Illinois Supreme Court Rules Common Fund Doctrine Does Not Apply to Healthcare Liens – Wendling v. Southern Illinois Hospital Services

A recent Illinois Supreme Court decision affects the way Illinois personal injury attorneys are compensated by medical lien holders, such as as hospitals, clinics, or doctors. Wendling v. Southern Illinois Hospital Services, et al. and Howell v. Southern Illinois Hospital Services, Nos. 110199, 110200 Cons reversed an appellate court decision that held that hospitals were responsible for paying plaintiff attorney fees when the plaintiff’s attorney had assisted in securing payment for the hospital’s outstanding medical lien.

The original lawsuit revolved around three different plaintiffs who were injured in three separate car accidents; however, each plaintiff was treated at hospitals owned by Southern Illinois Hospital Services. Each plaintiff failed to pay his or her hospital bills, so Southern Illinois Hospital Services filed medical liens for each plaintiff under the principles of the Healthcare Services Lien Act.

A lien is entered when an entity, in this case Southern Illinois Hospital Services, lays claim to future funds in payment for past services provided. Because the individual plaintiffs failed to pay their medical bills, the hospital was seeking payment from the defendants who caused the injuries that necessitated the hospital treatment. The idea is that had the defendants not caused the auto accidents, the plaintiffs wouldn’t have needed treatment, and the hospital wouldn’t be left with unpaid bills. Therefore, if proven negligent, then the defendants are responsible for paying the outstanding hospital bills.

Both of the Illinois personal injury lawsuits associated with Wendling were settled with the defendants, at which point the plaintiff’s attorneys filed petitions to adjudicate the hospital’s liens. If the case had gone to trial, then the jury would have decided on the amount of damages awarded for past medical expenses. However, in a settlement, the agreed payment typically comes in a total sum that is not broken down into individual damages.

Under Illinois law, plaintiff’s attorney fees are determined by a previously agreed-upon contract between the plaintiff and his/her attorney; attorney fees are typically 30% of the total settlement. However, in Wendling, the hospital liens were not part of the settlement amount, but were negotiated above and beyond the settlement. Therefore, plaintiffs’ attorneys petitioned to have the hospital liens included in the total settlement and asked the court to order the hospital to reduce its lien amount by 30%, which would go towards additional attorney fees.

The plaintiffs’ attorneys cited the common fund doctrine in support of its motion for additional attorney fees, alleging that the amount of the hospital liens was essentially part of the settlement and as such was fair game for payment of attorney fees.

However, the hospital appealed this decision, arguing that it had not retained the plaintiffs’ attorney and as such was not responsible for paying his fees. The Illinois Appellate Court did not agree with the hospital’s arguments and affirmed the lower court’s decision, ordering the hospital to pay the plaintiffs’ attorneys’ fees. The appellate court stated that the hospital had directly benefitted from the work done by the plaintiffs’ attorneys in creating the common fund and therefore should be responsible for paying the pro rata share of the plaintiffs’ legal expenses.

The hospital then appealed that decision to the Illinois Supreme Court, where it argued that the Healthcare Services Lien Act does not create a common fund and therefore the lower courts’ decisions did not apply. The Illinois Supreme Court agreed with the hospital, reversing the lower courts’ decisions. In its decision, the Supreme Court held that the Healthcare Services Lien Act

expressly allows a hospital to ‘pursue collection, through all available means, of its reasonable charges’ that remain unpaid after satisfaction of the lien…Therefore, hospitals did not directly benefit from and were not unjustly enriched by, the efforts of the plaintiffs’ attorneys.

The plaintiff’s attorney used this portion of the Act to support his claim for 30% of the hospital’s lien, stating that the hospital benefited from the plaintiff attorneys’ efforts in securing its lien because the hospital did not have to pay their own attorney to collect the outstanding bills that resulted from the Illinois auto accident. However, the Supreme Court denied this argument, stating that although the hospital did benefit, it did not have an opportunity to choose its own lawyers or negotiate its own settlement. Therefore, the Supreme Court denied the lower courts’ application of the common fund doctrine in Wendling and ruled that the common fund doctrine does not apply healthcare liens under the Illinois Healthcare Services Lien Act.

Kreisman Law Offices has been handling Illinois car accident lawsuits and Illinois personal injury cases on behalf of individuals and families for more than 35 years in and around Chicago, Cook County, and surrounding areas, including Lincolnwood, Rolling Meadows, Berkeley, Westchester, Justice, and Schaumburg.

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