The Ohio Supreme Court held that an insurer who settles a
personal injury claim with an accident victim has no duty to issue payment
directly to the victim’s former lawyer pursuant to a charging lien.
In the underlying personal injury matter, an automobile
accident victim hired a law firm to represent him. The victim and his law firm
entered into a contract that granted the law firm a charging lien on the
proceeds of any insurance payment, settlement, judgment, or verdict that might
be obtained in the victim’s favor. The law firm then began negotiations with
the alleged tortfeasor’s insurer. No lawsuit was filed regarding the personal
injury claims. However, the victim decided to discharge the law firm and
negotiate a settlement with the insurer on his own, which he succeeded in doing.
Although the law firm gave the insurer notice of its charging lien, the insurer
paid the settlement proceeds directly to the victim, and the victim did not pay
the law firm. The law firm then filed suit against the victim, the alleged
tortfeasor, and the insurer.
A charging lien is an attorney’s lien on a claim that the
attorney has helped their client collect, such as by obtaining a judgment or
settlement. A New York court characterized the charging lien as a device to
protect counsel against “the knavery of his client”.
Many states have enacted statutes that govern charging liens, but in Ohio
charging liens are recognized and enforced under the common law. The court’s
decision in Kisling therefore turned
on interpretation of Ohio common law.
The insurer argued that an action on a charging lien is an
action in rem, i.e. that the law firm
had a cause of action against the fund that included the settlement proceeds,
not a cause of action against the insurer. The court agreed, but it noted that
the law firm could have an action against the insurer if the insurer ever
controlled the fund. Citing an Ohio Supreme Court decision from 1904, the court
held that a settlement fund comes into existence at the moment the release and
the money are exchanged, meaning the fund never existed while the settlement
proceeds were in the insurer’s control. As a result, the law firm could not
maintain an action against the law firm.
In Ohio, at least, the court’s decision in Kisling means that insurers cannot be
sued by the former lawyers of tort victims in order to recover fees from
settlement funds. Notably, however, other states treat charging liens
differently. In Florida, for example, the charging lien is effective against
any person who, at the time notice of the lien is given, holds money or
property that becomes proceeds of a judgment (such as an insurer who later pays
a settlement). Thus,
while the Kisling decision may
simplify payment of settlements for insurers in Ohio actions, insurers should
remain diligent in determining the effect of charging liens elsewhere.
Netisco & Redick, L.L.C. v. Progressive Max. Ins. Co., No. 2018-0682,
2020 WL 236806 (Ohio Jan. 16, 2020)
 Butler, Fitzgerald & Potter v. Sequa
Corp., 250 F.3d 171, 177 (2d Cir. 2001).
 Geico General Ins. Co. v. Steinger, Iscoe
& Greene-II, P.A., 275 So.3d 775, 777 (Fla. Ct. App. 3 Dist. 2019)