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The Basics of Contingency Fee Agreements

Fiol Law Group|Posted in Lawsuits on June 13, 2018

A lawsuit is the best method an injured person has of recovering compensation for damages after an accident caused by another party’s negligence. However, legal representation generally isn’t cheap, and many plaintiffs cannot afford legal representation out of pocket. For this reason, many personal injury attorneys offer billing based on contingency agreements.

What Is a Contingency Agreement?

At a basic level, a contingency agreement is an “if-then” agreement; if the plaintiff wins his or her case, then he or she will pay legal fees to the attorney. This means the client has very little or no upfront expenses to worry about and can quickly start building a lawsuit. This may not sound advantageous for lawyers, but the reality is that contingency agreements allow them to be more scrupulous concerning the cases they take.

Attorneys who operate on contingency- fee billing typically only accept cases they are sure they can win. If they waste time and resources on cases with little chances of winning, the attorneys don’t make any money due to their contingency agreements. An attorney will generally assess the risk associated with taking a case, and some attorneys may agree to take riskier cases with a higher contingency fee. For example, a case that appears open and shut to the attorney will likely take a short time to reach a conclusion with minimal chance of surprises, so the attorney’s contingency fee may only be 20% of the case award. For a riskier case that will be more time-consuming, the attorney may ask for 30% or more.

This type of billing structure offers a mutually agreeable solution to the problems of lawyers avoiding frivolous lawsuits and plaintiffs securing legal representation they otherwise couldn’t afford. Ideally, a contingency agreement should compel an attorney to provide the best possible representation for a client, as a successful case ensures the attorney gets paid. If the client loses, the attorney doesn’t get anything.

Things to Remember About Contingency Fee Agreements

It’s important for potential clients to realize the nuances of contingency agreements. The average attorney will simply agree to accept a flat percentage of the case award or settlement, but the client will still need to pay for all of the litigation costs after he or she wins the case. As soon as the client agrees to representation, the attorney will handle all applicable fees and expenses until the case reaches a conclusion.

During the case, the attorney will bill for litigation costs including court filing fees, deposition payments, discovery costs, hiring expert witnesses, copying fees, and any other expenses related to handling the lawsuit. The attorney will also likely bill the client per hour or day for his or her services or a flat percentage of the case award. Once the client wins the case and receives his or her award, the attorney bills the client and subtracts his or her fees and expenses from the case award. For example, in a $500,000 case, an attorney may bill $10,000 in expenses and a 20% contingency fee for time spent handling the case. 20% of $490,000 is $98,000 for the attorney, leaving the client with a net total of $392,000.

If you or a loved one will need legal representation for any type of personal injury case in the near future, it’s crucial to understand a potential lawyer’s billing structure. Carefully review a contingency agreement to look for any additional fees or surcharges and be sure to ask questions of the attorney concerning how they bill their time. If your legal fees and litigation costs exceed your case award, you could still be out-of-pocket for legal fees once your case is over.

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