Lawyers who specialize in certain areas of the law often use contingency fees as a payment method. But what is a contingency fee, and how does it benefit you?
A lawyer who works on contingency gets a portion of the amount their client receives when they win their case. Unlike lawyers who get paid by the hour, those that work on a contingency fee get a percentage of the monetary compensation received through a settlement, verdict, or jury award. Their payment is “contingent” on winning their case or getting a settlement.
In comparison, lawyers who work for an hourly rate require a retainer. This is a certain amount of money the client pays upfront. The lawyer deducts his hourly wage from the retainer as the case progresses. If the retainer runs out before the case ends or the client can’t pay them, the lawyer may stop providing their legal services. The client has no guarantee that the lawyer they hire will finish the case.
A lawyer that works on a contingency fee won’t stop working on a claim once they take on a case. It is in their best interest and that of their client to finish the case and get the best outcome.
What Are the Advantages of a Contingency Fee?
No one knows how frustrating and sometimes scary it is to deal with injuries from an accident until it happens to them. Suddenly, they are in a situation where a lot of money is going out for medical bills. At the same time, they might not be able to work because of their injuries. They don’t seek out legal help to get compensation because they think it will add another expense that they can’t afford. Even if they only call a lawyer’s office to ask, “what is a contingency fee?” more accident victims could get the help they need to pay for their medical care.
Contingency fees level the playing field for accident victims who don’t have the financial means to pay for the best representation. It also gives attorneys an even greater incentive to do the best possible job for their clients. If they don’t win, they don’t get paid. They strive to get the maximum compensation for their client, so it’s a win-win for both.
Lawyers who work on contingency are selective about which cases they take on. No one wants to put in hours of work and devote their resources to a case they aren’t likely to win. If an attorney takes on your case, they believe they have a good chance of winning.
Most attorneys who work on contingency begin with a free consultation. This allows them to evaluate the strengths and weaknesses of the case. They look at the evidence and consider the value of the case. The initial consultation is also the time for clients to ask questions about their case and about what they will have to pay. If the lawyer agrees to take the case on contingency, the client will sign the contingency agreement and get to work.
A Few Disadvantages to Contingency Fees
Contingency fees offer multiple advantages to many clients who might not otherwise get legal representation. But in some situations, they can be a disadvantage. For example:
- It might be difficult to find a lawyer who will take your case on a contingency basis. If it requires extensive work or a major investment of time and money, they might not be willing to take the risk.
- You might end up with a much lower settlement than you expected due to the contingency agreement.
- If you don’t get a lawyer who invests the time and resources into the case, you might feel like you won’t get the best possible outcome from your case. Getting a lawyer who takes cases on contingency is important, but not as important as getting the highest quality of legal representation.
- You might have to pay taxes on the entire settlement amount and then claim the payments to your lawyer separately. This can make filing your taxes problematic. For example, if you receive a settlement of $50,000, you must pay taxes on the entire sum. The one-third or $16,667 that you paid the lawyer must be listed as a separate claim. You might no be able to simply pay taxes on the $33,333 that you received.
What Is a Contingency Fee Agreement?
Most lawyers require clients to sign a contingency fee agreement. This is a legal document that lays out the services that the lawyer will provide. It also covers the specific costs included in the contingency plan and any exceptions that the client might have to pay upfront. The agreement explains the percentage that the lawyer charges for his services based on the specific situation. Some additional charges might apply such as:
Costs of Discovery
Discovery is the process of exchanging information between parties. This process might include depositions, the sworn, out-of-court testimony of witnesses. Depositions alone can cost up to $1,000 for each one required.
If a claim requires expert analysis, those costs might be separate from the lawyer’s fees. For example, a client’s traumatic brain injury might require evaluation by a neurosurgeon. Some lawyers might require the client to pay those costs out-of-pocket at the time they are given.
These are witnesses who are experts in their field and who typically charge thousands of dollars to look at a case. If they provide depositions or personal testimony, they cost much more.
The large majority of personal injury cases never go to court. It is in everyone’s best interest to reach a settlement through negotiation. When both sides fail to reach an agreement and the case goes to court, the client might have to pay court fees.
Even though most personal injury cases don’t go to court, the attorney must prepare the case in the event that it does. This includes obtaining records from medical providers, insurance companies, and law enforcement. If these authorities charge for official copies of records, the lawyer might transfer the cost to the client.
