Mahler is an important Washington State Supreme Court case concerning subrogation and attorney fees.
Normally an injury victim who recovers damages must reimburse their own insurance company for benefits the insurance company paid that are related to the injury, such as medical expenses, or other damages caused by the at fault party.
However, it is unfair for the injury victim’s insurance company to collect its money from the settlement generated by the efforts of the injury attorney and injury victim unless the insurance company helps pay the attorney fees. Otherwise the insurance company benefits from the settlement funds but does not contribute to the creation of the settlement.
It is grossly inequitable to expect an insured, or other claimant, in the process of protecting his own interest, to protect those of the [insurer] as well and still pay counsel for his labors out of his own pocket, or out of the proceeds of the remaining funds. And this is precisely the view taken by the overwhelming majority of decisions, in that a proportionate share of fees and expenses must be paid by the insurer or may be withheld from its share.
Mahler v. Szucs, 135 Wn.2d 398 at 425 (1998).
The Mahler rule does not apply to all subrogation claims. For example, DSHS liens and subrogation claims for benefits provided through emplyment (ERISA benefits) are governed by separate law.
by Travis Eller