State Farm Mutual Automobile Insurance Company v. Charles Waibel

Citation: Not availableDocket: 03-00-00215-CV

Court: Court of Appeals of Texas; March 14, 2001; Texas; State Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

State Farm Mutual Automobile Insurance Company appeals a summary judgment from the Travis County court that favored Charles Waibel, awarding him expenses incurred from a third-party tortfeasor related to injuries from an automobile collision. The judgment also included Waibel's trial and appellate attorney's fees. State Farm's appeal raises issues of equity and the evidence's sufficiency, leading to a partial reversal and remand for further proceedings.

In August 1997, Waibel sustained injuries as a passenger in a vehicle struck by Marius Pocol, whose vehicle was insured by Royal SunAlliance Insurance Company. Pocol's liability was acknowledged by Royal. Waibel, insured by State Farm with a Medical Payment Coverage (Med-Pay) limit of $5,000, had retained attorney Lonnie Roach to represent him. Roach had a contingency-fee agreement to take one-third of any settlement from responsible parties.

After the collision, Roach notified Royal of his representation but did not respond to requests for medical documentation. Meanwhile, State Farm informed Waibel about the Med-Pay coverage and the potential for reimbursement from any third-party recovery. Waibel submitted a Med-Pay claim in March 1998, which State Farm paid, subsequently notifying Royal of its subrogation claim.

State Farm followed up with Royal regarding the subrogation claim, which Royal acknowledged but requested supporting documents. State Farm urged Waibel not to jeopardize its reimbursement rights and to inform them before any settlement. Roach eventually provided Royal with medical documentation, leading to a settlement offer from Royal. However, Roach did not mention State Farm's subrogation claim in his counteroffer, and ultimately, he settled on Waibel's behalf.

The parties are in disagreement regarding the characterization and division of a settlement related to Waibel's claim against a third-party tort-feasor, Pocol. Waibel and Roach assert that Roach settled Waibel's entire claim for $22,000, while State Farm contends that Royal settled State Farm's subrogation claim for $5,000 and Waibel's claim for $17,000. Royal issued two checks: $17,000 to Waibel and Roach, and $5,000 to Waibel, Roach, and State Farm. Waibel argues that part of the $5,000 should cover his expenses incurred in pursuing the claim against Pocol. Waibel subsequently filed a lawsuit against State Farm for a declaratory judgment seeking to reduce State Farm's recoverable subrogation interest by his expenses.

In the lower court, Waibel's motion for summary judgment was granted, awarding him $1,694.46 from the $5,000 as a pro rata share of his expenses. State Farm appealed, arguing that the summary judgment was legally incorrect and unsupported by evidence, and also contested the imposition of attorney's fees awarded to Waibel.

Regarding summary judgment standards, it is clarified that it is warranted when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. State Farm contends it is entitled to recover its full subrogation interest based on contractual and equitable grounds, asserting Waibel has not met the common-fund doctrine's requirements. While State Farm has a subrogation interest due to Waibel's insurance policy, such rights are confirmed but not expanded by contract. The court must balance equities in determining the subrogee's entitlement. An insurer's right to subrogation is limited and cannot be enforced until the insured is fully compensated. If the insurer does not assist in recovering damages, it must share in the costs and expenses incurred, including attorney's fees.

Waibel maintains that State Farm's subrogation interest should be adjusted to reflect the expenses he incurred during his recovery efforts from Royal, which included extensive medical documentation shared with both State Farm and Royal.

Royal communicated to State Farm that it would reimburse the subrogation claim once it received necessary information. However, Royal did not act on this until Roach, Waibel's attorney, sent medical records, after which Royal made its initial settlement offer to Roach six days later. The negotiations between Royal and Roach resulted in a settlement that fully compensated Waibel, allowing for State Farm's subrogation interest to be addressed. State Farm's involvement was limited to protecting its subrogation interest and did not contribute to Waibel's settlement, which was necessary for State Farm’s potential recovery. 

The court determined that State Farm did not assist in the recovery process, making it liable to share in Waibel's incurred expenses. The common-fund doctrine, which prevents unjust enrichment by distributing costs among beneficiaries of a common fund, was discussed, but the court decided not to apply it since Waibel was entitled to recovery under other equity principles. State Farm’s challenges to the reasonableness of Waibel's attorney's fees were noted, with the assertion that there was insufficient evidence to prove their necessity and reasonableness. The court ultimately overruled State Farm's objections regarding both the recovery of expenses and the attorney's fees awarded to Waibel.

State Farm's argument relies on precedents from *Arthur Andersen Co. v. Perry Equipment Corp.* and *Woollett v. Matyastik*, which outline the necessity of presenting evidence for the reasonableness of attorney's fees in support of fee awards under statutes. The *Arthur Andersen* case emphasizes that while a contingent fee agreement can be admitted as evidence, it cannot solely justify an attorney's fees award under the DTPA. Several factors must be considered to assess reasonableness, including the labor involved, the customary fees in the locality, and the attorney's experience. Similarly, *Woollett* reinforces that guardians seeking attorney's fees must meet statutory proof requirements and present competent evidence, which was lacking in that case due to inadequate documentation and absence of expert testimony. 

Although State Farm's subrogation claim is based on contract and equity rather than statutory law, Waibel is still required to demonstrate the reasonableness of his attorney's fees. The court concluded that Waibel failed to provide sufficient evidence supporting the reasonableness of attorney's fees incurred in settling his claim with Royal, as he did not address the necessary factors for evaluation. Consequently, despite being entitled to reimbursement for his expenses, those expenses, categorized as attorney's fees, must be reasonable and necessary. The court upheld State Farm's position, indicating that Waibel's claims were not substantiated by adequate proof.

State Farm contends that the county court at law improperly awarded trial and appellate attorney's fees in the declaratory-judgment action, arguing that there is no evidence to support the reasonableness and necessity of such fees, and that the award was inequitable and unjust. Additionally, State Farm claims that there are factual issues regarding the sufficiency of the evidence for the fee award. Following a partial reversal of the county court's summary judgment, the appellate court also reversed the attorney's fees award without prejudice, allowing Waibel the opportunity to renew his request. The court affirmed the summary judgment in other respects and remanded the attorney's fees issue for further proceedings. Waibel provided evidence of $7,333.33 in attorney's fees and $122.29 in other expenses, totaling $7,455.62, with the trial court allocating $1,694.46 against State Farm based on its subrogated interest in a $5,000 claim from a $22,000 settlement. The case does not challenge State Farm's right to subrogation, only the amount owed. Waibel argues that he has met the requirements of the common-fund doctrine, while State Farm disputes the sufficiency of evidence related to this doctrine.

Waibel claims that State Farm waived its objection to the attorney's fees he sought by failing to raise the issue in response to his motion for summary judgment, arguing that State Farm only contested the reasonableness of those fees in its motion for a new trial. However, the court finds that State Farm did address the fee amount in its response. The court cites the need for factual evidence to support the reasonableness of attorney's fees, referencing various cases where this principle has been applied. Waibel provided limited evidence for his fees, including a contract with his attorney, a settlement statement, and a list of case-related expenses. Under the Declaratory Judgments Act, attorney's fees are recoverable, and the court has remanded the case to the county court for further proceedings regarding the fees, while affirming the summary judgment on other matters. The document also notes the total fees Waibel incurred and how the trial court calculated the amount owed to him based on State Farm's subrogated interest. Finally, the court indicates that the primary issue is the amount State Farm should receive rather than its right to subrogation, and it highlights a dispute regarding the evidence supporting Waibel's claim for a common fund.