How do Contingency Fees Work in a Personal Injury Case?

1. How Are Personal Injury Attorneys Paid for Their Legal Services When They Represent Accident Victims?

Personal injury attorneys are paid for their work through a contingency fee. In a contingency fee case, the attorney is paid out of any funds that are obtained through a successful case result. If a monetary recovery is made in the case, whether through settlement, trial, arbitration, or default, the attorney will be paid a predetermined percentage of the total amount recovered. The attorney’s fees are therefore contingent upon the case results. For instance, if the attorney is able to reach a settlement in a car accident case with the defendant’s insurance carrier, the attorney is entitled to be compensated out of the total settlement amount.

This is very important for injury victims because it means that they pay no legal fees whatsoever until, and unless, their attorney achieves a successful result in their case. The amount of legal work required to handle a personal injury case from start to finish can be substantial, so many injury clients would not have the financial means to pay their attorney on an hourly rate basis. This permits clients who have legitimate personal injury claims to pursue a recovery regardless of their financial situation. This goes a long way toward providing equal access to the civil justice system with regard to personal injury cases.

2. What Percentage Do Personal Injury Attorneys Charge for Their Contingency Fee?

The amount of the contingency fee is going to be a percentage of the settlement or judgment that is agreed upon between the attorney and client at the beginning of the representation. There is no set amount that attorneys are required to charge for their contingency fee in California, as long as it’s not considered “unconscionable” under ethical rules. Many personal injury attorneys charge a contingency fee of 33% or thereabouts, but the contingency fee can be higher or lower than that, depending on the attorney, the circumstances of the case, how much work will be involved, and other factors. The fee may also depend upon what stage the case reached before it was resolved, such as whether the case was resolved before or after a lawsuit was filed, or whether trial had commenced.

Contingency fees are technically “negotiable” between the attorney and client, but in reality, most firms have set contingency fee structures and are frequently unwilling to deviate

from them. Many personal injury attorneys are not willing to “haggle” with a prospective client over the contingency fee. This will again depend upon the individual attorney and how they handle setting their contingency fees.

3. What About Costs and Expenses That The Attorney Has to Pay For During the Case?

In addition to recovering a contingency fee, personal injury attorneys are also entitled to be reimbursed for any reasonable costs and expenses that they incur in prosecuting the case. Attorneys may be required to expend substantial sums of money to properly develop and pursue an injury case. Costs and expenses can include money paid for court filing fees, deposition transcripts, medical record requests, travel expenses, jury fees, and expert witness fees, among other types of charges. These amounts are advanced on the client’s behalf either by the attorney directly or through litigation funding, so they need to be reimbursed when a successful case result is achieved. If paid through litigation funding, the client may be obligated to pay for the interest incurred through the funding arrangement.

The attorney will be reimbursed for costs and expenses out of the settlement or other positive recovery, just like their contingency fees. This reimbursement may come out of the settlement before or after the contingency fee is taken, it depends on the attorney and their attorney-client fee agreement.

4. The Contingency Fee and Cost Reimbursement Needs to Be in Writing

In California, all contingency fee agreements are required to be in writing. No oral agreements, no handshakes, no winks back and forth, you need to have it in writing. The contingency fee amount, how costs and expenses are to be reimbursed, and other related issues need to be set forth explicitly in the attorney-client fee agreement. The client needs to read the agreement carefully and be sure to ask the attorney for clarification on any provisions that are confusing. Clients should also feel free to take some time reviewing the agreement and deciding whether they want to proceed with the representation. There’s nothing wrong with sleeping on it for a night or two, since retaining an attorney for a personal injury case is an important decision.

5. What Happens if the Case is Lost?

If the plaintiff loses his or her personal injury case, then the attorney will not recover a contingency fee. If the case is lost, dismissed, or disposed of in some other unprofitable way, the attorney will be paid nothing. The attorney assumes this risk when a contingency fee case is taken. This is why personal injury attorneys need to be particularly careful when they are evaluating the merits of a case. The attorney can spend a significant amount of time and effort working on a case, only to have all of that time be wasted if the case has an unfavorable result. Not only will the attorney be unable to recover a contingency fee, but the attorney will also not be able to recover costs and expenses incurred. So, if the case is lost, the attorney just has to suck it up. It just has to be viewed as a painful business expense.

However, the fun doesn’t always end there. If the case is lost, the defendant will likely be entitled to recover the costs and expenses that they incurred in defending the matter. The defendant may obtain a judgment against the plaintiff for these amounts. This means that if the plaintiff loses the case, he or she may be obligated to pay the defendant money. There are other situations where things can get dicey as well, such as where the defendant makes a Code of Civil Procedure § 998 offer to compromise. This is where the defendant makes an offer to settle the case where they can recover not only costs and expenses, but also expert witness fees, if the plaintiff is unable to make a recovery at trial that exceeds the amount offered by the defendant. Expert witness fees can be substantial and the plaintiff can potentially be on the hook for those amounts. In cases against government entities, there is also the added risk that a judge might determine that the case lacked sufficient merit and that the government entity is entitled to recovery attorney fees, which obviously can be substantial.

So, plaintiffs can’t always just walk away from a bad case and go their separate way. The chance that such a bad result will occur is very low, but it’s an issue that needs to be carefully evaluated by an attorney at the beginning of a case and the risks need to be discussed with the prospective client. Certain cases, based on problematic liability, causation, damages, or other issues, may present scenarios where the plaintiff could potentially end up with an adverse judgment where they owe the defendant money. Pursuing litigation is not necessarily risk-free, as many plaintiffs imagine it to be.

Feel free to contact Suits Litigation, Inc.’s office in San Jose, California at (408) 637-5413 for a complimentary consultation regarding your personal injury case. We are more than happy to discuss our contingency fees, which are simple, transparent, and easy-to-understand.