If you have been injured in an accident and are considering hiring a personal injury lawyer, first question that may come to mind is: How am I going to afford an attorney?
Most personal injury attorneys work on a contingency fee, which is commonly described as “no fee unless we win.” Instead of paying an attorney by the hour or writing a large check upfront, the attorney’s fee is generally paid as an agreed-upon percentage of the recovery obtained for you. In other words, in attorneys’ fee is contingent on the outcome of the case.
If there is no recovery, you generally do not owe any attorney’s fee.
But what does that actually mean? And what should you know before signing a contingency fee agreement?
Our experienced San Bernardino personal injury lawyers explain how contingency fees work in California personal injury cases.
What Is a Contingency Fee?
A contingency fee is a payment arrangement where an attorney’s fee depends (or is “contingent”) on obtaining a financial recovery for the client.
In a typical personal injury case, this means you do not pay the attorney an hourly fee to investigate your claim, deal with the insurance company, negotiate a settlement, or litigate the case.
Instead, the lawyer receives an agreed-upon percentage of the money recovered through a settlement, judgment, or verdict.
For example, assume an injured client agrees to a contingency fee of 33⅓% and the attorney later obtains a $300,000 settlement. Before considering case costs, medical bills, liens, or other deductions, the contractual attorney’s fee would be $100,000.
The actual percentage and how it is calculated depend on the written fee agreement, the type of case, and applicable law. This aligns the client’s interest and the attorney’s interest to assure the highest amount is recovered for their clients.
What Does “No Fee Unless We Win” Mean?
When a personal injury law firm says “no fee unless we win,” it generally means the client does not owe an attorney’s fee unless the lawyer obtains a financial recovery for the client.
That is important because personal injury cases can take significant time and resources to pursue.
A serious case may require attorneys to obtain medical records, investigate the accident, interview witnesses, retain experts, take depositions, file motions, negotiate with insurance carriers, and potentially prepare the case for trial.
Under a contingency fee arrangement, the client generally does not pay the lawyer by the hour while all of that work is being performed. The client also does not have to worry about advancing the costs associated with the matter which can run in the thousands of dollars.
The law firm takes the risk that it will invest substantial attorney time and money into the case without knowing whether it will ultimately be paid an attorney’s fee or reimbursed their costs.
Do I Have to Pay a Personal Injury Lawyer Upfront?
Generally, no.
One of the primary purposes of a contingency fee arrangement is to allow injured people to obtain legal representation without having to fund attorney’s fees upfront.
This is particularly important after a serious accident.
Someone who has just been injured may already be dealing with medical bills, missed work, transportation problems, and uncertainty about when—or whether—they will be able to return to their normal life. Coming up with thousands of dollars for an attorney may simply not be realistic.
A contingency fee arrangement allows the injured person to pursue a claim without paying traditional hourly attorney’s fees as the case progresses.
What Percentage Does a Personal Injury Lawyer Take?
There is no single percentage that applies to every California personal injury case.
The contingency fee should be explained in the written agreement between the lawyer and client. Depending on the agreement and circumstances, the percentage may also change based on the stage of the case. For example, whether a claim resolves before litigation (filing a lawsuit) or requires substantial litigation or trial work.
Before hiring an attorney, you should understand:
- The contingency fee percentage;
- Whether and when that percentage can change;
- How litigation or case expenses are handled;
- Whether expenses are calculated before or after the attorney’s fee;
- How medical liens and outstanding medical bills will be addressed; and
- What happens if there is no recovery.
A good attorney should be willing to walk you through the agreement rather than simply asking you to sign it.
Are Attorney’s Fees and Case Costs the Same Thing?
No. This is one of the most important distinctions to understand.
Attorney’s fees compensate the lawyer or law firm for legal services.
Case costs and expenses are amounts spent to pursue the case. This is usually advanced by the attorney and then recouped once the matter resolves. If there is no recovery, the attorney has to eat those costs.
Depending on the case, expenses can include things such as court filing fees, deposition costs, medical records, expert witness fees, investigation expenses, exhibit preparation, and other litigation-related costs.
In a serious personal injury lawsuit, those expenses can become substantial.
How costs are advanced, reimbursed, and handled if there is no recovery depends on the fee agreement and applicable law. This is why clients should review the cost provisions of a contingency fee agreement carefully rather than assuming that “no fee unless we win” answers every financial question.
