When you’re considering hiring a lawyer to help with your personal injury case, one of the first questions that likely comes to mind is: “What percentage does a lawyer take from a settlement?” Understanding how lawyers charge for their services can help you make an informed decision and avoid any unpleasant surprises during the settlement process.
This blog post will break down how personal injury lawyers typically charge, the different types of fee structures they use, and factors that can affect the percentage they take. We’ll also discuss the pros and cons of hiring a lawyer on a contingency fee basis, and provide guidance on how to negotiate legal fees for your case.
What is a Contingency Fee?
In personal injury cases, most lawyers operate on a contingency fee basis. This means that instead of charging an hourly rate or requiring upfront payment, the lawyer agrees to take a percentage of the settlement or verdict if you win the case. If you lose the case, you generally don’t owe the lawyer any fees.
Contingency fees are popular in personal injury law because they allow individuals who cannot afford upfront legal fees to still have access to quality legal representation. It also aligns the lawyer’s interests with the client’s: the lawyer is motivated to get the best possible outcome, because their fee depends on it.
Typical Contingency Fee Percentage
The typical contingency fee for personal injury lawyers ranges from 25% to 40% of the settlement amount. The exact percentage can vary based on factors like the complexity of the case, the lawyer’s experience, and the geographical region where the case is being heard. However, the most common fee is around 33% (or one-third of the settlement).
Here’s a breakdown of how these percentages generally work:
- 25% to 33%: For cases that settle early, without the need for a long trial.
- 33% to 40%: For cases that require litigation or go to trial, which involves more time, resources, and legal effort.
- Up to 40%: If the case goes to trial or involves appeals, some lawyers may increase their fee percentage.
Why Do Lawyers Charge a Percentage?
Lawyers charge a percentage of the settlement for several reasons:
- Risk and Reward: Personal injury lawyers take on significant risk when they accept a case. There’s no guarantee that the client will win or get any settlement. By charging a percentage, the lawyer shares the risk of the case with the client, and in return, they get a share of the financial reward if the case is successful.
- Financial Accessibility: Many people who are injured or facing a personal injury lawsuit may not have the financial resources to pay an attorney upfront. A contingency fee structure allows them to still pursue their claim and seek justice without having to pay out of pocket.
- Motivation to Win: Since the lawyer’s fee is based on the outcome, they have a strong incentive to work diligently and secure the highest possible settlement or verdict for their client. The better the outcome, the more they earn, so it aligns their goals with the client’s.
- Predictability: With a contingency fee, the client knows they won’t owe anything unless they win. This gives injured parties confidence in proceeding with legal action without the fear of mounting legal bills.
How Contingency Fees Are Calculated
Contingency fees are typically calculated as a percentage of the gross settlement. This means that the fee is based on the total amount of money awarded in the settlement or verdict, before any deductions for costs or expenses.
Example 1: Early Settlement
Let’s say you’re involved in a car accident and you hire a personal injury lawyer on a contingency fee basis. The lawyer agrees to a 33% contingency fee and your case settles for $30,000.
- Settlement amount: $30,000
- Lawyer’s fee: 33% of $30,000 = $9,900
- You would receive: $30,000 – $9,900 = $20,100
Example 2: Trial Settlement
If your case goes to trial and the settlement amount increases to $100,000 due to the complexity and time invested, the lawyer might charge a higher percentage, say 40%, for trial cases.
- Settlement amount: $100,000
- Lawyer’s fee: 40% of $100,000 = $40,000
- You would receive: $100,000 – $40,000 = $60,000
Are Other Fees or Costs Included?
In addition to the contingency fee, lawyers may also charge for case-related expenses. These are out-of-pocket costs that the lawyer incurs while working on your case. Some common expenses include:
- Court filing fees
- Expert witness fees
- Deposition costs
- Investigation costs (e.g., hiring private investigators)
- Travel expenses
- Medical records retrieval
These costs are typically not included in the contingency fee and are usually deducted from your settlement, separate from the lawyer’s percentage. It’s important to clarify this with your lawyer during the initial consultation, so you understand how these costs will be handled.
Example with Expenses
Let’s say your case settles for $50,000 and your lawyer charges a 33% contingency fee. The lawyer incurs $2,000 in case expenses (e.g., medical records, expert witnesses, filing fees). Here’s how the breakdown might look:
- Settlement amount: $50,000
- Lawyer’s fee (33%): $16,500
- Expenses: $2,000
- Total deductions: $18,500
- You would receive: $50,000 – $18,500 = $31,500
Negotiating the Contingency Fee
While the standard contingency fee for most personal injury lawyers is around 33%, you may have room to negotiate depending on the specifics of your case. For example, if your case is relatively simple and likely to settle quickly, you may be able to negotiate a lower percentage. On the other hand, if your case is complex or requires significant legal work, the lawyer might charge a higher percentage.
Here are some tips for negotiating the contingency fee:
- Be upfront about your expectations: Discuss the lawyer’s fees during your initial consultation. Ask about their standard fee and if they’re open to negotiating it based on your case.
- Consider the lawyer’s experience: More experienced attorneys or law firms with a proven track record may be justified in charging a higher percentage. If you’re working with an attorney who specializes in your type of case, they may be able to justify a higher fee due to their expertise.
- Inquire about sliding scale fees: Some lawyers may offer a sliding scale based on the complexity of the case or how much work is involved. For example, they may offer a lower percentage if the case settles early or if the settlement amount is lower.
- Ensure transparency: Get all details of the fee agreement in writing, including any potential extra costs for expenses, before you sign the contract.
When Will You Pay the Lawyer?
Typically, you don’t pay your lawyer’s fee until the case is settled or a judgment is made in your favor. This is beneficial for clients who may not have the financial means to pay upfront or on an hourly basis. Once the settlement is finalized, the lawyer’s fee is automatically deducted from the amount.
However, if you lose the case, you generally won’t owe the lawyer any fees. But be mindful of the fact that you might still be responsible for court costs or other expenses related to the case, depending on the terms of your agreement.
Pros and Cons of Contingency Fee Arrangements
While contingency fee arrangements are common in personal injury cases, they have their pros and cons. Here are some advantages and disadvantages of working with a lawyer on a contingency fee basis:
Pros:
- No upfront costs: You don’t need to pay anything unless you win, which makes it easier to afford quality legal representation.
- Incentive for lawyers: Lawyers are motivated to secure the best outcome for you, since their fee depends on the result of the case.
- Access to legal representation: Even if you can’t afford an hourly lawyer, a contingency fee gives you access to expert legal help in a time of need.
Cons:
- Percentage can be high: Depending on your settlement, the lawyer’s fee could be significant. In some cases, this might be as much as 40% of the settlement amount.
- Costs can still add up: Even if you win, you may still have to pay for additional case expenses, which could eat into your settlement amount.
- Lack of control: Some clients feel that they have less control over their case when they are working on a contingency basis, especially if the lawyer needs to make decisions quickly in order to secure the best outcome.
Conclusion
Understanding the contingency fee structure is essential when hiring a lawyer for a personal injury case. The typical fee ranges between 25% and 40% of the settlement amount, depending on factors like the complexity of the case, whether it goes to trial, and the region where the case is being heard. While a contingency fee arrangement offers clear benefits, such as no upfront costs and motivated legal representation, it’s important to consider the potential downsides, including the percentage taken by the lawyer and additional case expenses.