What Is a Contingency Fee and How Does it Affect You and Your Case?

If you turn on the TV, you are flooded with legal ads and personal injury lawyers promising you that they will not get paid unless you do. For those facing legal issues, this “contingency” basis may seem like the ideal solution they need. Yet, no matter how promising this arrangement may be, very few people actually understand what these fees mean or how they work on an individual case basis.

To help you better grasp the concept of contingency fee agreements, we have created the following blog to try to help explain what contingency agreements are, how they work, and whether they are right for you and your case.

Contingency Fees – What Are They, and How Do They Work?

contingency fee is a type of payment that a personal injury lawyer receives if you obtain some compensation for the harm you endured. Instead of charging an hourly rate for their services, the attorney receives a percentage of any monetary recovery they help you recover. Consequently, their payment is “contingent” on you receiving some monetary compensation. Typically, you and your lawyer will agree to an agreed-upon percentage. The precise amount of compensation your attorney can receive may depend on:

Typically, you and your lawyer will agree to a recovery percentage.
The precise amount of compensation your attorney can receive may depend on:

  • Who will pay for the litigation costs, and when?
  • How complex is the case, and what risks are involved with it?

Contingency Fee Percentages

Contingent fees can vary from attorney to attorney and case to case. The average cost of a contingency is between 30% – 60% depending upon the number of possible wins for a client, the strengths of the case, or other factors. Contingencies fees can be up to 50% and 15% in large cases. However, this is normally a fixed percentage that you and your lawyer will decide on before beginning to work on your case.

Case Complexities and Contingency Fees

Generally, in a more risky or complicated case, a personal injury attorney can charge a higher contingency fee percentage as long as it is not unreasonable or excessive. Time limitations imposed by the client or the expected duration of the case may also influence the attorney’s fee percentage. In comparison, the lawyer can lower the contingency fee if the case appears relatively straightforward or likely to end in recovery.

For example, you could have an arrangement in which your attorney agrees to a lower fee if the case settles out of court. If your case then involves litigation, your lawyer’s fee may ultimately be a higher percentage. This agreement is sometimes known as a staged or graduated contingency fee.

When Are Contingency Fees Used?

Contingency fees are especially beneficial in complex or costly cases and when the client is short on funds. However, because a personal injury lawyer would not get paid until their client receives compensation—and even then, would only collect a percentage of that compensation—and—most personal injury attorneys do not accept cases unless they find a means to collect a settlement or judgment, such as an insurance policy or a clear and present liability.

Lawyers often work for contingency fees in civil cases such as workers’ compensation claims or personal injury cases. But some lawyers may use them in:

  • Sexual harassment cases
  • Professional malpractice cases
  • Wage dispute cases
  • Employment discrimination cases
  • Class action lawsuits
  • Debt collection cases
  • Bankruptcy cases

When Contingency Fees Are Not Used

Contingency fees are not allowed in criminal law cases or divorce cases where the fee is contingent upon securing a divorce, alimony support, or a property settlement. This decision has been long upheld by the legislative bodies of the legal profession as a way to ensure professional conduct among attorneys.

A financial incentive in the form of a contingent fee could potentially give a law firm a financial incentive to take legal actions that may not necessarily lead to the best outcome for the parties involved. This is especially true in cases of family law, where the victory of child custody or divorce settlement could impact the well-being of the children, or in criminal defense cases, where a financial interest could be interpreted as condoning illegal acts.

What Happens to the Litigation Costs – Do You Still Have to Pay?

In most situations, even if a lawyer will work for a contingency fee, the client may still need to pay for individual administrative costs—unless the contingency fee contract states explicitly the client is exempt from these fees. These legal fees can include:

These litigation costs can include:

  • Court Filing Fees
  • Expert Witnesses
  • Discovery Costs which can consist of deposition expenses
  • Mediation Costs
  • The cost of obtaining specific evidence, such as medical records or public documents
  • Investigator Costs
  • Telephone Costs
  • Travel Costs
  • Messenger Costs
  • Incidental charges, including postage costs or making copies

Before agreeing to any contingency fee arrangement, it is vital to review your contract and clarify with the attorney what expenses you must pay, even if you lose your case.

Contingency Fee Arrangement Variations

There are some variations to the standard contingency fee agreement used in certain cases. Your lawyer can help you determine whether these may be applicable to your case.

Hourly Contingency Fee

In this fee agreement, your attorney will keep track of how many hours are spent working on your case, and your attorney’s fees will correspond to this amount. However, as with a standard contingency agreement, you won’t owe anything for these legal services unless a recovery is made on your behalf.

Mixed-Hourly Fee

In this arrangement, your attorney would charge an hourly rate for his or her services, for which you are required to pay immediately. This would normally be a fraction of the attorney’s standard hourly fees. If a recovery is made, the remaining portion would be paid from your settlement.

Not all law firms use these contingency fee variation practices, and they may not be convenient or desirable for every personal injury case. Your lawyer can give you more insight regarding your unique personal injury claim and work with you to determine how legal costs will be handled.

Contingency Fee Advantages

The numerous advantages of contingency fee agreements include:

  • No fees you need to pay upfront: The most significant benefit of a contingency fee arrangement is that you do not have to deal with legal bills as your case is ongoing. Many individuals believe this helps those with lower incomes have better access to get the legal assistance they need.
  • Attorney incentive: When your attorney only gets paid if you receive some sort of compensation, your attorney will be highly motivated to do everything they can to fight for maximum damages on your behalf.
  • Paying attorney fees: Another significant advantage of a contingency fee is that if you lose your case, you will not pay the attorney any fees (although you may still need to pay administrative expenses).
  • Increased compensation: People who hire personal injury lawyers on contingency tend to recover more money than they would if they had brought the case on their own—even after their attorneys deduct fees and expenses.

What to Consider When Creating a Contingency Fee Agreement

Contingency fee agreement contracts need to be in writing and signed by the client, and any lawyer paid under the contract. These agreements must also state the percentage of the recovery the attorney can keep, the expenses the attorney will deduct from the award, and how the attorney will deduct these expenses. Check the state’s laws; many times, they cap the contingency fees a lawyer may charge.

Check the state’s laws; many times, they cap the contingency fees a lawyer may charge.

Should You Be Represented on a Contingency Fee Basis?

Lawyer fees can be complicated and hard to understand. However, they should not stop you from bringing a claim for the harm you endured. If you are looking for a more detailed explanation regarding contingency fees, you need to discuss your case with a trusted and experienced attorney who can take the time to explain everything you need to know about the legal process and how these contingency fee agreements work.

If a personal injury accident injured you or a loved one, do not wait. Contact a skilled personal injury lawyer today, and let these lawyers provide you with the answers you want and the clarification you need, and fight for the justice that you deserve.

December 7, 2022

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