Lawyers charge for services. In an injury case, this fee will cover the advice provided by the lawyer. It will also cover the lawyer’s time spent working on your case.
Most injury lawyers charge a contingency fee. But before you hire a lawyer, you should understand how contingency fees work as well as their benefits.
Here is some information about contingency fee arrangements.
Lawyers have three primary billing structures:
A flat fee is a fixed amount the lawyer charges for a fixed amount of work. Lawyers charge a flat fee when the work project has well-defined boundaries. For example, a lawyer might charge a flat fee to write a will or file a business license application.
An hourly fee means you will pay for the lawyer’s time on your case. Lawyers charge an hourly fee when the work project has no boundaries. Thus, a lawyer might charge an hourly fee to litigate a contract dispute or resolve a tax dispute with the IRS.
A contingent fee depends on the outcome of your case. In this respect, a contingency fee does not reward the lawyer for the amount of work or the put into the case. Instead, a contingency fee rewards the lawyer based on the results produced.
A lawyer charges a contingency fee when the lawyer cannot predict the amount of work needed, but the time and effort spent on the case will directly affect the results. Injury lawyers typically charge a contingency fee to pursue personal injury cases against an at-fault party and its insurer.
How a Contingency Fee Works
A contingency fee usually represents a percentage of the compensation a lawyer recovers for you. A typical contingency fee ranges between 25% and 35%, although a firm may quote a higher fee for more complex or riskier cases.
Lawyers may sometimes structure contingency fees on multiple tiers. Some examples of tiered contingency fees include:
- 33% if the case settles without a lawsuit or 38% if the lawyer files a lawsuit
- 35% of the first $100,000 in compensation and 15% of any compensation over $100,000
- 30% of a settlement or 40% of a jury award
When you hire a lawyer on a contingency fee, the lawyer will provide a written fee agreement. The fee agreement will set out the amount of the fee, including any tiers where the fee may increase or decrease.
Calculating a Contingency Fee
You might think the calculation simply requires you to multiply your compensation by the fee percentage. But this skips an important step.
An injury case will have “litigation costs.” Litigation costs include any hard expenses that the lawyer paid on your behalf to litigate your lawsuit. Some common litigation costs include:
During the litigation, the lawyer will front the money to pay these expenses for you. But at the end of the case, the lawyer will need reimbursement.
How the lawyer gets reimbursed will affect the fee you pay and the compensation you keep. Suppose you win $100,000, the contingency fee was 33%, and the lawyer fronted $8,000 in litigation costs.
If you deduct the costs first, the lawyer gets $8,000 for reimbursement and $30,360 in legal fees, and you keep $61,640. If you deduct the fee first, the lawyer gets $33,000 in legal fees and $8,000 for reimbursement, and you keep $59,000. This means that you pay an extra $2,640 if the costs get deducted after the fees.
Before you sign the contingency fee agreement make sure you understand the order in which the fees and costs get deducted. It could make a significant difference in your compensation.
Benefits of a Contingency Fee
Injury lawyers charge a contingency fee because they understand the financial difficulties you face after an injury. You have large medical bills and ongoing treatment, but you might have little or no income due to missed work. As a result, you might have cash flow issues.
The benefits of a contingency fee for accident victims include:
- The lawyer starts work without any upfront fees
- You do not pay any fees until the case ends
- The fee you pay comes out of your settlement or damage award, not your pocket
- You pay nothing if the lawyer fails to settle or win the case
- You keep the bulk of your compensation
As a result, you can get high-quality representation without paying out-of-pocket. This means you can spend your savings or income on medical treatment and daily expenses rather than lawyers.
Hiring a Contingency Fee Lawyer
Lawyers in Maryland must provide a written agreement for all contingency fees. Review this agreement carefully. If you have questions, ask the lawyer or seek out an independent lawyer to help you understand the agreement.
Once you understand the fee structure, you can sign the agreement. The lawyer will immediately begin working on your case.