In legal terms, contingency fees are a payment arrangement whereby a lawyer agrees to represent a client on the condition that the lawyer will only receive financial compensation if the lawyer is successful in recovering compensation for the client. In other words, if you don’t get compensation after filing a claim, neither will your lawyer.
In a contingency fee agreement, you and your lawyer will agree on what percentage of the award amount each party gets in terms of damages and fees, respectively. Once an agreement is defined, the lawyer pays out of pocket all the expenses associated with the management of the claim. If compensation is not recovered, you are not required to pay any fees or other expenses. There is usually nothing up front to hire a contingency fee attorney.
Contingency fees are most often used in personal injury cases such as car accident claims, slip and fall accidents, medical malpractice cases, defective product injury claims, etc.
Typically, the contingency attorney’s fee is a percentage (either one-third or approximately 40%) of the total amount recovered through a lawsuit. The attorney may also charge additional fees for expenses incurred during the case, including:
- Filing fees
- Research fees
- Expert fees
- Other court costs
Typically, your attorney will advance these expenses, covering them out of her own pocket with the expectation that they will be reimbursed from any settlement or award you receive from your claim. Therefore, it is important to discuss all possible fees and expenses upfront with your lawyer to eliminate any possible surprises or misunderstandings.
There are several ways to structure contingency fees in personal injury cases, with the “pure” or “straight” way being the most common. This payment structure means that the attorney will get a fixed percentage of the fees earned on your claim. This percentage can vary depending on the phase in which the case is resolved, and some lawyers may ask for a higher percentage if the case has to be taken to trial.
Other common variations are hybrid fees,” in which the attorney receives a smaller percentage of the total compensation amount, but also charges hourly rates; and “modified” fees, in which the attorney receives a smaller percentage of the settlement or full verdict, but only gets paid if he can recover money for the client.