In most personal injury cases, a lawyer's services are offered on a "contingency fee" basis, which means the lawyer's fees for representing the client will be deducted from the final personal injury settlement in the client's case—or from the damages award after a favorable verdict, in the rare event that the client's case makes it all the way to court trial. If the client doesn't get a favorable outcome (doesn't get any money, in other words), then the lawyer collects no fees. Here's what you need to know before hiring a personal injury lawyer.
Most contingency fee agreements give the lawyer a percentage of between 33 and 40 percent, but you can always try to negotiate a reduced percentage or alternative agreement. In the majority of cases, a personal injury lawyer will receive 33 percent (or one third) of any settlement or award. For example, if you receive a settlement offer of $30,000 from the at fault party's insurance company, you will receive $20,000 and your lawyer will receive $10,000. (Learn more about hiring and working with an attorney and when it makes sense to represent yourself.)
The "Sliding Scale" Option
Many lawyers will draw up a fee agreement in which the contingency fee percentage varies depending on the stage at which the case is resolved. This is often called a "sliding scale." For example, your lawyer might send a demand letter to the other side fairly early on. If you have a good case, the other side might make a counteroffer, there will be further negotiations, and a fair settlement might be reached before you have to file a personal injury lawsuit in court. In that situation, the lawyer's fee percentage might be at (or maybe less than) the standard 33 percent.
But if your settlement occurs after you file a lawsuit, your lawyer may receive a higher percentage of the settlement, perhaps closer to 40 percent. For example, when your case settles for $30,000, but only after you've filed a lawsuit in court, your lawyer might recover $12,000 if the fee agreement allows for a 40 percent cut at this stage. The percentage may even go up a few notches if the lawsuit reaches the trial stage So, before choosing to reject a pre-suit settlement offer, consider that as your case progresses, it may get more costly in terms of the percentage you stand to give up.
Most personal injury lawyers will cover case costs and expenses as they come up, and then deduct them from your share of the settlement or court award. It's rare for a personal injury lawyer to charge a client for costs and expenses as they become due.
Costs and expenses in a personal injury case include:
Costs and expenses can get significant, especially if settlement does not occur until close to trial. The lawyer's final percentage with all fees, costs, and expenses may end up totaling between 45 and 60% of the settlement.
For example, suppose you settle your personal injury case for $30,000 after the lawsuit was filed. There were various costs and expenses that your lawyer covered totaling $4,000. The lawyer will receive 40% of the settlement amount as lawyer's fees, which is $12,000. The lawyer will also deduct $4,000 for costs and expenses from the $30,000 settlement. In this case, the lawyer will receive $16,000 of the final settlement amount. Get tips on managing costs and expenses in a personal injury case.
It is common practice for the settlement check to be sent to the lawyer. This ensures that your lawyer will get paid for his or her services. Many personal injury lawyers only take contingency cases and, therefore, risk not getting paid if they do not receive the settlement check. The lawyer will contact you when he or she receives the settlement check, and should provide an itemized list of what he or she deducts from your settlement check to cover lawyer's fees, costs, and expenses. If you dispute certain charges, the lawyer may place the disputed amount in a trust account until the issue is resolved.
If you switch lawyers or decide to represent yourself, your original lawyer will have a lien for fees and expenses incurred on the case prior to the switch, and may be able to sue both you (the former client) as well as the personal injury defendant for failing to protect and honor the attorney's lien.
If you find yourself in a situation where you feel you have to terminate your lawyer, it is best to get them to agree in writing to seek no interest on fees or expenses in the case. This document should then be forwarded to the defendant before settlement in order to avoid any unnecessary delays on the lien.
Learn more about hiring and working with a personal injury lawyer.