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ATTORNEY FEES / INSURANCE - EX PARTE STATE FARM MUTUAL AUTO INSURANCE CO.

Ex parte State Farm Mut. Auto Ins. Co., [Ms. 1141039, Jan. 29, 2016] __ So. 3d __ (Ala. 2016). A UIM carrier that advances the amount of a liability insurer’s policy-limits settlement offer does not owe a share of the attorney fee when the plaintiff recovers from the tortfeasor. Here, GEICO insured the tortfeasor; State Farm provided underinsured motorist coverage to the plaintiff, Pritchard. GEICO offered Pritchard its $50,000 policy limits. Pursuant to Lambert v. State Farm Mut. Auto Ins. Co., 576 So. 2d 160 (Ala. 1991), State Farm paid Pritchard that $50,000 to preserve its right to subrogation as to any amount Pritchard recovered from the tortfeasor above the $50,000 liability limits and below the amount of UIM coverage (which was $100,000). Pritchard won a $400,000 verdict against the tortfeasor. The trial court held that State Farm owed the plaintiff a $20,000 attorney fee, 40% of the $50,000 that State Farm paid pursuant to Lambert. The Court of Civil Appeals affirmed. On certiorari, the Supreme Court reverses. This is a plurality opinion by Justice Stuart with three Justices concurring and four Justices concurring in the result. Justice Stuart’s reasoning is that “[t]he making of a Lambert advance does not create for a UIM insurer a right of subrogation to proceeds within a tortfeasor’s liability limits.” Thus, “the insured’s recovery of the Lambert advance is an incidental benefit of the litigation and does not create a common fund from which the insured’s attorney may be awarded fees.” Justice Murdock, in his opinion concurring in the result, more directly holds that there is no common fund to which the common-fund exception to the attorney fee rule could apply. Justice Stuart’s opinion adopts the reasoning of Judge Moore dissenting from the opinion below. He says that the UIM carrier does not have a subrogation interest in the amount of its Lambert payment because the plaintiff has no interest in that amount of the recovery from the tortfeasor. “The insured has already been ‘guaranteed’ that payment through the Lambert procedure. ... In a Lambert situation, the insured prosecutes a civil action against the tortfeasor solely to obtain UIM benefits from its own UIM insurer and additional damages against the tortfeasor. An insured must recover a judgment exceeding the Lambert payment in order to create a fund to which he or she has any interest at all.” Opinion of Stuart, J., quoting Judge Moore’s dissent in the opinion below. The UIM carrier does have a subrogation interest as to the amount above the liability coverage and below its UIM coverage.

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