Are you concerned about the cost of legal representation in the aftermath of a personal injury accident? A slip and fall, a defective or dangerous product, or a medical mistake are just a few of the ways in which you or a loved one may find yourself injured and in need of medical care and treatment. This medical care and treatment does not come cheaply, however. Even with health insurance, you may find that your out-of-pocket expenses can easily and quickly climb into the thousands of dollars. The thought of incurring additional expenses in the form of legal bills may seem like a terrible idea. Yet, proceeding with your personal injury case without the benefit of competent legal advice and representation can be an equally-disastrous decision. Does this leave the personal injury victim in an unsolvable quandary? Not quite.
Personal Injury Lawsuits and Contingency Fee Arrangements
Those not connected with the legal field or who do not regularly employ the services of a personal injury lawyer may imagine that the only way an attorney bills a personal injury client for representation is by charging the client a steep hourly rate for each and every task the lawyer performs on behalf of a client – right down to making phone calls or responding to e-mails. Under such a model, a personal injury client could easily be presented with a bill for $100 or more if the attorney simply spends a few minutes e-mailing a witness, speaking with opposing counsel on the phone, and/or attends a brief scheduling conference. What is more, this traditional method of billing a client requires the client to pay the hourly fees that the attorney incurs regardless of the outcome of the personal injury lawsuit. So therefore, a person can incur thousands or tens of thousands of dollars in attorney’s fees and still be required to pay them even if their lawsuit is not successful and does not result in that person obtaining any monetary compensation for their injuries and losses.
There are other ways that attorneys can bill personal injury clients, however. A more popular – and more beneficial, from the client’s perspective – method of billing clients is known as contingency fee billing. This method gets its name from the fact that the attorney’s ability to earn his or her fees is contingent upon the attorney obtaining a judgment or monetary damages award in favor of the client. If the attorney is successful and the personal injury suit leads to the recovery of compensation, then the attorney is entitled under the fee agreement to recover the compensation he or she and the client agreed upon. If the personal injury lawsuit is not successful, then the attorney is typically foreclosed from recovering his or her fee.
How are Fees Calculated Under a Contingency Fee Arrangement?
Under a traditional “hourly fee” fee arrangement, the attorney and client agree upon an hourly rate for the attorney’s services. Then, the attorney bills the client for every task completed at that hourly rate. If a task takes only a few minutes, then the fee charged for that task is adjusted accordingly. For example, if a lawyer charges an hourly rate of $100 and a scheduling phone conference takes 15 minutes, then the client would be charged $25 for that phone conference. As noted earlier, the client would be required to pay this fee and other fees incurred regardless of the outcome of the case.
Contingency fee agreements, on the other hand, generally require the client to agree to turn over a percentage of the total amount recovered to the attorney in compensation of the attorney’s fees. Because the attorney’s earning of these fees is contingent upon the recovery obtained, the client generally does not have to “prepay” any of the attorney’s fees or deposit a sum upfront to cover the attorney’s fees. Depending on the jurisdiction, the skill of the lawyer, and other similar factors, this percentage will typically range from 20 percent to 40 percent. Thus, the greater the value of the damages award given to the injury victim, then the greater amount of compensation the attorney would receive. For example, suppose a lawyer and personal injury client agree to a contingency fee arrangement in which the attorney is entitled to receive 40 percent of the recovery. If the attorney is able to obtain a monetary damages award of $20,000 for the client, then the attorney’s fees (paid out of this total award) would be $8,000. If the client receives a damages award of $200,000, then the attorney’s fees jump to $80,000. If the client’s damages award is $2 million (which is possible in some personal injury cases, especially medical malpractice cases), then the attorney’s fees would be $800,000 (obviously, then, a contingency fee arrangement provides ample encouragement for the attorney to do a good job!).
Cautions About Contingency Fee Arrangements
While there are many commendable features to contingency fee arrangements for personal injury victims to consider, there is one caveat that should be borne in mind. While a contingency fee arrangement does not require the client to pay for the attorney’s fees if there is no recovery, a client may still have to pay the costs that the attorney incurs in preparing and presenting the client’s personal injury case. For example, if depositions are conducted, there may be costs for a court reporter or travel costs for the witnesses that are incurred. If the client has extensive medical records, the attorney may need to retain the services of a medical expert to review these records and prepare a summary opinion. These would be costs that the client could still be responsible for, depending on the details of the contingency fee arrangement.
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