released at the same time so that they know exactly how much money is in the pot and they don't wind up double-paying. The insured's attorney may then request the maximum amount the defendant's insurer is willing to pay with the understanding that the subro claim---if one is ever even asserted--will be paid from that fund. If no subro claim is ever asserted, the insured and his/her counsel are doing okay. If it such a claim is asserted, the insured’s counsel makes the argument that, but for his/her work on the case, there would be no money at all because our client certainly didn't nut up and bring a claim or locate the defendant. It’s a basic unjust enrichment claim. And that's basically what the Common Fund Doctrine is: that the insured's attorney, who did the work to procure the money, should get paid for that work. Seems to make sense.

But now suppose you are the client. You never hired this yahoo to represent your claim, but here (s)he is telling you that you have to take cents on the dollar because (s)he has already settled everything out for you. Remember, (s)he doesn't work for free. But shouldn't you be able to hire whomever you want? Shouldn't you get to decide whether or not to accept less than what you paid on behalf of your insured?

The answer is Yes, of course. But you have to actively preserve your subro rights; there’s no sitting back and letting someone else do all the work for you—at least, not without notifying them. Specifically, you (remember, you're still pretending to be the insured) need to reasonably (and timely) notify the defendant's insurance company and the insured of your subro claim and your intent to pursue it. If you do that (and that is a regular part of our clients' claim pursuit), any settlement between the defendant's insurance company and your insured is made subject to your claim. Your insured's counsel can whine all he wants about the Common Fund and making whole (we'll save that issue for a future entry. Maybe), but, as long as proper notice is given, (s)he can pretty much suck it.