Allstate v. Daniel ( 1998 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
FILED
ALLSTATE INSURANCE COMPANY, ) July 31, 1998
)
Plaintiff/Appellant, ) Knox Circuit No. 2-493-94 Crowson, Jr.
Cecil
) Appellate C ourt Clerk
VS. ) Appeal No. 03A01-9710-CV-00466
)
W. ZANE DANIEL, )
)
Defendant/Appellee. )
APPEAL FROM THE CIRCUIT COURT OF KNOX COUNTY
AT KNOXVILLE, TENNESSEE
THE HONORABLE HAROLD WIMBERLY, JR., JUDGE
W. ANDREW FOX
Knoxville, Tennessee
Attorney for Appellant
W. ZANE DANIEL
DANIEL & OBERMAN
Knoxville, Tennessee
Attorney for Appellee
AFFIRMED
ALAN E. HIGHERS, J.
CONCUR:
W. FRANK CRAWFORD, P.J., W.S.
DAVID R. FARMER, J.
Plaintiff/appellant, Allstate Insurance Company (“appellant”), appeals the judgment
of the trial court awarding defendant/appellee, W. Zane Daniel (“appellee”), one-third of
appellant’s subrogation funds. For reasons stated hereinafter, we affirm the trial court’s
judgment.
In April of 1991, appellee was retained to represent Lisa Robinson (“plaintiff”) in her
automobile accident litigation. The accident occurred on April 14, 1991. Appellee was
retained on the basis of a contingency fee of one-third of the total recovery. Eventually,
appellee represented plaintiff in an action concerning this accident styled Robinson v.
Heagey, et al., Knox County Circuit Court Docket No. 2-253-92. Appellant had an
insurance policy with John H. and Winona Robinson which provided coverage, including
coverage for medical payments for plaintiff.
Pursuant to this contractual agreement, appellee gave formal written notice of his
representation of plaintiff to all interested parties including, but not limited to, the appellant.
The letter forwarded to appellant was dated April 23, 1991.
A little over four months later in correspondence dated September 9, 1991,
appellant notified appellee of the possibility of a subrogation interest by stating:
As a claimant carrier, State Farm, has limits of liability greater
than or equal to ours, we will be closing all coverages under
this policy other than medical payments.
Once treatment is completed or our limits are exhausted, we
will be subrogating from the claimant carrier for our
expenditure under the medical payments coverage.
Suit was filed in the Knox County Circuit Court on April 10, 1992. (Id.). Soon
thereafter, appellant intervened in the suit. Appellant was represented in this intervention
by Ron Cunningham, attorney.
On May 26, 1992, appellee forwarded a letter to Cunningham which stated:
Enclosed you will find the Order wherein you have intervened
on behalf of Allstate Insurance Company in the above-styled
action.
I will expect you to be present at all depositions, and your
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company pay for the necessary costs in proving the medical
bills and expenses to establish your claim.
Likewise, any and all costs should be split equally between
your company and my client, which is necessary in order to
pursue this matter for trial. I assume there will be no questions
pertaining to this but if there are, please notify me immediately
and I will ask the Court for an Order directing that your client
share in the expenses in pursuing this matter.
Please notify me if there are any questions or otherwise I will
assume that any and all depositions, et cetera, will be shared
equally between our clients.
On July 29, 1992, attorneys for appellant wrote appellee stating that they would
relay this information to appellant. They further stated that there was an anticipation that
defendants in the initial matter would stipulate as to medical bills and that a more definite
reply would follow.
Thereafter, on October 7 of that same year, attorneys representing appellant
responded that appellant would not assume costs and, once again, that appellant
anticipated defendants stipulating to the amount of medical bills.
No further contact was made by appellant with appellee until the day of trial.
On December 11, 1992, pretrial depositions were taken of all parties concerned.
This involved four different individuals. Appellant was cognizant of these depositions but
failed to appear to represent their interest.
One month later, the deposition of Dr. John Soldano was taken, and, once again,
appellant failed to have its attorney present to represent its interest. Thereafter, on
January 25, 1993, Dr. James David Johnson’s deposition was taken. Again, no one
appeared on appellant’s behalf.
