Insurance Subrogation Attorneys Fees
When an insurance company lays claim to subrogation proceeds, obviously someone has to collect them, and attorneys rarely work for free.
It is grossly inequitable to expect an insured, or other claimant, in the process of protecting his own interest, to protect those of the company as well and still pay counsel for his labors out of his own pocket, or out of the proceeds of the remaining funds.
And this is precisely the view taken by the overwhelming majority of decisions, in that a proportionate share of fees and expenses must be paid by the insurer or may be withheld from its share. 8A J. Appleman & J. Appleman, Insurance Law and Practice 4903.85, at 335 (1981);
see 16 R. Anderson & M. Rhodes, Couch Cyclopedia of Insurance Law 61:47, at 131 (2d ed. 1983) ("Where the insured prosecutes the suit against the tortfeasor, thereby incurring legal expenses and court costs, the insured is generally entitled to recover such expenses prior to any recovery going to the insurer, or the insurer must at least pay its proportionate share of the expenses. ");
Insurance subrogation attorneys fees cases:
see also Phillips v. State Farm Mut. Auto Ins. Co., 73 F.3d 1535, 1539 n.2 (10th Cir. 1996) (citing state courts that require subrogees to pay share of attorney's fees incurred by their insureds in prosecuting actions against third-party tortfeasors);
Principal Cas. Ins. Co. v. Norwood, 463 N.W.2d 66, 68 (Iowa 1990) (prevailing law in other jurisdictions is that insured may retain costs and expenses from fund recovered from wrongdoer and benefitting insurer);
Hedgebeth v. Medford, 74 N.J. 360, 378 A.2d 226, 229-30 (N.J. 1977) (rule that right of subrogation carries with it equitable requirement of paying proportionate share of attorney's fees "is now clearly accepted"); Amica Mut. Ins. Co. v. Maloney, 120 N.M. 523, 903 P.2d 834, 839 (N.M. 1995) (joining majority of jurisdictions that have extended common fund doctrine to insurance cases where insured incurs attorney's fees in obtaining judgment or reaching settlement that benefits subrogated insurer);
Bowen v. American Family Ins. Group, 504 N.W.2d 604, 606 (N.D. 1993) (joining "nearly unanimously adopted" rule that insurer's subrogation interest is subject to proportionate share of attorney's fees incurred by insured in securing settlement against third-party tortfeasor).