Contingency Fees

Law firms are a business, and just like any business, they need to make a profit. However, not all lawyers are paid in the same way. Sometimes lawyers are paid by the hour while at other times they operate using what is known as contingency fees.

What is a Contingency Fee for a Personal Injury Attorney?

A contingency fee means that the lawyer’s pay is based on the success of the case. If their client is rewarded compensation, the lawyer takes an agreed-upon percentage of that compensation as their fee.

The average percentage for most contingency fees is 33% or 1/3 for Personal Injury Attorneys. This means that a lawyer agrees to work on your case without upfront payment, and if you win compensation your lawyers is paid 33% of your winnings. A contingency fee is always negotiable, a lawyer and client will settle on a percentage and sign paperwork before the work begins.

Other Costs to Consider with Contingency Fees

Contingency fees are relatively straightforward on the surface. For example, you make a 33% contingency agreement with your lawyer. Your case wins you $90,000 in compensation, and your lawyer is paid $30,000, leaving you with $60,000 to take home. However, the legal process has other fees and expenses which can make these calculations more complex.

Bringing a case to court costs money. There are filing fees, payment of expert witnesses, fees for needed documents and transcripts, and more depending on the case. This can easily add up to several thousand dollars in litigation expenses.

Besides litigation expenses, your medical bills will also likely be a part of your compensation. Hospitals and insurance companies can issue a lien on your case which requires that they are paid out of any compensation you receive.

All of these other costs can have a huge impact on your contingency fees and overall reward. For example, let’s say that in our example of a case with a $90,000 reward and a 33% contingency fee there were $20,000 in legal and medical expenses. If your lawyer takes his fee before these costs are deducted, you will have $60,000 from which the expenses of $20,000 will be taken and you will be left with $40,000.

If your lawyer takes the fee after the expenses are deducted, the $20,000 will be taken from the overall $90,000 leaving $70,000. Your lawyer will then get 33% of this $70,000. Thus, your attorney will get $23,100, and you will walk away with $46,900.

Whether you apply the contingency fee before or after the additional expenses makes a difference in the final amounts awarded to your lawyer and yourself. When making a contingency fee arrangement keep this in mind, and remember that you will likely incur expenses that have to be paid out of your settlement in the process of bringing your case before the court. Of course, these expenses may be more or less depending on your case, and you should ask your attorney to advise you on how much to expect.

Pros and Cons of Contingency Fees

Paying an attorney through contingency fees allows you to seek compensation as the victim of an accident even if you do not have the money to pay a lawyer upfront. This type of payment also protects clients because payment is contingent on winning your case.

However, there are some drawbacks to contingency fees. In simple cases, a contingency fee will often ultimately have you paying an attorney more than if you had paid them by the hour. Another potential issue is that if your case is particularly tricky, many lawyers may be unwilling to take it on as a contingency fee case.

Key Takeaways for Contingency Fees

• Hiring a lawyer on a contingency fee allows you to pursue your case without the upfront cost and protects you from significant financial loss if you lose.
• The average contingency fee is around 1/3 of your reward, but this will vary depending on the difficulty of your case.
• Do not forget to consider how additional legal and medical expenses might affect your compensation when making a contingency agreement with your attorney.

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