HOUSTON – A summary judgment against Geico was reversed in the Court of Appeals for the First District of Texas on Aug. 15.
Justice Julie Countiss authored the opinion. Chief Justice Sherry Radack and Justice Gordon Goodman concurred.
Jeffrey Stern, doing business as Stern Law Group (SLG), sued Geico Choice Insurance Co. over allegations of wrongful payment of assigned interest and conversion. The law firm alleged Geico settled one of its client’s hospital bills without SLG’s or the client’s knowledge, infringing on a contingent-fee agreement SLG had with the client. SLG alleged it was entitled to a fee interest on the payment and is owed $2,559, which Geico did not pay.
Texas First District Court of Appeals Justice Julie Countiss
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A judge with the 127th District Court in Harris County granted SLG its motion for summary judgment, which the appeals court reversed.
"We reverse the summary judgment entered by the trial court in favor of SLG and render summary judgment in favor of Geico on SLG’s claims against Geico for wrongful payment of assigned interest and conversion related to (Delmi) Maldonado," Countiss wrote.
SLG said that one of Geico’s insureds injured Maldonado, sparking a personal-injury lawsuit against the insured. Maldonado and SLG had a contingent-fee agreement, which included Maldonado assigning a “present, undivided ownership interest” of 33-and-one-third percent of any amount that Maldonado was awarded.
Geico’s main argument was the trial court erred in granted summary judgment because SLG’s agreement with Maldonado “does not give SLG a recoverable right to [the] proceeds which Geico used to satisfy [the] hospital lien,” according to the ruling. But SLG maintains that it had the right to recover the interest paid on the bill.
Countiss noted that in most cases, a lawsuit for attorney’s fees isn’t “maintainable” by an attorney in a separate lawsuit. While there’s an exception if the client has tried to pay their claim without paying their attorney, that doesn’t apply in this case since SLG was included in a settlement Geico sent to the insured for her personal-injury lawsuit.
“Therefore, the exception allowing an attorney to maintain a separate cause of action against a defendant ... does not apply because SLG’s client did not attempt to exclude SLG from her recovery from Geico without compensating it for its efforts in her case,” said the justice.
Ultimately, Countiss ruled this is a dispute between the insured and SLG, not Geico, so SLG doesn’t have the right to sue Geico in a separate lawsuit.
"Based on the foregoing, we hold that SLG does not have a right to maintain a separate cause of action against Geico for recovery of additional attorney’s fees in this case," she wrote. "We also hold that the trial court erred in granting SLG’s summary-judgment motion and in not granting Geico’s summary-judgment motion."