A contingency fee is a method of charging fees for legal services. A contingency fee means that a lawyer does not receive any upfront, hourly, or guaranteed payment for their services. Instead, their fee from the client is contingent upon the attorney securing compensation for the client.
If the attorney secures a settlement or judgment, they receive a percentage of the client’s financial recovery. If the attorney does not obtain a settlement or judgment, they receive no compensation for their services.
Why Do Personal Injury Attorneys Use a Contingency Fee Structure?
A personal injury lawyer often represents clients who have already suffered financial harm. These clients may come to the attorney after a motor vehicle accident, fall, or another event that leaves them injured and financially stressed.
A contingency fee structure may make sense for a personal injury lawyer because:
- Many clients cannot afford to pay out-of-pocket for an attorney: Personal injury lawyers aim to represent clients regardless of their financial status. If someone has suffered harm because of another party’s negligence, the lawyer may represent them. However, some of those clients may not afford a lawyer if they have to pay out of their own pocket. A contingency fee allows anyone to get legal representation.
- They’re confident in their ability to win: A lawyer who charges a contingency fee does not get paid unless their client does. Therefore, the lawyer is taking a financial risk, offering their services with no guarantee of payment. For a law firm to do this, it must be confident in its ability to win for clients.
- They have ample resources on their side: For a law firm to handle a case without payment from a client, it must already have resources. Law firms that charge contingency fees can pay for case-related expenses upfront, even at the risk of receiving no payment from the client.
A law firm has also done the math. The firm has reviewed the potential settlement or verdict the client may receive and determined that the potential financial reward is worth their risk.
A Contingency Fee May Cover the Attorney’s Services and Case-Related Expenses
A lawyer’s contingency fee should cover the cost of completing a case.
Expenses that a law firm may incur during a case include:
- Fees for filing the case in civil court
- The cost of transportation to case-related meetings
- Fees for any experts the law firm hires for the case
- The cost of reconstructing a client’s accident, whether digitally or with a physical display
- The wages or salaries of employees who work on the case, such as paralegals
The attorney who handles a case will also hope to recover compensation for their services. The contingency will reflect the value that the attorney places on their legal experience and services.
Don’t hesitate to ask a law firm why they set the contingency fee where they set it. You may find out more about what exactly a law firm will do to try and win your case.
What Determines How Much a Law Firm Charges as a Contingency Fee?
A law firm may set its contingency fee based on the following:
- The value the firm believes it brings to each case
- The strength of its case results, which may be a tangible basis for charging a higher contingency fee
- The amount of resources and work that the firm puts into a case
- The firm’s general reputation for success
A law firm may set its fee at a point that it believes is fair for the client but also for the firm.
How Much Do Attorneys Charge as a Contingency Fee?
Each law firm has the power to set its contingency fee rate. The ethical rules that apply to lawyers require the fee rate to be reasonable, given the circumstances.
Before you hire a law firm, you should be clear on whether they offer contingency fees. If they do, you may ask what their specific contingency fee is.
Why Don’t Certain Other Lawyers Use a Contingency Fee Structure?
The contingency fee structure makes sense for personal injury lawyers. There is a clear objective in personal injury cases, which is financial recovery for the client. Both the client and attorney share the same goal: to secure that financial recovery.
Personal injury lawyers understand that a client brings value to them. It is the client’s case, after all, and the attorney cannot seek a financial recovery without the client being onboard. Therefore, the lawyer is willing to forego upfront compensation in exchange for handling the client’s case.
For other attorneys, contingency fee structures may not make as much sense or might not be permissible.
Take a criminal lawyer as an example.
Depending on the specific case, a criminal lawyer’s goals may be to:
- Reduce the criminal charges that their client faces
- Achieve a dismissal of the charges against the client
- Complete a successful appeal or achieve some other outcome for a client
A criminal defense lawyer’s goal generally does not include securing a financial recovery. Though contingency fees for criminal defense lawyers were a phenomenon in the past, the ethical rules now prohibit them. Contingency fees are also prohibited in domestic relations cases.
The unique dynamics of personal injury cases make contingency fees possible.
Attorneys Generally Use Contingency Fee Structures for Wrongful Death Cases
Personal injury attorneys also handle wrongful death cases. A lawyer may use the contingency fee arrangement in their wrongful death cases, too.
The dynamics of a wrongful death case, although more tragic, are similar to that of a personal injury case. In wrongful death actions, one or more plaintiffs have lost someone they’ve loved. As a result, the plaintiffs have suffered harm—pain and suffering, lost financial support, medical expenses, funeral expenses, and otherwise.
The attorney representing the plaintiffs will seek a financial recovery. If the lawyer is successful, the plaintiffs will get that financial recovery, and the lawyer will receive a percentage.
