Common Fund Doctrine
The common fund doctrine is an equitable rule. It provides that a litigant or a lawyer who benefits another by recovering, preserving or increasing the value of a common fund or pool of funds may be reimbursed for reasonable fees and expenses from the fund as a whole. In personal injury claims, this often allows attorneys to obtain a reduction of the amount of money that has to be paid back to a health insurer that covered bills arising from the negligence of another (an idea called subrogation). This doctrine makes sure that certain insurers reduce the amount you owe by taking into account how much you paid in attorney’s fees and costs in recovering medical expenses. The idea behind this rule is that the insurers interests are protected by the efforts of your attorney. To obtain this money, the insurer would typically have to have its own attorney.
An example of the common fund doctrine in effect is that if you pay your attorney 33 1/3% in fees, your certain insurers may have to reduce their bill by that amount and could potentially share the costs associated with the service and any gross receipts tax. An even simpler example is if your insurer pays $60 to visit your physician and using the common fund doctrine you would only own $40. This is because the insurer would have to reduce the amount you owe by $20. Savings under the common fund doctrine means more money in your pocket in the end. You may only have to pay a portion of the amount owed if you have health insurance.
Unfortunately, the common fund doctrine does not apply to ERISA plans which is a federal law that governs some health insurance companies. This doctrine also does not apply when using a letter of protection because those providers gave you treatment under a contract with your attorney. An attorney will know best when the common fund doctrine can take effect and when it cannot be used at all.
Many injured patients are unaware that they must pay back medical bills even though they had insurance to cover the bills. Some medical providers will balk at the idea that the medical bills you owe can be reduced by a percentage under the common fund doctrine. But what is good to know is that the reduction of bills is required by law in New Mexico for many insurers.
The Davis Kelin Law Firm has a firm understanding of the common fund doctrine. Contact us today at (505) 242-7200. Let us fight for your personal injury needs and stand up for you in this difficult time.