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Contingency Fees: Everything You Need to Know

Last Updated on May 16, 2024 by Admin

When you’re involved in an accident your expenses can quickly pile up. Suddenly, you’re facing mounting medical expenses, and don’t forget about the cost to repair or replace damaged property. To recover any financial damages, chances are you need to file a personal injury claim. This often means retaining legal counsel and now you’re adding lawyer fees to your growing expenses.

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Most personal injury attorneys work on a contingency fee basis. However, understanding contingency fee arrangements isn’t always easy. If you’re not sure what contingency fees are or if it’s the right payment structure for your case, here’s everything you need to know.

What is a Contingency Fee Arrangement

A contingency fee arrangement is a payment agreement between you and your attorney. Instead of worrying about paying for legal services upfront or on an hourly basis, your attorney agrees to wait until your case is settled

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Once you settle with the defendant’s insurance provider, your attorney receives the check. The check goes into an escrow account, typically in the attorney’s name. From there, your attorney deducts the agreed-upon fee and you receive the remainder of the settlement.

In a nutshell, a contingency fee means your attorney is agreeing to represent you in the personal injury case without being paid upfront. Your attorney only gets paid if your personal injury claim is successful.

For attorneys, contingency fees can be risky. They’re only paid if you win your case. On the other hand, contingency fee arrangements can be a lifesaver for those who can’t afford the upfront costs typically associated with hiring an attorney.

Something else to note about contingency fee agreements. Your attorney can’t deduct an hourly rate from your settlement. They’re only entitled to the amount you agreed to pay.

Are Contingency Fees Standard in Personal Injury Cases

Attorneys in any legal field, including personal injury law, aren’t required to work on a contingency fee basis. Lawyers are legally allowed to charge fees by the hour or on a case-by-case basis. The decision to use a contingency fee structure is entirely up to the attorney and/or the law firm.

In fact, most criminal defense attorneys charge by the type of case or by the hour. In some states like Nevada, it’s illegal for a defense attorney to charge a contingency fee. If a defendant can’t afford an attorney, the state will appoint one at no charge, and this is also a right outlined in the U.S. Constitution under the Right to Counsel.

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While attorneys specializing in divorce and other types of family law aren’t legally prohibited from working on a contingency fee structure, there really isn’t any reason to do so. Very rarely is a settlement involved in a family law case that justifies an attorney temporarily waving their fees. However, personal injury cases are a little different.

The payouts can be substantial and a large percentage of personal injury victims simply can’t afford upfront lawyer fees. To help ensure accident victims receive adequate legal representation, attorneys typically work on a contingency fee payment structure. Once again, it also doesn’t hurt that the payout the attorney receives after winning the case can be more than simply charging an hourly rate.

Don’t forget that every lawyer and law firm is different, so it’s a good idea to inquire about fee structures before agreeing to let an attorney handle your personal injury claim.

Benefits of Contingency Fees in Personal Injury Claims

An obvious advantage of contingency fees in personal injury claims is not having to come up with lawyer fees. Accident victims typically already have a lot going on, and this often includes trying to pay off mounting expenses stemming from the accident.

If you end up losing your accident claim, you’re not on the hook for attorney fees. Remember, your attorney is only paid when you win your accident claim. Some people may feel like contingency fees encourage attorneys to work harder to secure a win.

There can also be a potential downside; some less-than-reputable personal injury attorneys may only accept cases that can end in a large payout. They may turn away personal injury cases with smaller payouts, leaving these individuals without adequate legal counsel. With that being said, overall, contingency fees benefit both the attorney and the client.

Who Decides to Settle a Personal Injury Claim

Okay, this is a common concern. Who decides to settle a personal injury claim with your attorney is working off a contingency fee? Since the lawyer is basically working for free until your case is successfully settled, do they have the legal right to decide to accept the offer? Don’t worry, the answer is no.

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Regardless of the payment or fee structure, you’re always in control of your personal injury case. You decide when to accept an offered settlement, continue negotiations, or take your claim to civil court.

Your attorney can and should be on hand to provide recommendations. Whether or not you listen to your attorney’s advice is strictly up to you. Your lawyer can’t contact the insurance company and agree to their offer without your permission.

Contingency Fee Rules in Personal Injury Claims

There are some rules governing contingency fees designed to protect attorneys and clients. These rules include:

  • The contingency fee agreement must be in writing
  • Both you and the attorney must sign the agreement
  • The agreement must state it’s for contingency fees and this can’t be in writing smaller than the text of the document.
  • The amount the client owes in contingency fees must be clearly stated. The agreement must also detail if fees are owed if the attorney loses the personal injury claim. Most of the time, if the attorney loses the case the client doesn’t owe a dime.
  • All contingency fee agreements must also state if you’re responsible for paying the other’s party legal fees.

If you have any questions about the contingency fee agreement, discuss your concerns with your attorney before signing on the dotted line.

Contingency Fees Can Ensure You Have Legal Representation

If you’re planning on filing a personal injury claim, it’s always a good idea to have an attorney. Unfortunately, most accident victims can’t afford attorney fees. Contingency fees can help ensure your legal rights are protected and you receive fair compensation for your damages.

With a contingency fee arrangement, you only pay attorney fees if you win your case, allowing you to focus on your recovery without the burden of upfront legal costs.

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