Because the goal in wrongful death cases is financial recovery (as well as justice for the deceased), the contingency fee structure still works.
Advantages of Contingency Fees for the Client
From the client’s perspective, there are several clear advantages to having a lawyer operate on a contingency fee basis.
A client may gravitate towards a contingency fee structure because:
- They face difficult financial times: Plaintiffs often bring a personal injury case because they’ve suffered financial harm, among other reasons. When someone is already under financial stress, they may be unable or unwilling to spend money on an attorney. The contingency fee structure eliminates the direct financial cost of hiring a lawyer.
- They don’t want to face the financial risk of a personal injury case: Even if a plaintiff can afford a lawyer, they may ask: why should I take the financial risk if a lawyer is willing to take it for me? With a contingency fee structure, law firms handle all case-related expenses, minimizing the financial risk to the client.
- The contingency fee gives the law firm a clear incentive to win: When someone hires a lawyer by the hour, the client may wonder if the law firm is using their billed hours effectively. With a contingency fee structure, there is no reason for the law firm to waste its time during a case. The law firm only receives payment if it wins the case, so the client knows that the law firm will do everything in its power to win the case.
Even if a plaintiff wanted to pay a personal injury lawyer upfront, they might be out of luck. A law firm’s fee structure generally is what it is, and the structure is that way for good reason.
Advantages of Contingency Fees for the Lawyer
Contingency fees can be a win-win for both clients and attorneys. While a law firm faces some risk whenever they don’t receive upfront, guaranteed payment, personal injury lawyers generally know what they’re doing.
A personal injury firm may use a contingency fee structure because:
- They believe that they can win a significant amount: The amount of compensation that a law firm receives through a contingency fee structure might be more than it can receive through hourly billing. Depending on the value of the judgment or settlement, a law firm might rather have a percentage of a financial recovery than whatever their hourly or flat fee might be.
- A contingency fee can allow the client and the lawyer to get fair compensation: A personal injury law firm generally wants to see its clients compensated fairly. Yet, the law firm also wants to cover its costs and make a reasonable fee on each case. The firm may set its contingency fee structure so that both the attorneys and their clients will receive fair compensation.
- The contingency fee provides a simple goal for the law firm: Attorneys who charge contingency fees don’t have to worry about billing lots of hours. They don’t need to do mental gymnastics considering how to maximize the value of a case. The attorney simply has to win as much compensation for their client, making the most of their contingency fee. It’s simple.
- The contingency fee allows the law firm to represent anyone: For law firms that care about delivering justice, the contingency fee is welcome. A law firm never has to turn away a client with limited financial means and does not have to do pro bono work for such clients. Instead, a contingency fee allows the firm to represent anyone who needs their help.
Contingency fees are a widely-used practice when it comes to personal injury law.
I Am Considering a Personal Injury Case. Can I Hire a Lawyer on a Contingency Fee Basis?
Whether you’re seeking justice for an injury, illness, or a loved one’s passing, you’ll likely hire an attorney on a contingency fee basis. Contingency fees are simply the way that most personal injury law firms do business.
Plaintiffs do not generally take issue with contingency fees. They have to pay no upfront cost and don’t have to pay the attorney if the law firm fails to secure a financial recovery. While the client does have to promise a significant portion of their recovery to the law firm, many plaintiffs might not get any financial recovery if not for their lawyer.
What Services Does a Client Get in Return for a Contingency Fee?
If you hire a personal injury lawyer on contingency, you will provide them with a percentage of your recovery. It’s only fair to ask: What will I get in return for this percentage of my financial recovery?
Personal injury lawyers generally handle the entire legal process for clients.
Though responsibilities can vary from case to case, a lawyer’s duties generally include:
- Investigating the event that has led the client to seek compensation
- Collecting evidence
- Documenting the client’s damages
- Calculating the monetary cost of the client’s damages
- Filing the case, whether it is an insurance claim or lawsuit
- Managing all case-related communications
- Seeking a financial settlement
- Taking the case to court, if necessary
A lawyer must also defend the client’s rights. This means shielding them from any attempts to undermine the case. Insurers and other attorneys may try to assign fault to the plaintiff, have them accept a low settlement offer, or intimidate the plaintiff. It’s a lawyer’s job to protect the client from such threats.
Call a Personal Injury Attorney Today to Seek Compensation for Your Losses
Remember that contingency fees allow anyone to hire a personal injury lawyer. If you’ve suffered injuries or lost a loved one due to another party’s negligence, you can contact one or more lawyers today at no cost.
Personal injury lawyers offer free consultations. These consultations allow you to learn more about a firm, and you can choose the law firm that suits you best.