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Deturk v. State Farm Mutual Automobile Insurance Co.12/4/1998
Attorney Philip DeTurk sued State Farm to recover a portion of attorney's fees incurred by six of his clients who settled personal injury claims. State Farm provided Personal Injury Protection (PIP) coverage to each client and had paid PIP benefits on behalf of each. The trial Judge granted summary Judgement for State Farm and awarded attorney's fees under RCW 4.84.250 against DeTurk. We reverse.
FACTS
Philip H. DeTurk settled personal injury cases during 1994 and 1995 on behalf of six clients insured with State Farm Mutual Automobile Insurance Company. Each client was involved in a car accident and was paid first-party (PIP) benefits under a State Farm policy. DeTurk sued State Farm, contending his clients were entitled to reimbursement from State Farm for a pro rata share of legal expenses they incurred in recovering PIP payments from the third parties.
Each policy contained the following PIP subrogation language: 3. Our Right to Recover Our Payments . . . . b. Under first party benefits and underinsured motor vehicle coverages, we are subrogated to the extent of our payments to the proceeds of any settlement the injured person recovers from any party liable for the bodily injury or property damage. If the person to or for whom we have made payment has not recovered our payment from the party at fault, he or she shall:
(1) keep these rights in trust for us and do nothing to impair them;
(2) execute any legal papers we need; and
(3) when we ask, take action through our representative to recover our payments.
We are to be repaid our payments, costs and fees of collection out of any recovery.
d. If the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses. Our share is that per cent of the legal expenses that the amount we recover bears to the total recovery. This does not apply to any amounts recovered or recoverable by us from any other insurer under any interinsurer arbitration agreement.
For the combined claims, DeTurk requested fees and expenses totaling $9,080.60. State Farm moved for summary Judgement, arguing that DeTurk and his clients were not entitled to attorney's fees because (1) State Farm had not requested DeTurk's services and in four cases actually advised DeTurk not to recover payments on its behalf; (2) DeTurk did not benefit State Farm in recovering the payment; (3) DeTurk's services were not necessary; and (4) under paragraph (d) above, the payments were "recoverable in interinsurer arbitration." State Farm also requested attorney's fees under RCW 4.84.250 and RCW 4.84.270. The trial court granted summary Judgement and awarded $3,400 in attorney's fees to State Farm. Reimbursement of Legal Expenses
In Mahler v. Szucs, 135 Wn.2d 398, 957 P.2d 632 (1998), the Supreme Court, reviewing language essentially identical to the language here, held "State Farm's policy require{s} it to pay its insured a portion of their expenses necessary to obtain a recovery from the tortfeasors." Mahler, 135 Wn.2d at 405.
The court explained that subrogation has two features: a right to reimbursement and a mechanism for enforcing that right. The mechanism for enforcement can be either (1) a "type of lien" in favor of the insurance company against any recovery its insured receives from the tortfeasor; or (2) an action that the insurance company, standing in the shoes of the insured, may initiate against the responsible third party. Mahler, 135 Wn.2d at 412-13.
A right of reimbursement can arise either by operation of law or by contract. Mahler, 135 Wn.2d at 412
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