In a car accident case, a contingency 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 contingency 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," and
- 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 to convince a lawyer to work for such a low fee that your case ends up in the back of her file cabinet.
Change in Percentage
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 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 recognizes the fact that appeals involve a great deal more legal work.
Based on Gross Recovery or Net Recovery
If a fee is based on the "gross recovery," it is calculated based on the full amount of your injury settlement. The alternative is a "net fee agreement" which means that costs (and, often, your medical bills) 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 and you will only have to pay the lawyer back if you win. If you lose, the lawyer absorbs the loss. Clearly, an agreement which requires your lawyer to advance the out-of-pocket costs and not be repayed if you lose your case 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, "costs" in any car accident case include 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, 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 three more 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 medical payments coverage claim to your insurance company. However, some lawyers charge extra for these services.
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 the lawyer will agree to the terms you request.