What Does a Contingency Fee Mean?

What Does a Contingency Fee Mean?

When an attorney handles your case on a contingency fee basis, it can provide both you and the lawyer with numerous benefits. Before entering into this agreement, you must understand the perks and risks of this arrangement.

The following information will help you understand the details of working on a contingency fee basis. It covers what you need to know about contingency fees, including paying an attorney under this agreement and how attorneys decide their percentage. This information should help you better understand if this type of agreement is right for you.

What Does Contingency Fee Mean?

A contingency fee is a form of payment to an attorney for their legal services. Under this arrangement, attorneys receive a percentage of their client’s settlement or award when they settle or win their case. With this agreement, the attorney working on your claim will only receive compensation if they are successful. The amount they receive is contingent upon the result they obtain. Typically the contingent fee increases based on the phase of litigation in which the dispute settles.

In addition, even though the contingency fee is an agreed-upon percentage, determining that percentage will depend on multiple factors, including the risks involved, litigation costs, and the amount of time it takes for the case to resolve.

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The Complexity of a Legal Case and the Risks Involved

Typically, the more complicated or risky a legal case, the higher the contingency fee. A lawyer may lower their contingency fee if a potential case appears straightforward or will likely end in financial recovery.

The Litigation Costs

Even if an attorney will work on contingency, personal injury lawsuits always involve costs.

For instance:

  • Court fees
  • Mediation fees
  • Discovery expenses, such as deposition costs
  • Filing fees
  • Expert witness costs
  • Obtaining evidence costs, including copies of medical records, police reports, and other documents
  • Costs related to travel or investigator costs
  • Incidental and overhead expenses, such as postage costs or the cost of copying documents

You may still need to pay the administrative costs of your case unless the contingency fee contract explicitly exempts them. When an attorney collects these expenses, it can affect how much you ultimately get from the verdict or settlement.

Before you sign a contingency fee agreement, you should discuss these terms with the attorney, figure out how they impact your final payout, and make sure you and the attorney are on the same page for all aspects of the arrangement.

What Types of Cases Typically Utilize Contingency Fees?

A contingency fee will usually apply to civil cases such as personal injury claims and workers’ compensation issues.

However, lawyers may use them in:

  • Wage dispute cases
  • Sexual harassment cases
  • Employment discrimination cases
  • Professional malpractice cases
  • Class action lawsuits
  • Debt collection suits
  • Bankruptcy cases

On the other hand, there are strict rules regarding cases in which contingent fee arrangements are not allowed. For example, if the issue is relatively straightforward, an attorney should give the client a reasonable rate based on how much work will go into the case. Otherwise, it may appear that the lawyer is taking advantage of the client based on the circumstances of the case by utilizing a standard contingency fee.

This type of fee agreement is also not allowed in criminal or family law cases because it could imply that the legal professional is encouraging criminal activity or a divorce.

What Are Some Advantages of a Contingency Fee Arrangement?

When it comes to contingency fee arrangements, they can be especially beneficial when legal cases are otherwise complicated, costly or the client does not have much money for legal assistance or litigation.

In addition, a contingency fee agreement can provide:

  • No Fees or Bills Upfront: This is one of the most significant benefits of a contingency fee arrangement. This “no fees upfront” factor means that individuals with lower incomes can still access legal help if they cannot afford it.
  • Payment Only If You Win: Another upside of this arrangement is that you will not have to pay your lawyer if you lose your case. However, remember that you may have to pay administrative expenses and other costs related to the lawsuit, win or lose. It is always best to discuss these issues before entering into any fee agreement.
  • Incentives for the Attorney: Because your lawyer will only get paid if you win the lawsuit or settle, they will be motivated to do everything they can to fight for the maximum monetary damages you deserve.

Please note that because an attorney under this fee arrangement does not get paid unless they are successful, many attorneys do not accept a contingency case unless they have reasonable confidence in collecting a judgment or a settlement.