All costs of taking the above depositions and proving the medical bills and expenses
which are the subject of this subrogation claim were borne by the original plaintiff and
appellee, her counsel, with appellant refusing to take part.
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On February 3, 1993, the matter was set for trial and an attorney for appellant
appeared at the courthouse at approximately 8:45 a.m. Appellee then advised appellant’s
attorney that he felt that appellant’s attorney should not participate in the trial inasmuch as
he had virtually no knowledge of the case. Prior to this time, no representative of appellant
was ever requested not to participate in the investigation and preparation of this matter for
trial.
Contrary to appellant’s anticipation, defendants in Robinson v. Heagey, et al did not
stipulate to plaintiff Robinson’s medical bills. Consequently, medical proof through the
doctors was required in order to prove Robinson’s injuries and that the medical bills were
related to the automobile accident.
Appellee investigated the case, prepared interrogatories and requests for admission
to the defendant, and answered the interrogatories of the defendant. In short, appellee
fully prepared the case for deposition and trial.
Appellant performed no work on the case at any time. In fact, the only appearance
made by appellant’s counsel was on the morning of the trial wherein counsel appeared for
approximately one hour before the case commenced.
At the conclusion of the trial, judgment was entered for plaintiff in the amount of
$4,153.56, and appellant contacted appellee and informed him that they would be
requesting the $4,153.56 allegedly due under their subrogation rights. The appellee then
withheld monies allegedly payable to appellant under its subrogation interest upon the
basis that he was entitled to reasonable attorney’s fees and costs for his services in
securing payment of appellant’s subrogation claim.
Upon the conclusion of the case, appellee tendered two-thirds of the above sum to
appellant for its subrogation interest and retained one-third for himself. Appellant filed this
action and stated that they would not pay attorney’s fees for the work performed and asked
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that plaintiff pay the full subrogation amount of $4,153.56.
This cause was heard before the Judge Wimberly in chambers, and he reviewed
the statements of the parties and the different documents. Judge Wimberly was the same
judge who heard the case of Robinson v. Heagey, et al. In view of the fact that appellant
had not performed any work or services, or advanced any expense in order to collect their
subrogation claim, the court decided that appellee was entitled to one-third attorney’s fees
for the work performed in collecting this money. Case expense was not an issue raised
at trial. Therefore, the trial court did not consider the issue. This appeal ensued.
The issue presented by this case was considered by the Tennessee Supreme Court
in Travelers Ins. Co. v. Williams, 541 S.W.2d 587 (Tenn.1976), and by this Court in
Tennessee Farmers Mut. Ins. Co. v. Pritchett, 54 Tenn.App. 410, 391 S.W .2d 671 (1964),
and Motors Ins. Corp. v. Blakemore, 584 S.W.2d 204 (Tenn.App.1978). In Pritchett, this
Court held that the insurer was obligated to pay its insured's attorney a fee for collecting
a subrogation claim. Specifically, the Court found an implied contract to pay a reasonable
attorney’s fee for recovery of the subrogation claim where the insurer acquiesced in the
action of the insured's attorney on its behalf. In Williams and Blakemore, the Supreme
Court and this Court found that because the insurer notified the insured's attorney prior to
the performance of beneficial services that it would handle its own subrogation claim the
attorney was not entitled to a fee.
The applicable legal principle is recognized in all of the above cases. It is stated
in Williams, as follows:
There are, of course, many situations in which the work of an
attorney proves useful to persons other than his own client.
The normal rule in such cases is that he must look only to his
client, with whom he has contracted, for his compensation,
notwithstanding the acceptance of benefits by others. But, an
exception to this rule is made whenever one person, having
assumed the risks and expense of litigation, has succeeded in
securing, augmenting, or preserving property or a fund of
money in which other people are entitled to share in common.
In that event, the expenses of the action are borne by each
participant according to his interest. The fairest and most
efficient means of distributing these costs is thought to be to
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make them a charge upon the fund itself. This device, known
as the 'fund doctrine,' was invented by courts of equity to
prevent passive beneficiaries of the fund from being unjustly
enriched. It is, therefore, never applied against persons who
have employed counsel on their own account to represent their
interests. Thus, the right to employ counsel of one's own
choosing is preserved. . .
