"Litigation" is a term for the process of taking a case through the civil court system. And litigation can be expensive -- very expensive. Usually, we think in terms of what litigation will cost us and factor that into our strategy when it comes to deciding whether the settle a personal injury case. It's a good idea to also consider the costs to the other side, the insurance company representing the defendant. The cost of litigation is the main reason insurers usually settle credible injury claims, rather than fight them out in the court system. Let's take a closer look.
First and foremost, there are legal fees that come along with taking a case to court and fighting it out: the cost of attorneys, in other words.
In personal injury cases, the plaintiff's attorney (that is, the lawyer for the injured party) often works on contingency. That means he or she gets a percentage or portion of whatever the plaintiff wins or recovers -- and gets nothing if the plaintiff doesn't win. This in turn means the plaintiff is not usually responsible for a big cost of going to court, unless he or she wins -- in which case there will be money to pay it. Keep in mind most personal injury lawyers will stipulate a higher contingency fee if a case must be litigated. Typically, a fee agreement between a plaintiff and his or her lawyer would include one contingency percentage (usually around one-third) if the case is settled before trial and a higher percentage (forty percent and higher) if it goes through litigation. Even though the cost of a personal injury lawyer for the plaintiff is contingent on winning, it's still "costly" for an injured person to fight a case out in court – more of the award goes to their lawyer.
Insurance companies don't have the luxury of a contingent fee agreement. They pay their defense counsel by the hour, and watch the meter go up and up. Insurers tend to not use their own in-house counsel for litigation, which means that they hire outside counsel. Depending on what part of the country the case is in, and the attorney's experience and level of expertise, a standard rate for a personal injury lawyer might range from $150 to $400 per hour. Since a trial can take upwards of 50 or 60 hours -- sometimes significantly upwards! -- legal fees can get very high very quickly.
A second major expenditure is expert witness fees. Experts don't come cheap, and some injury cases can involve multiple experts: engineers to testify about products or cars, accident reconstructionists to testify about how an accident occurred, medical professionals to testify to injuries and medical treatment, even accountants and actuaries to testify as to lost income or wages. Many experts can get several thousand dollars for working on a single injury case.
Third, there are transcription, copying, messenger, and delivery costs. Lawsuits are document-intensive, and hiring a court reporter to take depositions, making copies of transcripts or voluminous medical reports, and sending documents around in various high-priority, guaranteed-delivery ways all add up over the course of an injury case.
Fourth, there are court and filing fees, including the cost of service of process. These expenses might each only be a few tens of dollars, but over the course of a trial, the total costs in this area can mount up to another several hundred or even several thousand dollars.
Fifth, there are other out-of-pocket costs, such as travel costs for lawyers and witnesses. If anyone needs to fly, rent cars, stay overnight, etc., these expenses can add up quickly.
There really is no "typical" personal injury trial, since the facts and complexity of each case -- and therefore what is needed to bring or defend the case -- vary so much. However, more importantly, an inexpensive trial -- i.e. a simple case, with few or no experts required -- in the metropolitan New York area usually costs $15,000+ just in terms of lawyer, court, transcription, copying, etc. costs. While the New York area happens to be one of the more expensive areas for litigation, once you add in expert witness fees, it's easy to see that a more complex case anywhere could cost upwards of $30,000 dollars; and it's not uncommon for a large case, which could involve multiple attorneys or hundreds of attorney hours, to cost $100,000 or more.
Another important consideration is the amount of time it takes to resolve a personal injury matter through the court system. If the plaintiff chooses to go all the way in court, it may be years before the award is actually paid. Negotiating a settlement before trial has the added benefit of expediting payment to the injured party.