Rather than placing a financial burden on the client, many attorneys deduct these costs from the settlement or verdict once they win the case. Unlike the costs for the attorney’s services, these fees might still be due if the lawyer fails to win the case. Make sure you understand your total financial obligation before signing the agreement. Otherwise, you could end up owing a lot of money at the end of your case whether you win or not.
What Is the Cost of a Contingency Agreement?
Contingency works pretty much the same for all attorneys that offer it as a payment plan. If the attorney earns a settlement through negotiation or an award from the court, they take a per-determined percentage of the total amount as their fee. Most attorneys charge between 33-1/3% and 40% depending on several factors.
Laws don’t generally regulate how much a lawyer can charge for contingency. While there are some exceptions, competition among personal injury lawyers keeps the fees constant throughout the different law firms. Most often, it is the most complex cases that are the most expensive to prepare and present that draw the highest contingency fees. For example, an auto accident injury that is likely to settle for $100,000 requires less preparation than a multi-million dollar medical malpractice lawsuit involving multiple individuals. The auto accident might incur a 33-1/3% rate, while the latter case might incur a 40% contingency rate or higher.
What Is a Contingency Fee Based On?
The percentage that a lawyer receives on contingency is based on the merits of the case and the stage of the lawsuit at which the case is resolved. There are three general levels of resolution including:
1. The car accident attorney in Bakersfield reaches a settlement before filing a formal complaint with the court.
2. The attorney files a formal complaint.
3. The case isn’t resolved, and it progresses to court.
As these levels of resolution increase, so does the amount of the contingency fee. Lawyers also set contingency fees based on the amount of time and effort a case might take. There is never a guarantee of how a jury or judge will determine a case. However, some cases have stronger documents and evidence to back them than others. The attorney might base their fees on the amount of risk involved in taking the case.
Clients might think that anywhere from 33-1/3% to 40% is a lot. But accident victims who have a lawyer are likely to get much more money than if they handled it on their own. This might happen for several reasons including:
They accept the initial offer from the insurance company.
Many people falsely believe that the insurance company is there to help. Insurance adjusters often take advantage of accident victims who aren’t aware of their rights. They offer them a much lower amount than their case is worth before they have time to talk with a personal injury attorney.
They didn’t know the real value of their case.
A personal injury attorney uses a “multiplier” to determine the value of a personal injury claim. Some factors they base the case on include how much the client was impacted by their injuries, the medical treatment needed, and the degree of pain and suffering they endured. Whether the attorney is negotiating with the insurance adjuster or representing their client in court, they know what the client’s case is worth.
Failing to know the different types of damages they can claim.
Filing a claim for compensation is more complex than most people imagine. There are different types of damages that apply to different cases. Only a knowledgeable and experienced personal injury lawyer knows which types of damages to ask for in any case.
What Kinds of Lawyers Use Contingency Fee Arrangements?
Nearly any lawyer can use contingency fee arrangements but only for civil litigation. Civil law cases are basically those that do not involve criminal offenses and often relate to settling disputes between private citizens. Personal injury law is also known as tort law, which allows a person to file a civil lawsuit and receive damages for their losses from an accident. Lawyers that specialize in personal injury are the most likely ones to take on cases on a contingency basis.
Questions to Ask an Attorney About Contingency
Am I liable for court costs if I lose?
Sometimes courts award court costs against the losing party. When this happens, the client might be responsible for the costs, not the lawyer. Although this isn’t common, make sure you won’t have to pay court costs if you lose your claim before making an agreement.
What is a contingency fee based on – the total amount recovered or the total after the expenses are deducted?
In the majority of cases, the fee is calculated on the total amount recovered. Otherwise, the cost for complex cases would come out of the lawyer’s fees. This would create a conflict of interest that might result in not spending money that is necessary to build a strong case.
Do you require repayment of costs expended if I lose?
Different lawyers handle contingency payments differently. Some require clients to repay expenditure costs if they lose. Some charge a lower contingency rate since this reduces their risk. Sometimes lawyers charge a flat contingency fee (as opposed to levels as explained above) whether they settle the case or it goes to court or appeal.
Why Choose Kuzyk Law
If someone else caused your injury and you need help getting compensation, contact Kuzyk Law today. Finding an attorney who works on contingency is just one of the criteria you should consider. Experience, knowledge of the law, and a genuine desire for success are also essential for a successful case.
Our law firm takes on cases ranging from small minimum liability limits to multi-million dollar settlements. In cases with more significant injuries and medical bills, we frequently obtain 6 and 7-figure settlements for our clients. Our “no win no fee” practice ensures you get the best legal representation for your case. We fight hard for our clients to get the maximum recovery possible.