Contingent Fee Agreements

A contingent fee agreement means that there is no legal fee unless a condition – a contingency – is met. The condition is a successful result to your case, a recovery of money damages for your injuries and losses. If there is a recovery, the legal fee is a percentage of the recovery, payable when the case is resolved. If there is no success – no recovery – there is no legal fee. You win, you pay a fee. You lose, you don’t pay a fee.

The effect of a contingent fee is that any client with a strong case can afford to hire a lawyer. In fact, the client can afford to hire the best lawyer that she can find since the percentages charged tend to be similar from lawyer to lawyer.

However, even though the percentages that lawyers charge are similar, there is no "standard" contingent fee agreement that all lawyers use.

The main differences between contingent fee agreements concern . . .

❏ the percentage.

❏ whether the percentage changes if the case goes to court, or is appealed.

❏ whether the percentage is based on the “gross recovery” “or the “net recovery.”

❏ whether you have to pay the “costs.”

❏ what services are covered.

Let’s look at these in a little more detail.

Contingent fee agreements usually involve fees of 1/3 to 40%, although they can be any percentage.

Obviously, you want the lowest possible percentage, but don’t be “penny wise and pound foolish.” You don’t want a lower percentage to be a dis-incentive to your lawyer giving your case priority and maximum effort. Don’t be afraid to raise this issue with your prospective lawyer. Ask him whether he will treat the case as well as any other case he has even though you have negotiated a lower-than-usual percentage in your case.

Some contingent fee agreements provide different percentages depending on when and how your case is resolved. For example, they may provide for a certain percentage if the case is settled before suit is filed but a higher percentage if a lawsuit is filed.

In deciding whether to accept this type of agreement, understand that almost all car accident claims settle and that most settle without filing suit.

It is also common for the percentage to increase if there is an appeal. This is reasonable since appeals involve a great deal more legal work.

“Gross amount” means that the fee is calculated based on the full amount of your injury settlement. This is sometimes called a “gross fee agreement.” The alternative is a "net fee agreement" which means that costs are paid out of the gross recovery before the legal fee is calculated.

Obviously, a net fee agreement is better for you.

Most contingent fee agreements require you to pay the out-of-pocket costs of your case. However, in states where this is allowed, some lawyers will agree to pay the costs of the case if you lose and others will pay the costs of your case win or lose.

You don’t need me to tell you that an agreement which requires your lawyer to pay the out-of-pocket costs is best for you, but you may have a hard time finding a lawyer who will handle a car accident case on these terms unless it is a very large case.

Generally, these are the main "costs" of an car accident case . . .

Charges for obtaining medical records. Health care providers can charge to produce copies of their records and bills and almost all of them do. In a routine car accident case (I hate that term because all cases are unique), these charges total less than $100. These costs are incurred in all cases, even if you do not file your case in court.

If your case is filed in court, there are 3 main types of costs that could be incurred.

First, there are filing fees and the charges for having the court papers served on the person or company you are suing. These costs are normally $150 or less.

Second, there are “pre-trial discovery” costs, mainly the charges for deposition transcripts. These vary from case to case, depending on the type and complexity of the case. In routine car accident case, these charges range from $250 to $1,000, usually spread out over several months.

Third, there are expert witness fees. These also vary depending on the case. In a routine case, the only expert witness fee is your doctor’s charge for testifying about your injuries. In a typical car accident case, these charges range from less than $1,000 to $5,000, depending on the doctor(s) involved.

Usually, although the contingent fee is based on the recovery for your injuries, your lawyer will, for no additional charge, help you resolve property damage issues such as the repair of your car and getting a rental car while the car repair work is done and will help you submit a PIP or medial payments claim to your insurance company. However, some lawyers charge extra for these services.

Here are some final thoughts about contingent fee agreements.

The law of many states requires your contingent fee agreement to be in writing. Even if it is not a legal requirement, your contingent fee agreement should be in writing.

Because of the variables that you now know about, you want to be sure that you and your lawyer understand your obligations to each other. You want to make sure that you are “on the same page.”

The fee agreement should be signed when you hire your lawyer and you and your lawyer should both get a signed copy of the agreement.

Remember, that a lawyer's fee agreement is not carved in stone. You can propose different terms and see if the lawyer will agree to them. The better your case, the more likely it is that the lawyer will agree to the terms that you request.

Click here to return from this discussion of contingent fee agreements to a general discussion of car accident lawsuits.