Most personal injury attorneys operate on a contingency fee basis, meaning that you don’t have to pay any upfront fees for your representation. Instead, the lawyer will only be paid if he or she wins your case and will receive a percentage of what you receive in a final settlement or judgment. The actual contingency fee percentage will vary according to the stage of your case.
Contingency Fee Percentages
The typical personal injury lawyer will charge a contingency fee to handle your case. Some state statutes limit the percentage that a lawyer can take as a contingency fee. Most contingency fees are between 33 and 40%, but you can always try to negotiate a reduced or alternative agreement. In the majority of cases, a personal injury lawyer will receive 33.33% (or one third) of any settlement. For example, if you receive an offer of $30,000 from the wrongdoer or his insurance company in your case, you will receive $20,000 and your lawyer will receive $10,000. (Learn more about hiring and firing your attorney and when it makes sense to represent yourself.)
In some states, there is a limit on how much the lawyer can take as a contingency fee, and these fees are typically somewhere between 33% and 40%. You do have the option of negotiating with your attorney to reduce the contingency fee percentage. The general rule is that your attorney will get at least 1/3 of your settlement or judgment. If you receive a $60,000 settlement, your attorney will receive at least $20,000, and you’ll get the other $40,000. The lawyer may also cover the necessary up front court costs and these expenses will also come out of your final settlement. Thus, if the attorney covered $1,000 worth of court costs and other legal fees for you up front, then in the above example, he or she would receive $21,000 and you would get $39,000.
Settling Before Filing Lawsuit
In most states, the limits for the shifting contingency fees will vary according to the stage of your case. The filing of the demand letter will occur before you file a lawsuit, initiating negotiations. If your case is settled during this stage, prior to filing a formal complaint in the court, then the lawyer will probably be limited to 1/3 of your settlement amount.
Settling After Filing Lawsuit
If you have a strong case and the other party refuses to take your negotiations seriously (or if they simply don’t respond to your demand letter), then it will be time to file a lawsuit. Your lawyer will be able to collect a higher percentage (i.e. 40%) if you settle your case after filing a lawsuit. You will also want to think about the escalating expenses of your case if it happens to be drawn out.
Associated Costs and Expenses
While many personal injury lawyers will agree to cover the associated costs and expenses of your legal initiatives, and you will have to pay them back from your settlement, some lawyers won’t do this. If your lawyer charges you for the costs as they are due, then your case is not likely to proceed until you are caught up with all of these payments. Costs and expenses include:
- Filing Fees
- Fees for Expert Witnesses
- Investigators Fees
- Trial Exhibits
- Police Reports
- Medical Records
The longer it takes to settle your case, the higher the associated costs and expenses are going to be. In some cases, you may end up losing up to 60% of your final settlement to these expenses.
Settlement Check Sent to Lawyer
Because your lawyer needs to guarantee that he or she will be paid (most personal injury attorneys rely on their contingency fees), the settlement check will be sent to the attorney instead of to you in most cases. He or she will then take their cut of the check and forward it to you. Your attorney should clearly explain exactly what is being taken from the settlement and what it covers. In any situation where the charges are disputed, the lawyer can place the disputed amount in a trust account until it is resolved and forward the undisputed amount to you.