Some things you hope you never need to do, like hiring a personal injury attorney. If you need an attorney, it means you’re dealing with damages after an accident. Your damages can include your injuries, property damage, and lost income.
However, hiring an experienced personal injury lawyer isn’t exactly cheap. Attorneys charge fees and not everyone can meet the upfront costs, which is when contingency fees can be helpful. Before you sign an agreement, understanding contingency fees and legal costs is crucial if you don’t want any unpleasant surprises when your claim is resolved.
Since you probably have plenty of questions about contingency fees, here are some answers to help simplify the payment structure.
What Are Contingency Fees?
Attorneys have the option of using different fee structures that include charging flat and hourly rates. A flat fee is typically paid upfront and covers legal representation for the duration of your case.
Hourly fees are exactly what the name implies. You pay the attorney a set rate for every hour they work on your case. Hourly fees typically also include an upfront payment.
Personal injury attorneys have another option—they can choose to charge their clients a contingency fee; this type of payment structure is limited to personal injury law. A criminal defense attorney can’t charge a client a contingency fee. They’re limited to either hourly rates or a flat fee.
So, what are contingency fees? This is a written agreement you enter into with your attorney. Your attorney agrees to provide legal representation without receiving any upfront fees.
If they successfully settle your injury claim, you agree to pay your attorney a percentage of your award. In other words, your attorney only gets paid if they win your case.
How Much of Your Settlement Goes to Your Attorney?
This is a question that should be answered in your contingency fee agreement. Remember, this must be a written contract for it to be legally binding. A handshake and a verbal promise aren’t enough. Everything must be in writing, including the percentage your attorney receives.
Attorneys pretty much have free rein when it comes to the amount they charge in contingency fees. The law presumes if a client doesn’t agree with the percentage, they’ll look for another attorney with more reasonable rates. With that being said, most personal injury attorneys charge between 25% and 40% with 33% being the national average.
So, if your contingency fees are 25% and your settlement is for $100,000. You receive $75,000 and your attorney is paid $25,000.
Your attorney may also use a sliding scale to decide their contingency fee percentage. This information will also be included in your contingency fee agreement. The sliding scale allows the attorney to adjust their contingency fee amounts if your case goes to trial or you appeal a negative verdict. Generally speaking, the sliding scale usually adjusts contingency fees by around 5%.
Do Contingency Fees Cover All Costs?
The answer to this question depends on the contingency fee agreement you have with your attorney. Some attorneys include any extra costs in their contingency fees, while others count it as extra.
So, what extra costs may not be part of your contingency fee contract? This typically includes costs associated with obtaining copies of your medical records and accident report. If expert witnesses are necessary, this is usually an extra cost. Court filing fees are another expense that often isn’t covered by contingency fees.
Who Covers Costs If You Lose Your Claim?
Unfortunately, not every personal injury claim is successful. If you lose your case, you’re not getting a settlement check from the insurance company. Your attorney put in the hard work, so are you responsible for paying their fees?
If you have a legally binding contingency fee agreement, you’re not responsible for paying attorney fees. Remember, your contract must be in writing. If it’s not, you may not have a contingency fee agreement. While you’re not responsible for paying attorney fees, you may need to cover additional costs.
How Does Your Attorney Get Paid?
Congratulations on winning your personal injury claim. Now you can take a breath and relax knowing that your bills are going to be paid, which includes settling up with your attorney.
The precise process for paying your attorney can vary a little, but most follow a simple process. The insurance company sends your settlement check to your attorney, who places it in an escrow account.
From there, your attorney deducts their costs and sends you a check for the remaining amount. You may not even need to leave your house to receive your insurance settlement. There will be some paperwork to sign to finalize your attorney’s payment.
Can The At-Fault Party Cover Your Contingency Fees?
If your personal injury claim heads to civil court as a lawsuit, there’s a chance the judge or jury can instruct the defendant to cover your legal expenses, and this can include your contingency fees and other costs.
However, don’t count on this; state laws also apply and not all allow contingency fees to be covered by the losing party. You should expect to be responsible for paying your contingency fees if your case is successful.
Are Punitive Damages Part of a Contingency Fee Agreement?
While it’s not common, some personal injury cases result in punitive damage awards. Punitive damages are separate from your economic and non-economic damages and you can’t include them in your injury claim. Only a judge or jury can award punitive damages, and it’s done rarely.
Punitive damages serve two purposes. They punish the defendant and work to discourage others from engaging in the same negligent behavior.
Your contingency fee agreement should cover the possibility of a punitive damage award. However, most attorneys will count punitive damages as part of your settlement which means they’re entitled to receive a percentage.
Contingency Fees Can Help You Retain Legal Representation
Contingency fees help ensure everyone can afford legal representation after an accident. Instead of coming up with an upfront payment, your attorney works for a percentage of your settlement. Before entering into a contingency fee agreement, read the contract carefully. If you have questions, don’t be afraid to ask.
Understanding the terms of the agreement can prevent misunderstandings and ensure you are comfortable with the arrangement. Adopting this approach allows you to focus on your recovery while your attorney handles the legal aspects of your case, working diligently to secure the best possible outcome.