Most injury lawyers charge a contingent fee for legal services. But many new clients have never hired a lawyer during their lives and might not understand all of the details surrounding contingent fees.
Before you hire a lawyer on a contingency fee basis, you should make sure you understand how the fee is calculated. You should also talk to the lawyer about what the fee covers. This will allow you to predict how much compensation you will receive.
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Contingent fees depend on the outcome of a case. This distinguishes contingent fees from hourly and flat fees. When you hire a lawyer on an hourly or flat fee, you must pay the fee regardless of the outcome of the case.
Examples of hourly and flat fees include:
- A flat amount to prepare a will
- An hourly amount to negotiate a contract
When you pay an hourly or flat fee, you compensate the lawyer for the amount of work put into the case. By contrast, when you pay a contingent fee, you compensate the lawyer for the results the lawyer produces.
Examples of contingent fees include:
- 33% of all compensation recovered
- 33% of any settlement or 38% of any jury award
Since a contingent fee represents a percentage of the case’s outcome, the fee is larger when the lawyer gets more compensation for you.
Benefits of Contingent Fees
Contingent fees provide several benefits to accident victims, including:
No Upfront Fee
Since the lawyer cannot calculate the contingent fee until the end of the case, the lawyer will start working for you without any upfront fee. This provides a great benefit to accident victims, who often face financial difficulties after their injuries.
After an accident, you may face large medical bills and auto repair bills but be limited in your ability to work.
Since you do not need to pay any upfront fees for your contingent fee lawyer, you can use your limited resources for the essentials, like your living expenses and medical treatment.
You Keep the Bulk of the Recovery
The contingent fee represents a percentage of the amount recovered. Pennsylvania’s Rules of Professional Conduct restrict lawyers from charging an “excessive” fee. Whether a fee is excessive depends on many factors, including the fee customarily charged for similar services.
Contingent fees typically range from 20% to 40%, depending on the complexity of the case and the lawyer’s skill and reputation. But even at 40%, you will keep 60% of the compensation the lawyer recovers for you.
You Pay No Legal Fee for a Loss
Lawyers calculate contingent fees based on the amount recovered. But 30% of zero is zero. This means that your lawyer gets no fees if they cannot settle or win your case.
Your Lawyer Has an Incentive to Maximize Your Compensation
With a contingent fee agreement, the lawyer’s fee increases as your compensation increases. As a result, the lawyer has a financial incentive to get the highest compensation possible for your case.
Calculating a Contingent Fee
Contingent fees can include tiers based on the amount recovered. Thus, your fee could be 30% if your case settles without a lawsuit or 35% if your lawyer must sue the person or business that caused your injury.
This type of tiered fee helps to compensate the lawyer for the additional time and work necessary to litigate a case.
Contingent fees can also include tiers based on how much you recover. For example, the lawyer might charge 33% of the first $100,000 recovered and 15% of any amount over $100,000.
If you settle for $100,000, your lawyer receives $33,000. If you settle for $200,000, your lawyer receives $48,000 or $15,000 more than if you settled for $100,000.
What a Contingent Fee Covers and Does Not Cover
Lawyers do a lot of work to resolve a personal injury case. Some of the legal services covered by a contingent fee include:
- Legal consultations
- Preparing and negotiating insurance claims
- Investigating the accident and collecting evidence
- Negotiating and writing settlement agreements
- Preparing and filing a lawsuit
- Litigating the lawsuit
- Taking and defending depositions
- Presenting the case at trial
Some of the services that lawyers usually exclude from your contingent fee include:
- Costs for court reporters and transcripts
- Filing fees
- Expert witness fees
During your case, your lawyer will probably front the money to pay certain costs associated with your case.
For example, if you have a medical malpractice case and you need an expert witness, the lawyer will probably pay the expert witness out of the law firm’s account.
But once the case ends, the lawyer may expect you to reimburse any amounts expended on your behalf. You should discuss with your lawyer whether you will need to pay these costs even if you lose your case.
Hiring a Contingent Fee Lawyer
Once you pick a lawyer, you will receive a fee agreement. You should review this fee agreement carefully and discuss any concerns with the lawyer. You should also feel free to discuss the fee agreement with a different lawyer.