Updated January 10, 2024

Contingency Fee: Understanding Legal Fees

When you start looking for an attorney, you may feel uncertain about paying for their services. Not knowing how much an attorney will charge for your case can feel nerve-wracking, especially if you also face extravagant medical bills and lost work due to injury.

What Is a Contingency Fee Agreement?

If you’re in the process of hiring a lawyer, you likely need to know how much it will cost. While some lawyers charge an hourly rate or a flat fee, others work on a contingency fee basis. Legal fees can get complicated, so let’s break down the most common ways that lawyers charge for their services:

  • Hourly: The client pays an hourly rate for work done.
  • Flat Fee: The attorney charges a set amount for a particular service or set of services, regardless of how many hours it takes.
  • Retainer Fee: A client agrees to pay an hourly amount for a specified number of hours. This billing structure is similar to an hourly fee, except both parties agree ahead of time on how many total hours the lawyer will spend on the client.
  • Contingency Fee: The attorney will collect a percentage of the money you recover only if you win your case.

What Cases Typically Have Contingency Fees?

Personal injury attorneys frequently opt for contingency fees. Given the clients’ circumstances, contingency fees can make legal assistance accessible when it may not be otherwise. It also makes sense in these cases since the court will award the client a specific amount. In cases like family and contract law, alternative fee structures are more common due to the nature of the settlements involved.

Each fee structure has its advantages and disadvantages, and contingency fees are no different. Let’s explore the pros and cons of a contingency fee arrangement.

Contingency Fees Pros and Cons

Pros of Contingency Fees

No Upfront Cost

Victims of personal injury cases often face numerous expenses and may lose their ability to work. Even after their initial release from the hospital, they may have many follow-up appointments, scheduled surgeries, and weeks or months of rehabilitation. Others may have new disabilities that will impact them for the rest of their lives. This medical care is expensive. Often, personal injury victims must pursue a settlement or lawsuit to return to their usual standard of living.

When someone hires a lawyer with a contingency fee, they will not have to pay the lawyer out of pocket. This provision allows victims who otherwise could not afford to pursue a claim to seek the damages needed to rebuild their lives.

Victims Pay Only If They Win

In a contingency fee agreement, the lawyer receives payment only if they win a settlement or lawsuit. When the defendant pays the claim, the law firm will collect a percentage of this total, and the rest will go to the victim.

Cons of Contingency Fees

Total Fees May Be Higher Than Other Fee Structures

On average, lawyers who use a contingency fee agreement charge between 20% and 50% of the total award. Despite the benefits of this fee structure, the client may end up paying an effective hourly rate higher than a lawyer who charges strictly by the hour.

Can You Negotiate a Contingency Fee?

Ask your attorney before signing their contract if you have any questions or concerns about your contingency fees. Depending on the case details, your attorney may agree to take a smaller percentage of your damages. For example, suppose your attorney believes your case will resolve quickly, requiring fewer work hours. In that case, they may agree to lower their fee.

Contingency Fee Agreement Examples

Let’s consider a hypothetical contingency fee example to understand this billing structure better.

A Medical Malpractice Case

When Ellen gives birth to her first child, her doctor makes a medical error during delivery. This error contributes to birth injuries in both the mother and baby. Although both survive, Ellen needs surgery to repair the damage, and her baby has brain damage and other physical injuries.

The Impact of the Medical Error

In addition to needing surgery, the mother must undergo physical therapy. Since healing will take longer than a typical birth, she cannot return to work for several months, resulting in a loss of income.

Her child spent time in the NICU, requiring extensive doctor’s appointments and therapies. Ellen’s child will require extensive care needs. As a result, she needs to significantly reduce her work hours each week, further reducing her pay and increasing her financial burden.

She decides to seek damages from the physician to help pay for her ongoing medical needs.

A Contingency Fee Agreement

Searching for representation, Ellen finds a medical malpractice attorney with experience trying birth injury cases. Her family’s budget is stretched thin, but she does not have to pay the lawyer upfront. She will only need to pay the law firm if she wins her case. She agrees to their contingency fee, which is 32% after a free initial consultation.

Results and Payment

Ellen has a robust case against her physician. However, the doctor also puts up a strong fight, and the case takes multiple years to conclude.

Ultimately, Ellen and her child receive the maximum settlement available under the law, $1.8 million. Ellen pays her attorney 32%, which is $576,000. Ultimately, it takes $20,000.00 in expert witness fees, depositions, and other case expenses to prosecute the case. Although the legal fees are substantial, Ellen and her family keep $1,204,000, the majority of the settlement, significantly helping them cover their ongoing expenses and rebuild their life after this tragic event.

Schedule a Free Consultation

If you or a loved one has suffered from an injury due to someone else’s negligence, contact an attorney as soon as possible. The lawyers at Wilson Kehoe Winingham can review your case and help you determine whether you can seek damages. Call or fill out a contact form to schedule your free consultation.

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