What Does It Mean To Work On A Contingency Fee?
Written by Cooper & Friedman PLLC on January 14, 2020
All attorneys charge fees unless they are representing a client for free – generally referred to as “pro bono.” This means you need to pay for services rendered as per your agreement with a lawyer. Most personal injury attorneys work on something called a contingency fee basis. This is typically based on a percentage of the client’s compensation. While most people are familiar with this term, they don’t know much about it. Here’s a look at what it implies:
What is a Contingency Fee?
Sometimes victims of personal injury accidents need legal representation without being able to afford it. They’re already burdened with medical expenses, temporary loss of income from wages, and even permanent loss of income if their injury jeopardizes future earnings. That’s why lawyers offer contingency fees to clients. It is an agreement between a legal representative and a client that payment is contingent upon a client receiving monetary compensation.
Most attorneys take around 33% or 1/3rd of the compensation amount, but charges can vary based on who is paying for all litigation costs and a case’s complexity. Legal representatives charge more for complex or risky cases. Fees can reach 35% to 40% in some cases.
Because fees are contingent on winning a case or getting a settlement, you don’t have to pay any money if the lawyer doesn’t win your case. However, if a client wins a $1 million settlement, around $330,000-$400,000 will go to their lawyer. Most jurisdictions require lawyer fees to be “reasonable,” which means they can’t exceed a certain amount without getting them in trouble. Most attorneys don’t go beyond 45%.
History of Contingency Fees
Evidence suggests that contingency fees have been a part of the American legal system since the early 19th century. Cases from the early 1800s indicate that contingency fees were accepted by different aspects of society readily. Many felt this was an excellent way to fulfill the Sixth Amendment guarantee that everyone has a right to legal counsel. People with modest means can hire a lawyer and take their case to court because no upfront payment is required.
What are the Pros and Cons?
Contingency fees have their pros and cons. Clients must consider all factors involved carefully before making a choice. Most lawyers offer hourly rates as well. They will keep track of the number of hours spent on a case and bill accordingly. Here’s a look at what you should know:
- Advantages
- There’s no need to pay money upfront.
- You don’t pay if the attorney hasn’t won or gained a settlement.
- A law firm will pay all court/legal fees like case filing expenses, discovery costs, expert witness expenses, overhead, incidentals, etc. These can add up to be a substantial amount.
- Lawyers may be more eager to win a case because they bear the risk.
- People with limited financial resources can still get excellent legal aid.
- Disadvantages
- Attorneys are often reluctant to pick up high-risk cases.
- They may not be as willing to settle or take less profitable avenues during a case.
- In some cases, clients end up paying more than they would have under a traditional hourly billing set-up. This is more likely to happen in straightforward cases.
As you can see, there are pros and cons to consider before making a choice. We recommend speaking with a trusted advisor or consulting with an unbiased and experienced injury attorney on this matter.
The experienced injury attorneys at Cooper and Friedman PLLC have been fighting for the rights of injury victims across the State of Kentucky and in Southern Indiana since 1993. When you work with our law firm, your case gets handled by an experienced attorney, and it is not passed off to paralegals or administrative aids. To learn more about our firm or to schedule a free case consultation with an attorney, call 502-459-7555 now.