[v]aried fact situations are disclosed by the reported cases
dealing with this problem. We doubt the advisability of
attempting to devise a single 'rule' to govern all such cases,
whatever the facts might be. Instead, each case, with its
peculiar facts must be decided by applying general,
fundamental principles of contract law. . .
[i]t follows that whether or not an attorney is entitled to collect
from the insurer a fee with respect to a subrogation claim
depends upon whether an express or implied contract or a
quasi contractual relation exists between them.
Travelers Ins. Co. v. Williams, 541 S.W.2d at 589-90 (citations omitted).
Implied contracts do that which the law says ought to be done as a matter of right
and justice. They are such as reason and justice dictate, and which, therefore, the law
presumes that every man undertakes to perform. Generally an implied contract is one
which is inferred from the conduct of the parties; it is not necessarily expressed in words.
7 Tenn.Juris., Contracts, § 98. “A contract implied in law is imposed by operation of law,
without regard to the assent of the parties, on grounds of reason and justice." Continental
Motel Brokers, Inc. v. Blankenship, 739 F.2d 226, 232 (6th Cir.1984) (citations omitted).
Courts are directed to look to the conduct of the parties in light of all the circumstances to
determine whether an implied contract exists. One Tennessee court has explained as
follows:
In Tennessee, any conduct from which a reasonable person in
the offeree's position would be justified in inferring a promise
in return for the requested act, amounts to an offer, and that
such a request might be implied when the facts and
circumstances are such that the person receiving the benefit
of such work or services know, or reasonably should have
known, that the person doing the work expected to be
compensated.
Cummins v. Brodie, 667 S.W.2d 759, 764 (Tenn.App.1983) (quoting In re Estate of
Holding, 61 Tenn.App. 654, 663-64, 457 S.W.2d 545, 549 (1969)).
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As noted supra, the principle recognized in Williams, Pritchett, and Blakemore is
this: after notice to the insurer by the insured's attorney of his/her representation, the
attorney will be entitled to be compensated for services rendered the insurer until such time
as the attorney is notified by the insurer that it will be responsible for asserting its claim for
subrogation. See Boston, Bates, and Holt v. Tennessee Farmers Mutual Insurance
Company, 857 S.W.2d 32 (Tenn. 1993).
The conduct of the parties indicates that an implied contract did exist, that appellee
was obligated to provide his services as an attorney, and that appellant was obligated to
pay for such services.
In the present case, appellee advised appellant of his representation of plaintiff.
Thereafter, appellant’s response was, at best, equivocal: “Once treatment is completed or
our limits are exhausted, we will be subrogating from the claimant carrier for our
expenditure under the medical payments coverage.” Although, no doubt, appellant
planned to pursue its subrogation interest, there is no indication from appellant as to how
appellant planned to go about securing payment of such interest. After appellant
intervened in this matter, appellee asked appellant to be present at all depositions and to
share in the costs of proving medical bills and expenses had by plaintiff. After medical bills
were not stipulated to by defendants, appellee set up depositions to prove medical bills and
expenses incurred by plaintiff Robinson. Appellant failed to attend any of the depositions
or to supply appellee with funds to aid in proving the medical bills and expenses. In fact,
appellant failed even minimally to involve itself in this matter until the morning of the trial.
Under these circumstances, it is the opinion of this court that a reasonable person in
appellee’s position would be justified in assuming that appellant wanted appellee to secure
payment of their subrogation interest. Appellee, undoubtedly, could not safely abandon
any portion of his client's cause of action.
Appellant cites this court to the Williams case mentioned above. This present case,
however, is distinguishable from Williams in that the insurer in Williams unequivocally
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stated that it would “handle its own subrogation.” As mentioned supra, appellant merely
stated somewhat equivocally that it would subrogate from the claimant’s carrier. However,
appellant failed to apprise appellee of who would handle its subrogation interest. This fact
coupled with the fact that appellant failed even remotely to participate in any aspect of this
matter is strong evidence that appellant knew or should have known that appellee
expected to be compensated for his services.
Based on the evidence in the record and in light of the foregoing, we think the trial
court properly found an implied contractual relationship between appellee and appellant
thereby awarding attorney’s fees to appellee. Accordingly, the judgment of the trial court
is affirmed. Costs are taxed against appellant, for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
FARMER, J.
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