Personal injury lawyers make money by winning personal injury cases in court or by settling personal injury case out of court. For the majority of personal injury cases, a personal injury lawyer will charge a contingency fee. In a contingency fee arrangement, the fee is contingent on the outcome. It is only paid if the case is successful.
If the lawyer wins the case, he or she will take a percentage of the final settlement in a case or from the final verdict at trial. When a person becomes a client of a personal injury attorney, he or she signs an agreement with the attorney agreeing to pay the percentage.
If no money is recovered from a judgment or settlement, the client does not owe the lawyer’s fees. The contingency-fee arrangement balances the interests of both the client and the attorney.
This percentage varies by state, case type and individual attorney. In general, it ranges from one third to 40% of the settlement amount. According to the New York City Bar Association, the ordinary percentage is 33%.
Contingency fees may appear high, however, when a person hires a lawyer on a contingency fee basis, that lawyer is taking a gamble on the case. During the course of litigation, some cases will settle, some will go to trial, and some will be appealed and perhaps tried multiple times. In other words, an attorney has little idea as to how much time a case will take at the time they take it. The case may make lots of money, or it could get nothing, and the lawyer will get no money for his or her time.
A client should always discuss a fee arrangement with the attorney at the start of the case, and it’s best to get the final agreement in writing.
It is common practice for the settlement check to be sent to the lawyer. When the settlement check is received, the lawyer will contact the client. The lawyer should also explain the amount he or she will be deducting from the settlement check to cover fees and expenses.
Most personal injury lawyers will also deduct any expenses that were covered by the lawyer. “Fees” and “expenses” do not mean the same thing.
Fees charged by lawyers are the charges for their time. Expenses are out of pocket expenses that lawyers pay in the furtherance of a case and may expect to be reimbursed for. Many personal injury lawyers will cover these costs and expenses and then deduct them from the client’s share of the settlement or judgment. Make sure it is understood whether the lawyer’s percentage is calculated from the total settlement, or whether costs are deducted before the calculation is made. In most cases, the lawyer fees are calculated based on the total settlement and then the costs are taken off after fees are deducted. Other lawyers charge for expenses as they become due. During an initial consultation with a personal injury attorney, be sure to inquire about all related fees and potential expenses.
Costs and expenses in a personal injury case may include:
- Court costs, such as filing and deposition fees
- Fees for investigators and expert witnesses
- Research service fees
- Trial exhibit preparation
- Copying, fax, postage and other office expenses
- Legal research costs
- Medical and police reports
- Travel costs
Some lawyers may charge lower fees, but keep in mind that a lower fee may mean a less experienced lawyer with less capital to fund a case. This means a higher percentage fee may be better if the lawyer obtains a higher settlement or verdict.
Some lawyers charge a tiered contingency fee that depends on how far a case goes before concluding. If the case settles before a lawsuit is filed, the contingency fee is lower than if the case goes to trial or beyond.
Most personal injury lawyers do not charge an hourly fee for their time. A number of lawyers will agree to take a personal injury case on an hourly basis, but a client needs available cash. A typical personal injury lawyer may charge anywhere from $125 to $250 or more per hour, plus expenses. This is why contingency fee arrangements are so attractive.