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How Do Contingency Fees Work for Injury Attorneys?

A contingency fee basis is an arrangement whereby a claimant pays a lawyer’s fees if the attorney successfully resolves a case through a settlement or favorable court decision. The attorney gets his or her payment from the money awarded to the claimant. Most injury attorneys offer their services on a contingency fee basis, saving injured victims from incurring additional out-of-pocket expenses.

If the attorney fails to get any settlement on behalf of the client, neither the victim nor the attorney will get any money. A claimant may be, however, required to pay court filing charges and other related fees in some cases.

Contingency Fee Percentages

Contingency fee arrangements typically offer an injury attorney anywhere from 33 to 40% of a claimant's payout. In most cases, the attorney will get 33% of any amount recovered or awarded. For instance, if the responsible party’s insurer pays $40,000 as compensation for personal injuries, a victim will receive $26,800 and the attorney will get $13,200.

The Sliding Scale Arrangement

A sliding scale is an arrangement whereby contingency fee percentage fluctuates based on the stage at which the attorney resolves the case. If a claimant has a strong case due to severe injuries suffered in an accident, the at-fault party might provide a counteroffer, and a reasonable settlement may be agreed upon, eliminating the need to file a lawsuit. In such a situation, the contingency fee percentage for the attorney might remain at 33% or less.

If the settlement happens only after filing a lawsuit, the attorney may take a higher percentage of the amount recovered. For instance, if a settlement of $40,000 is made after a successful lawsuit, the attorney may receive $16,000 if the agreement permits a 40% share at this stage.

Cons of Contingency Fees

Contingency fees can be a great deal for some injured victims. They also may come with some drawbacks, however.

Some injury attorneys may decline to take a case on this basis, particularly if they think the odds of winning are low or the workload will be too heavy.

If a settlement comes too early or too late, either the claimant or the attorney may feel like the deal was unfair.

Challenges in filing taxes may arise because the IRS handles financial settlements as if the claimant got all of the money and paid for legal services out of pocket.

Costs

Costs in the legal field refer to the amount spent by attorneys in gathering evidence about car accidents or injuries, carrying out settlement negotiations, and handling personal injury litigation. Based on the agreement a person has with his or her attorney, he or she may have to reimburse the attorney for these expenses, normally out of a final settlement. Some expenses, such as fees for filing personal injury lawsuits and recording depositions, are inevitable. A person needs to discuss issues regarding costs with his or her attorney and capture them in a written agreement.

A claimant should be sure to ask his or her attorney as many questions as he or she can. The responses he or she gets will help determine whether or not a contingency fee basis will fit his or her situation.

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