If a personal injury case loses, the fee structure will determine how much, or even whether, the client will have to pay their lawyer. Many personal injury attorneys are paid a contingency fee. If the case loses, these lawyers get paid nothing. Some lawyers, however, charge upfront or an hourly rate. If the case loses, these lawyers keep the fee.
Do I have to pay my personal injury attorney’s fees if we lose?
If a personal injury case does not recover any compensation, the personal injury attorney’s fees will depend on the fee agreement. There are several different types of fee agreements. They include:
- contingency fees,
- flat rates,
- hourly rates, and
- retainer fees.
Victims who want to establish an attorney-client relationship with a lawyer in order to file a personal injury case should make sure that they understand the fee structure. It is one of the most important parts of the representation agreement they will sign with their lawyer. The fee agreement will determine whether plaintiffs will have to pay their lawyer if their case does not recover any compensation.
Contingency fees
The vast majority of personal injury cases rely on contingency fees. Under a contingency fee, the lawyer will get paid a certain percentage of the amount won in the case.
This means that, if the case loses and recovers no compensation, the lawyer is not entitled to a fee.
Most personal injury contingency fees are between 25 and 40 percent of the settlement or award. A fee percentage of 33 percent is a very common contingency fee in personal injury claims. Whether the lawyer’s contingency fee comes before or after subtracting expenses can make a significant difference in what the client ends up receiving.
Some personal injury attorneys use a sliding scale for their contingency fee. This fee structure generally charges a lower rate for cases that settle early. The contingency fee increases as the personal injury claim reaches each successive stage.
For example: Allison is a personal injury lawyer who uses a sliding scale to set her contingency fee percentage. After a free case review, she charges 15 percent of the recovery if a settlement is reached after she sends a demand letter for the accident victim. She charges 25 percent if the personal injury lawsuit has to be filed. She charges 40 percent if the trial begins.
Some states, like New York, have personal injury laws that regulate how much the fee can be. In medical malpractice claims, for example, the contingency fee has to be based on how much is recovered for the injury victim:
- 30 percent of the first $250,000 recovered,
- 25 percent of the next $250,000 recovered,
- 20 percent of the next $500,000 recovered,
- 15 percent of the next $250,000 recovered, and
- 10 percent of any amount over $1,250,000 recovered.1
Any contingency fee arrangement has to be in writing and has to be signed by the client.2
While contingency fee structures are common in personal injury cases, they may be prohibited in some other types of cases. In California, for example, contingency fees are prohibited in:
- family law issues to dissolve or nullify a marriage, or to set child support or alimony, and
- criminal cases.3
Flat rate fees
Many lawyers charge flat rate fees for legal services. These are usually meant to be paid up front, before the lawyer has done any work. Regardless of the outcome, the lawyer receives his or her fee under this agreement.
Flat rate fees are extremely rare in personal injury cases. They are generally only used for small, simple, or routine legal services, like:
- resolving a traffic ticket,
- filing for an uncontested divorce,
- writing a will, or
- closing on a house.
Hourly rates
Some lawyers charge an hourly rate for legal services. There may be different rates for different services – the rate for legal research may be lower than for trial representation. Many personal injury lawyers who charge an hourly rate will waive it in order to provide free consultations. Lawyers who charge hourly fees are entitled to payment for all work that has been performed, even if the case goes on to lose.
Many lawyers split the hourly rate to bill by a portion of an hour, sometimes as small as one-tenth of an hour.
For example: David charges a $200 hourly rate. He talks with his client, Wanda, on the phone for 6 minutes. He bills her $20 for the one-tenth of an hour.
Hourly rates are far less common than contingency fees in personal injury cases. However, they are more common than flat rate fees.
Retainers
A retainer is a way of paying an hourly or a flat rate fee in bulk. Some lawyers require a retainer. The retaining fee is often enough for a substantial amount of legal work. Once paid, it is put into a bank account. As the lawyer works, he or she draws the funds from the retainer fee on an hourly basis, or by a flat fee.
Who pays the court costs and other expenses in a personal injury case?
In a personal injury case, the lawyer or his or her law firm will generally cover the costs and expenses of the lawsuit, at first. If the case recovers compensation in a settlement or jury award, those costs are then deducted from the winnings. If the personal injury case loses, the lawyer will generally absorb them.
The costs of pursuing the lawsuit can end up being quite substantial. Some common costs and expenses include:
- fees for obtaining documents, like police reports and medical records,
- filing fees for filing documents in court,
- postage,
- expert witness fees,
- paying stenographers or court reporters during depositions,
- creating transcripts of testimony, and
- creating trial exhibits.
If the lawyer takes a contingency fee, when these costs get deducted will matter a lot. Personal injury lawyers can deduct costs before or after taking their legal fees. If the contingency fee is paid out, first, the lawyer will receive more of the winnings.
For example: Gerald is in a car accident. The final settlement for his personal injury case is for $100,000 – a figure he thinks adequately covers his medical bills and his pain and suffering. Even though they settled with the insurance company early, there were still $10,000 in court costs. His accident lawyer, Bob, charges on a contingency fee basis of 33 percent for his legal representation. If Bob takes his one-third contingency fee from the personal injury settlement check first, he will receive $33,333. After costs, Gerald will receive $56,667. But if the court costs are subtracted before the contingency fee, the lawyer’s fee will be $30,000 and Gerald will receive $60,000 in the car accident case.
When the costs are deducted from the settlement amount or award should be included in the contingency fee agreement.
Also see our related page on Why is my attorney taking so long to settle my case?
Additional reading
For more in-depth information and analysis, refer to these scholarly articles:
- Seven Dogged Myths Concerning Contingency Fees – Washington University Law Quarterly.
- The Economics of Plaintiff-Side Personal Injury Practice – University of Illinois Law Review.
- An Economic Analysis of the Contingent Fee in Personal-Injury Litigation – Stanford Law Review.
- Successfully Discharging Medical Liens in Personal Injury Cases – Cumberland Law Review.
- Bitter and twisted? On personal injury claims, predatory fees and access to justice – Orbiter.
Legal References:
- New York Judiciary Law 474-a.
- See Model Rules of Professional Conduct 1.5(c).
- California Rules of Professional Conduct 1.5(c).
