What Is a Contingency Fee?
If you experienced injury through no fault of your own and feel the other party could owe you compensation, you have likely done some research on obtaining a personal injury attorney. Sometimes, however, it can seem as if attorney websites have a language all their own. One of the most commonly misunderstood terms in the personal injury field is “contingency fee.”
Basic Contingency Fee Information
In most cases, attorneys charge a fee for legal representation, usually in the form of an hourly fee or up-front costs. After a car accident or other personal injury, however, many people find themselves in need of an attorney without the means to pay for legal services. A contingency fee is a way of paying a personal injury or car accident attorney for representation only if you win your case or receive a settlement.
Since your attorney will only receive the contingency fee if you receive compensation for your injuries, the attorney takes on all the risk for the case. Generally, contingency fees constitute around 33% of the amount of your settlement. For example, if you receive a $100,000 settlement, you would pay your attorney around $33,000.
Every case is different, and contingency fees often depend on the complexity and the risk involved with your case. A relatively straightforward case with very little risk for the attorney may have a lower contingency fee nearer 25%, while a complicated case that requires a great deal of time from the attorney at increased risk of never receiving payment may result in a higher contingency fee.
Benefits of a Contingency Fee
Contingency fee arrangements provide access to legal services for people who would otherwise struggle to pay for an attorney. Increased access to legal help can mean more people struggling with medical bills and other effects of a personal injury receive the compensation they need. Proponents believe this “open door” to the legal system equalizes the law for all.
Since attorneys assume all the risk by taking on a case they will not receive payment for unless they win, the attorney will only take on cases he or she has confidence are winnable. In addition, attorneys paid on a contingency basis will work diligently to win each case to receive payment.
Drawbacks of Contingency Agreements
Although you may enjoy the peace of mind knowing an attorney only accepts cases he or she is sure to win, if your case is complicated or risky, you may experience difficulty finding an attorney to take your case. Once you find an attorney, contingency fees may increase for your complicated or risky case. Alternatively, if your case is fairly straightforward and settles quickly, contingency fees may prove more costly than paying the hourly fee.
Additionally, filing a case in court requires other fees besides your attorney’s fees. Costs for expert witness testimony, for example, can reach into the thousands; other fees like filing fees and deposition fees can cost several hundred dollars. If you win your case, you will likely wind up paying the court costs, and dependent on your contingency agreement, your attorney may calculate contingency fees after court costs. The inclusion of court costs could wind up inflating your contingency fees.
Massachusetts places an important limitation on contingency fees, stating that attorneys may not receive contingency fees if the total amount of compensation recovered, fewer contingency fees, is less than the number of damages you received in the accident. In short, the court guarantees your ability to pay for your medical bills and other costs in your claim even if it means your attorney does not receive a fee.
Exceptions exist when the total fee is less than 20% or reduced so you can pay your medical bills. Otherwise, attorneys may not charge more than a 40% fee for the first $150,000 won, 33.3% for the next $150,000, and 25% of the next $200,000.