Can the Court Lower an Attorney’s Contingency Fee?

In general, attorneys and their clients are allowed to use their discretion when creating a contingency fee agreement, and more often than not, there will be no pushback unless the court finds the agreement is biased or unfair. If the court finds issues with the agreement, they may step in and either invalidate the contract or require more reasonable terms.

Yet, before a court takes any action on the agreement, they will first need to consider:

  • What are the typical fees for lawyers with these same types of issues or cases?
  • What was the amount of work that the attorney had to turn down to meet the demand of this specific case?
  • What time did the lawyer spend working on this legal case and preparing it?
  • What are the lawyer’s reputation, experience level, and abilities?
  • What is the total amount of financial damages awarded in the case?
  • What is the likelihood of the case succeeding?

Can You Negotiate the Contingency Fee With Your Personal Injury Lawyer?

Most lawyers want to take on a legal case where liability is easy to prove, the losses due are high, and the insurance company or defendant will pay for their actions. If you can provide such a case to an attorney, you may have more room to negotiate your contingency fees. Take, for instance:

Is There Clear Liability?

Liability refers to the state of being lawfully responsible for something. Consequently, when an attorney takes on a case on contingency, they likely believe there is a good chance they can prove liability. However, when liability is easier to prove, it may allow you to negotiate a lower fee since it will also mean the attorney will have less work to do. On the other hand, if liability is more challenging to prove, the attorney will be less likely to offer you a reduced fee.

In addition, attorneys often consider the following factors in determining the contingency fee:

  • Whether the client carries some liability for what happened
  • Whether there is a lack of evidence to support the claim
  • Whether the insurer or the other side denied the client’s claim

Are There Significant Financial Damages?

Financial damages for a personal injury case often refer to compensation for the injuries and losses the victim endured because of an accident or another’s wrongful actions. If you are pursuing large damages, that may be a point of negotiation for your lawyer to reduce your fees.

However, when a case produces an unreasonably low amount of damages, some lawyers may also agree to reduce their fees because they find it unfair for their clients to receive so little from their struggle.

Is There Coverage Available?

Another thing an attorney will consider before taking on a case is if the wrongful party has enough coverage. Coverage represents the ability of a liable party to pay for a victim’s injuries. A party can have coverage in various ways, such as through insurance or personal assets, including money, property, or accounts receivable, which they can use to cover damages owed to the victim.

As a result, when there is inadequate coverage, it will be hard for an attorney to agree to a fee reduction with no guarantee they will receive their fee, even if they win the case.

Why Should You Get Represented By a Lawyer on a Contingency Fee Basis?

Many people refuse to bring a legal claim following an accident due to others’ wrongful actions because they worry they will not be able to afford an attorney. However, when you work with a lawyer willing to take your case on a contingency fee basis, these factors should not stop you from bringing a legal claim against those who wronged you.

Instead, when you retain one of these attorneys, they can:

  • Go over the accident with you in detail, evaluate your claim, and determine if you have a viable case.
  • Answer all the questions and concerns you have regarding the legal process and discuss the legal options you may be able to pursue.
  • Investigate your case thoroughly and secure the evidence needed to prove damages and fault.
  • Help you hold all the liable parties accountable for your harm and losses.
  • Hire experts, including doctors, financial specialists, and accident reconstructionists, to validate your claim.
  • Make sure that legal motions are prepared correctly and filed before the statute of limitations expires.
  • Handle all the discussions and negotiations with the other side, including the insurance company, and fight for a just settlement offer.
  • Take your case to trial if the other side is unwilling to settle for the compensation you need and go after maximum damages.

If you are still unsure about retaining a lawyer on a contingency fee basis, reach out to a lawyer to have your questions and concerns clarified. Contact an experienced personal injury attorney today for a free case consultation. Find out how a lawyer and a contingency fee agreement can help you fight for the justice you deserve.

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