What is a Contingency Fee?
When an attorney works on a contingency fee, this means that the attorney only gets paid if the attorney makes a recovery for the client from another person or company. Contingency fee agreements are very common in personal injury cases. When using a personal injury law firm that works on a contingency fee basis, the attorney agrees to be paid a percentage of the overall recovery and receives nothing if no recovery is made. The attorney’s payment is contingent upon making a recovery from either a 1st party or 3rd party insurance policy or a third party themself.
Do Contingency Fees Include Expenses?
No. Typically, in a contingency fee agreement, the attorney puts up the money upfront for the investigation and litigation expenses and is reimbursed out of the recovery only if a recovery is made in addition to the attorney’s fee he/she is paid. Thus, the case expenses are reimbursed to the lawyer in addition to the contingency fee which is typically taken off the gross amount of the recovery. You also need to be aware that your medical expenses are not case expenses. If the lawyer writes a letter of protection to your doctors to cover your medical expenses, you need to understand that 1) the payment of these comes out of your portion in addition to the attorney fees and attorney expenses, and; 2) if there is no recovery, you are still legally responsible for any outstanding medical expenses for which payment may have been delayed by a letter of protection. The attorney can only write off his own legal expenses and his own attorney fees.
How Does a Contingency Fee Work?
There are many different ways a contingency fee can be set up. The predetermined percentage typically fluctuates depending on how far into the legal process the case ultimately goes. In Texas, it is common to be 33.33% or 1/3 if the case settles before filing a lawsuit, 40% if the case settles after litigation starts or goes to final judgment but does not go up on appeal, and 45% if the case must be appealed.
Why Use a Contingency Fee Attorney for a Personal Injury Claim?
Contingency fee agreements provide an opportunity for personal injury victims–who might otherwise not be able to afford access to justice–to seek legal recourse and get the compensation they deserve. The cost of litigating a personal injury claim can add up quickly. With investigation fees, deposition costs, and more, contingency fee attorneys front a majority of these costs and collect their payment after a settlement or judgment. This gives individuals who normally would not have the necessary financial resources the opportunity to receive the legal representation they deserve.
Another benefit that comes from choosing an attorney who works on a contingency fee basis is the clear and defined correlation between the client’s goals and the attorney’s goals. Because the attorney fees are contingent on the outcome of the plaintiff’s claim, the plaintiff’s attorney has extra incentive to work quickly and effectively to resolve the case at hand.
Do All Personal Injury Lawyers Work on a Contingency Fee Basis?
While contingency fees are extremely common, not every lawyer uses them. Some require you to pay all or part of the expenses upfront. Some require payment by the hour. You should talk to the lawyer before you hire them and make sure that they will work on a contingency fee that includes fronting expenses until a settlement or judgment and that you owe nothing for fees nor case expenses if no recovery is made.