Unlike most other types of attorneys, personal injury lawyers most commonly work on a contingency basis. This means the lawyer is only paid when he or she successfully negotiates a settlement that you accept, or wins you an award at trial. While this is a good system for the great majority of injured clients, it can also be an expensive proposition. The lawyer takes all the risk of losing the case in return for a handsome chunk of a winning outcome – typically 33% to 40%.
This article discusses a few options for negotiating reduced legal fees for handling your personal injury case. For more on lawyer fees in general, see our overview on the costs of a personal injury lawyer.
Here are three options you have to minimize the amount of money you'll need to give up from your settlement or court award to pay your lawyer.
By the time you first consult a lawyer, you may have already investigated your accident, obtained all the documents pertaining to your claim, and negotiated the insurance company into raising their initial settlement offer. If so, you will have done much of the work the lawyer would normally do. Because of this, some lawyers may be willing to accept a lower percentage contingency fee than the normal 33% to 40%. Be sure to bring all your documents to your initial meeting with the lawyer and show the lawyer the organized file you have put together. If you emphasize how much work the lawyer's office will have been relieved of because of your efforts, the lawyer may agree to some kind of reduced fee arrangement.
Of course, most lawyers will not suggest a reduced fee arrangement; you will probably have to propose it. And many lawyers will be reluctant to agree -- in part because they would make less money, but also because they may fear that the work a nonlawyer has done will not be of much value, and they'll have to do it again. It's your job to show them that your work was useful and that the case is in good shape.
Here are three possible ways to structure fee agreements that take into account the work you've done already:
Make an agreement that if the lawyer can resolve your case solely by negotiating an acceptable settlement -- that is, without having to go through any of the actual litigation process -- then the lawyer will receive a 25% contingency fee. But if prelawsuit negotiations alone fail to produce a satisfactory new settlement offer, the lawyer will receive the standard contingency fee of 33% (40% if the case ultimately is formally scheduled for trial). The reason for you to agree to the larger fee if there is no early settlement is that the lawyer will then actually have to begin work litigating the case, filing more complex legal documents, and working to prepare the case for trial.
Make an agreement that if you ultimately receive up to a certain amount -- say, $5,000 or $10,000 more than what you have already been offered by the insurance company -- the lawyer will receive a basic fee of 25% of the settlement. For everything over that amount, the lawyer will receive 33.3%. This structure guarantees that you do not wind up getting less by using a lawyer than you would have if you had accepted on your own the insurance company's earlier offer.
Pay the lawyer an hourly fee up to a prearranged limit -- say, $2,000. If the claim cannot be settled by the lawyer doing that amount of work, the fee will then switch to a contingency arrangement.
Sometimes, merely having a lawyer enter settlement negotiations on your behalf or file a standard form lawsuit for you gets an insurance company suddenly to increase an offer to an acceptable figure. That may happen because the insurance adjuster knows that if the matter is not settled immediately, the insurance company's own legal costs might rapidly mount.
Such a quick response might seem like good news for you. But if you have agreed to pay your lawyer the standard one-third contingency fee for handling your case, the lawyer will receive that large chunk of your compensation for having done almost no work. This is particularly true if, on your own, you already presented to the insurance company all the significant documents and arguments in the case. One way to avoid this windfall for the lawyer is to have your fee agreement cover such a situation.
A lawyer might agree to limit the fee if the insurance company makes an acceptable settlement offer after the lawyer has done only a small number of hours work on the case. If the claim is settled within the amount of lawyer hours you specify, the agreement can provide that you pay the lawyer at an hourly rate rather than the full contingency fee.
You might consider hiring a lawyer just to give you specific advice -- on a technical legal issue, for example -- that could help you reopen your negotiations with the insurance company or prepare you for small claims court or arbitration. Or, you might seek a lawyer's help only to prepare and file a lawsuit to protect your rights under your state's statute of limitations.
In these situations, you may be able to pay a lawyer by the hour, without having the lawyer take over responsibility for your claim. Because lawyers charge anywhere from $100 to $350 per hour, however, this is not an economical arrangement for you unless you can get useful assistance with only a few hours of the lawyer's time.
In such an advice-only arrangement, the lawyer would not deal directly with the insurance company, put the firm name on any correspondence or legal documents, or appear for you in arbitration or court. You would still officially handle the case on your own, but you would have the benefit of whatever advice the lawyer has given you. If this advice still does not get you a better offer from the insurance company, you can return to the lawyer to discuss whether it makes sense for the lawyer to take on full representation of your claim. If you decide to hire an attorney on an hourly basis, set a maximum number of hours the lawyer may spend on your case without your prior approval to do more. Also, know that you will most likely have to pay the lawyer immediately -- the lawyer will not wait until you receive your accident compensation.
You may have trouble finding a lawyer for advice only. Hiring a lawyer for an hour or two of advice on your personal injury claim might seem like a fairly easy thing to arrange. But many lawyers do not want to become involved in a case just to give a brief consultation. In part, that is because lawyers are trained to be very thorough, and they are uncomfortable giving limited advice. Also, lawyers become professionally responsible for the consequences of any advice they give. If they cannot control what you do with that advice, many would be reluctant to take on the potentially large responsibility for just a few hundred dollars in fees.
To learn more about working with a personal injury lawyer and what to expect from one, see AllLaw's resource section on Using a Personal Injury Lawyer.
This article was adapted from the book, How to Win Your Personal Injury Claim, by Attorney Joseph Matthews (Nolo). We highly recommend it, whether you handle your own claim or hire a lawyer.