Many types of attorneys require clients to pay upfront if they wish to hire the attorney for legal assistance. However, if you get into an accident, it’s important to know that injury attorneys almost always work on a contingency fee basis—including the attorneys at 801-INJURED, who only work on a contingency fee basis.
But what is a contingency fee and why does it matter? This article explains what the term “contingency fee” means and how a typical contingency fee agreement works.
What is a Contingency Fee Agreement?
If an attorney agrees to work on a contingency fee basis, it means that he/she will only get paid if you recover compensation from a settlement or a court trial. If you don’t recover any compensation, then your lawyer doesn’t collect any fees. In other words, a lawyer’s fees are “contingent” upon you recovering some amount of compensation.
If the lawyer is unable to win your case, then you don’t pay anything to the lawyer. This means that you don’t have to pay any money upfront to hire a personal injury attorney, and your own interests and the interest of the attorney are aligned.
How Does a Contingency Fee Agreement Work?
The way contingency fee agreements work is that a lawyer receives a percentage of a settlement or damages award instead of the client paying for the lawyer’s fees out of pocket. The usual contingency fee percentage is 33% (or ⅓). For example, if you receive a settlement of $50,000, your lawyer would get paid $16,500.
That being said, the riskier and more complex a case is, the more likely an attorney might request a higher contingency fee percentage.
About the Sliding Scale
In some situations, a lawyer might draw up an agreement that stipulates a “sliding scale” option. A “sliding scale” means that the contingency fee percentage received by a lawyer varies depending on which stage a case is resolved.
For example, if a settlement is reached early on, your lawyer might take the standard 33%. However, if a settlement is reached after a lawsuit has been filed, or if the lawsuit reaches the trial stage, your lawyer may receive a higher contingency fee percentage.
About Litigation Costs
Even if a lawyer agrees to work on a contingency fee basis, keep in mind that there are still litigation costs involved with any personal injury case. These costs are usually covered by attorneys as they come up.
Attorneys rarely charge the client when the costs become due. This is one of the advantages to the client of a contingency fee arrangement—the attorney covers all the costs of working up the case without any risk or cost to the client.
Typical litigation costs and expenses that the attorney would pay for upfront include:
- Court fees
- Filing fees
- Expert witness fees
- Evidence gathering
- Overhead and incidentals
- Discovery costs, which include:
- Deposition transcripts
- Court reporter fees
Litigation costs can accumulate over time and are typically deducted from the client’s share of the settlement or damages recovered.
For example, if you receive a $50,000 settlement, and you have agreed to the standard 33% contingency fee percentage, then your attorney will receive $16,500 as fees. However, if your lawyer covered $5,000 in litigation costs, then that means your attorney will receive a total of $21,500 of the final settlement amount to cover both his/her fee and to cover the costs incurred on your behalf.
Other Contingency Fee Variations
In addition to the standard contingency fee agreement, as well as the sliding scale option, there are two more kinds of contingency fee arrangements:
- Contingency Hourly Agreement: Instead of taking a percentage of the final settlement or court award, lawyers get paid an hourly rate in a contingency hourly agreement. For example, if an attorney who charges $300 an hour spends 10 hours on a case, then you would have to pay them $3,000 if you receive compensation.
- Mixed Hourly-Contingent Agreement: In this type of contingency fee agreement, the client is required to immediately pay a portion of the attorney’s hourly rate, while the remainder of the lawyer’s legal fees are paid if and when you receive compensation. For example, if your attorney charges $300 per hour, you might need to pay $50 per hour for the duration of your case, while the remaining $250 is only paid out if and when you obtain a recovery.
It’s also typical in a mixed hourly-contingent agreement for an attorney to receive a percentage of a client’s settlement or court award. However, it’s important to note that in a mixed hourly-contingent agreement, contingency fee percentages are usually lower than in a typical contingency fee agreement.
The attorneys at 801-INJURED almost always work on a standard contingency fee basis and do not use the variations outlined above.
Frequently Asked Questions
1. Who Will Receive the Settlement Check?
In a contingency fee agreement, it’s typical for a lawyer to receive the settlement check. Most, if not all, personal injury lawyers work on a contingency fee basis, so if they don’t receive the settlement check, they risk not getting paid.
In addition, the attorney has the responsibility to resolve any third-party liens before disbursing the settlement funds to the client.
At 801-INJURED, we always speak with our clients and discuss, line by line, any deduction in the gross settlement amount.
2. What if I Terminate My Lawyer Before My Case is Over?
If you decide to fire your lawyer before your case is resolved, your original attorney would typically have a lien for litigation fees and other expenses.
Important note: If you fail to honor the lien, it may be enough grounds for your former attorney to file a case against you, so consider this if you are thinking of firing your lawyer in the middle of your case.
3. Where Can I Find a Lawyer Who Works on a Contingency Fee Basis?
If you were involved in an accident and don’t have money to pay for legal assistance upfront, pick up your phone and dial 801-INJURED now. We will review your case for free, and make sure you get the comprehensive legal representation that you deserve.