Why Do Personal Injury Lawyers Use Contingency Fees?
The contingency fee system gives injured people access to attorneys regardless of whether they can afford to pay substantial legal fees upfront.
Consider the alternative.
If a lawyer charged $500 per hour and a case required hundreds of hours of attorney time, many injured people could never afford to pursue legitimate claims against insurance companies or large corporations.
A contingency fee changes that dynamic.
The lawyer’s compensation becomes tied to the outcome of the case. The law firm assumes the risk of devoting its time and resources to pursuing the claim, while the client gets access to legal representation without paying hourly attorney’s fees throughout the case.
When Is the Attorney Paid?
In most contingency-fee personal injury cases, the attorney is paid after a settlement or judgment results in funds being received.
The settlement process does not necessarily end the moment the parties agree on a number. Settlement documents may need to be signed, funds must be issued, and medical bills or liens may need to be addressed.
Once settlement funds are received and available for distribution, the law firm generally prepares a settlement statement showing how the funds will be distributed.
The specific process depends on the case and the terms of the client’s fee agreement.
What Happens to Medical Bills and Medical Liens?
Attorney’s fees are only one part of the financial picture in a personal injury case.
Depending on how medical treatment was obtained, doctors, hospitals, health insurers, government benefit programs, or other entities may claim a right to reimbursement from a settlement.
These claims are often referred to generally as medical liens or reimbursement claims, although the legal rules can vary significantly depending on who is asserting the claim.
Resolving these obligations can be an important part of concluding a personal injury case.
In some circumstances, an attorney may also attempt to negotiate certain medical balances or liens. Whether a particular obligation can be reduced depends on the facts, the provider or lienholder, and applicable law.
Does the Lawyer Get Paid More If the Case Is Worth More?
Because contingency fees are generally calculated as a percentage of the recovery, the attorney’s fee will ordinarily increase when the client’s recovery increases.
That creates an alignment of interests that does not exist in quite the same way with hourly billing.
A personal injury lawyer generally does not make more money simply by spending additional hours on the case. The focus is instead on obtaining the best result reasonably available under the circumstances.
Of course, no attorney can guarantee a particular settlement, verdict, or outcome. The value of a personal injury claim depends on many factors, including liability, available insurance, the severity and duration of the injuries, medical evidence, lost income, future damages, credibility issues, and the evidence available to prove the claim.
Is a Contingency Fee Negotiable?
Yes. In California, contingency fee agreements are subject to legal requirements, and the fee arrangement should be clearly set forth in writing.
Before signing an agreement, ask questions.
You should understand what percentage will be charged, when it applies, how costs are handled, and how the agreement affects the amount you ultimately receive.
You are hiring the attorney. You are entitled to understand the financial terms of that relationship.
Is Hiring the Lawyer With the Lowest Contingency Fee a Good Idea?
Not necessarily.
It can be tempting to compare personal injury attorneys based solely on percentages. But the percentage charged is only one part of the equation.
Suppose one lawyer charges a lower percentage but obtains a substantially lower recovery. The client may ultimately receive less money despite paying a smaller percentage in attorney’s fees.
That does not mean a higher fee automatically means a better lawyer, either.
Instead, when choosing a personal injury attorney, consider the lawyer’s experience with cases like yours, litigation and trial experience, results, resources, communication, reputation, and willingness to actually pursue the case if the insurance company refuses to make a reasonable offer.
The goal should not simply be to find the cheapest lawyer. It should be to find the right lawyer for your case.
Questions to Ask Before Signing a Contingency Fee Agreement
Before hiring a personal injury lawyer, consider asking:
- What percentage will I pay if my case settles?
- Does the percentage change if a lawsuit is filed?
- Does it change if the case goes to trial?
- Who advances the costs of pursuing the case?
- How are costs reimbursed after a recovery?
- What happens to costs if there is no recovery?
- Will I receive a written breakdown before settlement funds are distributed?
- How are medical bills and liens handled?
- Who will actually be responsible for my case?
- Does the firm have experience taking cases like mine to trial?
Do not be uncomfortable asking about money. A contingency fee agreement is an important contract, and you should understand it before signing.
Legal Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. Reading this article or contacting LA Century Law does not create an attorney-client relationship. Every case is different, and the outcome of any matter depends on its particular facts and circumstances. Contingency fee arrangements and responsibility for case costs are governed by the applicable written fee agreement and law. Past results do not guarantee or predict future results.
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