Common Fund Doctrine Applies to Illinois Medical Liens

Illinois personal injury lawyers should be aware that on March 4, 2010, the Appellate Court in Holloway v. Dunway, 2010 WL 763918, held that medical providers stautory liens for services rendered (770 ILCS 23/1 et seq.) to an injured person are subject to reduction under common fund doctrine for attorneys fees incurred by plaintiff in obtaining recovery. The Court held and stated:

* if the professional or provider seeks to collect the debt owed to it out of the common fund created by the plaintiffs and their attorneys, the common fund doctrine applies and it is responsible for its proportionate share of attorney fees and costs- 770 ILCS 23/45.
*the common fund doctrine permits a party who creates, preserves, or increases the value of a fund in which others have an ownership interest to be reimbursed from that fund in which others have an ownership interest to be reimbursed from that fund for litigation expenses incurred, including counsel fees. Scholtens v. Schneider, 173 Ill. 2d 375, 385 (1996).
*it is now well established that a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney fee from the fund as a whole.
*To sustain a claim under the common fund doctrine, the attorney must show that (1) the fund was created as a result of legal services performed by the attorney, (2) the claimant did not participate in the creation of the fund, and (3) the claimant benefited or will benefit from the fund that was created. Bishop v. Bugard, 198 Ill. 2d 495 (2002).
*it is irrelevant that the party who benefits from a lawyer’s services has a right to compensation, be it undifferentiated right of reimbursement or subrogation.
*We believe that by its use of this language, the supreme court intended to, and did, shift the focus away from the relationship between the parties and toward what it called the “real question” of whether the claimant benefited from the lawsuit without contributing to its costs, thereby becoming unjustly enriched. Bishop, 198 Ill. 2d 495, 510. (2002).
*While the hospital’s right to payment may not be dependent on the creation of the fund, its statutory lien is in fact dependent on the creation of the fund, for the lien specifically and expressly attaches only to the common fund. 770 ILCS 23/20.

The effect of this decision is that now an injured plaintiff can have the health care providers statutory lien amount (770 ILCS 23/20) reduced by an additional amount, customarily the standard attorney fees of one third. This is only fair and equitable.
This will also have the effect of health care providers submitting their bills to Medicare, Medicaid or an insurance company for payment where they never receive the full amount of their bills. Good news for injured Illinois citizens.

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