The Contingency Fee Explained: What it Means for Lawyers and Clients

When seeking legal representation for a personal injury case, the question of how much attorney fees will be often arises quickly. Many personal injury lawyers choose to operate on a contingency fee basis, though, which means that their payment will depend on the outcome of the case. For clients, this arrangement offers significant advantages but it can also be confusing if the terms of the agreement aren’t understood. 

Learning how contingency fees work is crucial as a client so that you can make informed decisions and avoid surprises when settling your claims. Learn everything you need to know about what a contingency fee is, its benefits and drawbacks, how it’s calculated, and what to ask your lawyer prior to signing up.

What is a Contingency Fee?

For those unfamiliar with the term, a contingency fee is a payment arrangement in which a lawyer only receives payment if the client wins their case or secures a settlement. This structure is most often seen in personal injury cases because it aligns the lawyer’s financial interests with your success as a client. Typically, contingency fees range between 30-35% of the total settlement or court award, but this can vary from state to state. 

The percentage will end up depending on factors such as the complexity of the trial the experience of the lawyer, and whether or not the case even actually does go to trial. A straightforward settlement may incur a lower fee than that which is described above, but a long and drawn-out battle in court may come with a higher fee. The contingency fee structure contrasts other common fee structures such as hourly billing or flat fees where clients may regardless of the outcome of the case, thus ensuring that you can pursue legal action without incurring immediate costs. 

How Contingency Fees Benefit Clients

Contingency fees provide several advantages to clients that make them an appealing option, particularly in personal injury cases. The most notable of these benefits include:

1. No Upfront Costs: Unlike hourly or flat fees, contingency arrangements eliminate the need for clients to pay legal fees upfront which makes legal representation accessible to individuals who may not have the financial resources to hire a lawyer otherwise.
2. Risk-Sharing: Since lawyers only get paid if they win, they have a strong incentive to work diligently on the case, meaning it aligns the lawyer’s goals with the client’s and ensures a commitment to achieving the best possible outcome.
3. Access to Justice: Contingency fees allow victims of accidents or injuries to seek justice without worrying about the financial burden which is especially important for cases where individuals face significant medical expenses or lost income.

Potential Drawbacks of Contingency Fees

While hiring a lawyer operating on a contingency fee structure may seem like a great idea right off the bat, there are some considerations to keep at the top of mind first:

1. Higher Costs for Larger Settlements: Because the lawyer’s fee is a percentage of the total award, clients in high-value cases may end up paying significant amounts, with a 33% fee on a $1 million settlement equaling $330,000 as an example.
2. Limited Case Acceptance: Lawyers are selective about the cases they take on under a contingency arrangement due to the risk of no income, so if a case appears to have low financial potential or a high risk of losing, the lawyer may decline to represent the client.
3. Client Responsibility for Other Costs: Even under a contingency fee agreement, clients are often responsible for covering additional expenses, such as court filing fees, expert witness costs, and medical record retrieval fees, so it’s essential to clarify how these costs will be handled.

While not all of the drawbacks may dissuade you, it will be a personal choice to weigh the pros and cons of contingency fees. 

How Contingency Fees Are Calculated

Understanding the calculation behind contingency fees can help you anticipate your financial obligation with more success. Many lawyers often charge a lower percentage on their fee if the case settles before trial (perhaps 25-30%) and a higher fee if it goes to trial (perhaps 30-40%). This change is meant to reflect the time and effort that is required by litigation. 

On top of this, though, additional expenses will be deducted from the settlement amount or award. Court fees, expert witness costs, and other expenses are often pulled out before or after the lawyer’s fee is calculated. Reputable lawyers will always provide clear and written agreements that outline how their fees and expenses will be handled, so review these documents carefully before signing anything.

To provide an example, say you win a $100,000 settlement that didn’t need to go to trial and the lawyer you are working with offered a 25% contingency fee for cases with no formal litigation. In addition to this, say $5,000 worth of additional fees were incurred during the process. You would walk away from the settlement with $70,000 in your pocket ($25,000 or 25% plus $5,000 in fees withdrawn). 

What to Ask Your Lawyer About Contingency Fees

To avoid any misunderstandings with the lawyer you are considering partnering with, consider asking some of the following questions:

• What percentage will you charge?

• Will the percentage increase if the case goes to trial?

• How are additional expenses handled?

• What happens if the case is unsuccessful?
• Are there any additional fees I should expect from you beyond a contingency fee?

The above questions will help you get a good foundation on what the lawyer you are talking to will charge. Use these questions to build confidence and rapport with your potential lawyer and to show them that you are well aware of how this fee structure works.

Partner with an accredited lawyer for your personal injury case

Contingency fees are a cornerstone of personal injury law and provide accessible legal representation to those seeking justice. While they may eliminate upfront costs and align the lawyer’s interests with the client’s, it’s essential to understand how they work to make informed decisions. By asking your lawyer the right questions, reviewing agreements carefully, and clarifying any expense deductions, you can ensure you enter into a fair arrangement that meets your needs.