Private lawyers charge clients for legal services. These fees compensate the lawyer for their time, experience, and legal knowledge. They also pay for the lawyer’s overhead expenses, like staff and office rent. However, lawyers know that people injured in car accidents or other traumatic incidents face a difficult financial situation.
Medical expenses play a role in about 62% of bankruptcies filed each year in the United States. Even when families have health insurance, the out-of-pocket costs of deductibles and copayments can reach tens of thousands of dollars. As a result, many injured victims need to spend their money on medical bills rather than legal bills. Contingency fees provide a solution.
Types of Legal Fees
Lawyers typically use three types of billing systems. Hourly fees are quoted by the law firm in dollars per hour. The lawyer tracks the time spent working on your case and periodically sends a bill. The amount billed will equal the number of hours, including fractions of an hour, multiplied by the hourly rate.
Lawyers use hourly fees in cases that require an unknown amount of work. For example, a lawyer may charge a property owner an hourly fee to litigate a boundary dispute with a neighbor. Importantly, clients must pay these legal fees regardless of the case outcome. In other words, a client may spend thousands of dollars on a lawyer even though they lost the case.
Fixed fees are quoted as a flat amount for a defined task. A lawyer charges these fees for a project that requires a known amount of work, such as filing a corporation or writing a will.
Contingency fees are quoted as a percentage. If the lawyer wins or settles the case, the lawyer receives the quoted percentage of any compensation received by the client. This fee compensates the lawyer for the outcome they obtained. These fees are often used in personal injury cases.
How Contingency Fees Work
Contingency fees, also called contingent fees, are calculated by multiplying the cost by the amount of financial compensation recovered. For example, if the lawyer quotes a 35% contingency fee and recovers $100,000 for the client, they receive $35,000.
Although law firms vary, the following services are typically included in a contingency fee for a personal injury case:
- Meetings, phone calls, emails, and other communications with the lawyer
- Preparing an insurance claim, including the time to gather records and documents
- Negotiating with the insurer to try to settle the claim without litigation
- Filing a lawsuit against the at-fault party if the lawyer cannot settle the case
- Litigating the case, including filing motions and taking depositions
- Presenting evidence to a judge or jury at trial
A contingency fee will typically not cover services after a trial verdict, such as an appeal or collection efforts against a party who refuses to pay.
Additionally, legal fees may not cover litigation expenses, such as:
- Court filing fees
- Deposition expenses
- Expert witness fees
In a typical case, the lawyer pays these hard costs for you so that your case remains on track. At the end of the case, you must reimburse the lawyer for these outlays.
Benefits of Contingency Fees for Injured Clients
The greatest benefit of a contingency fee is that clients get access to high-quality legal representation without any upfront costs. Since these lawyers know they will get paid when they win cases, they are willing to work hard to produce a positive outcome for their clients.
When a lawyer offers to represent an injured client on a contingency fee, the lawyer shares the risk involved in the case. The lawyer may need to pay costs out of their firm’s funds for the client. The lawyer also invests their time and effort into the case. As a result, the lawyer will carefully assess your likelihood of success before offering to represent you.
This deep analysis benefits the client. Contingency fee lawyers avoid cases with a significant risk of loss. The lawyer will identify any weaknesses in the case early so they can determine how to proceed. For example, the lawyer will account for any contributory negligence by the client, such as failing to wear a helmet during a motorcycle crash.
Once the lawyer assesses the case and is hired, they will start working on the case immediately without charging any upfront fees. Since contingency fees are paid at the end of the case, the client does not need to pay any legal fees during the case.
If the lawyer loses the case, the client owes no legal fees. Thus, the risk of loss falls on the lawyer.
Learn More About Contingency Fees
Although most personal injury attorneys charge contingency fees, you will still find variations from firm to firm. You should discuss fees early in the case to understand how the lawyer charges for legal services. If you have any questions, you should get satisfactory answers before signing a fee agreement.