What Is a Contingency Fee?
A contingency fee is one type of payment arrangement a lawyer may use. This type of fee arrangement is based on the outcome of your case, meaning if you don’t collect any compensation, you don’t pay your injury attorney. Under this arrangement, the attorney’s fees will be a set percentage of the money you receive in the case.
Contingency fees are common in personal injury cases because the injured party may not have the financial resources to pay upfront legal fees.
What Type of Cases Use Contingency Fees?
It is not a requirement that an attorney uses a contingency fee arrangement. The most common cases where attorneys accept a contingency fee are workers’ compensation and personal injury cases.
However, lawyers may be willing to accept a contingency fee arrangement for other types of cases, including:
- Class action lawsuits
- Bankruptcy
- Employment discrimination cases
- Sexual harassment cases
What Costs Does an Attorney Consider When Structuring a Contingency Fee Arrangement?
There are two main types of costs that an attorney will consider when determining their fee structure:
- Litigation costs: There are various fees associated with an insurance claim or lawsuit, such as the cost of obtaining evidence, discovery costs, court fees, and expert witness costs. With this kind of arrangement, the attorney spends time on the case without payment upfront. This means they are usually covering the fees while working on your case. An attorney may not consider a contingency fee if the costs are too high.
- Complexity of your case: When a case is too risky or complex, attorneys may ask for higher percentage rates. Because of this, straightforward cases may have lower contingency fees than more complex cases.
What Percentage Does a Lawyer Get in a Contingency Fee Arrangement?
Contingency fees vary depending on the case and the attorney. You should discuss your fee arrangement before entering into it to make sure you understand how it works. Typically, the percentage an attorney receives as a contingency fee is between 33 percent and 40 percent. For example, if you agree to 33 percent and settle for $100,000, your attorney will receive $33,000.
Sometimes, your contingency fee may depend on how your case resolves. For example, you may pay a smaller contingency fee if your case settles and a larger fee if the case goes to trial. Ultimately, the percentage you pay will depend on the specifics of your case and what agreement you and your attorney reach.
How Do You Pay?
Under the contingency fee arrangement, you will not pay your legal fees until after the other party to the case pays you. Typically, when you receive your money, it will go to the attorney, who puts it in a trust account. At this time, the attorney will distribute funds as needed. For example, they will pay themselves the contingency fee and pay any outstanding bills associated with your case before distributing the remaining funds to you.
Benefits of Contingency Fee Arrangements
This style of fee arrangement may not be the best option for everyone, but it provides several benefits, including:
- Access to legal services: This arrangement allows you to get legal assistance even if you cannot afford the upfront legal fees. Without the contingency fee arrangement, many people could not afford the legal services necessary to seek the justice they deserve.
- Motivation for lawyers: The contingency fee system motivates attorneys because they don’t receive money unless you do. Therefore, they have a stake in the case, which ensures your interests are aligned.
- Only pay if you win: When you pursue legal action, there is always a chance you could lose. Under the contingency fee arrangement, you protect your finances because you only pay if you win. However, you may be responsible for litigation expenses.
Drawbacks of Contingency Fee Arrangements
While there are many benefits to contingency fee arrangements, there are also some drawbacks, including:
- High fees: Depending on the case’s complexity and how many attorney hours it requires, contingency fees may be higher than hourly rates. This can be a disadvantage for people who receive large personal injury settlements and have high contingency fee rates.
- Conflict of interest: Sometimes, contingency fee arrangements can create a conflict of interest. The attorney wants to settle quickly and get paid rather than fight for a higher settlement or verdict. However, that is not always the case. To avoid this, you should communicate your outcome desires to your attorney.
Contact Loewy Law Firm Today
If someone’s negligence injured you and you cannot afford the upfront costs of litigation, the professional and experienced personal injury lawyers at Loewy Law Firm may be able to help. Contact us today to discuss our different fee arrangements and get a case review.
To discuss your legal options during a free and confidential case evaluation, call us at (512) 280-0800.