While many legal matters are charged on an hourly basis, a personal injury case is usually based on a contingency fee.
What is a contingency fee?
A contingency fee is a type of payment that is based on whether there is a monetary return for your case. In other words, your attorney needs to recover money for you in order to get paid.
That means that a contingency fee costs you nothing out of pocket.
How much is a contingency fee?
A contingency fee is usually a percentage. This ranges from 25% statutory for workers comp up to 40% for other personal injury cases. The percentage is based on the complexity and risk of the case, as well as the fees involved and when they are paid.
If a case is pretty straightforward and is highly likely to end in recovery, then the percentage tends to be lower. If a case is more complicated, and less likely to end in a recovery, then the percentage will be on the higher end of the range.
What other costs are involved?
There are always costs involved with a personal injury case. Those may include:
- Filing fees – for example, it can cost $400 to file a complaint in federal court
- Obtaining medical records and other evidence – this can add up to a few hundred dollars
- Expert testimony – generally a few thousand dollars (or more), this is the cost for an expert to review, prepare a report, and testify at the trial
- Overhead and incidentals – in cases with many documents involved, the cost for copying and postage can be a few hundred dollars
How are the other costs paid?
Other costs are fronted by your attorney but will ultimately come out of the monetary recovery from your case.
It’s important to understand that costs come out after your lawyer’s contingency fee. For example, let’s say the recovery for a case is $100,000 with a 35% contingency fee and there are $10,000 in costs. Then the $10,000 costs are removed from the post-contingency fee of $65,000 ($100,000 – 35% contingency), resulting in a final net recovery to you of $55,000.
So what does the contingency fee cover?
The contingency fee covers the time that the attorney spends on your case that would otherwise be billed to you on an hourly rate. For example, the attorney’s time negotiating the costs to repair or replace your car (property damage), gross settlement for your bodily and personal injuries, and negotiating any and all liens related to the claim (such as health insurance liens). If an attorney seeks to charge you separately for each of these, or adds on additional fees (beyond the costs listed above), that is a red flag. The contingency fee should cover all aspects of fully resolving your case.
Make sure you understand all of the costs and fees involved, and get a second opinion if necessary.