What Is a Contingency Fee?

What Is a Contingency Fee in a Personal Injury Case?

If you have been injured in an accident, one of your first questions may be: How can I afford to hire a lawyer?

Personal injury attorneys commonly handle cases on a contingency-fee basis. Instead of paying an attorney by the hour, the attorney's fee is tied to the recovery obtained in the case.

In simple terms, the lawyer receives an agreed percentage of the recovery if the case results in compensation for the client.

How Does a Contingency Fee Work?

Suppose a client hires an attorney under an agreement providing for a percentage of the amount recovered. If the case later settles or results in a judgment, the attorney's fee is calculated according to the written agreement.

For example, if a case produced a $100,000 recovery and the applicable contingency fee were 33⅓%, the attorney's fee would be approximately $33,333.

The actual percentage varies from agreement to agreement. Some contingency agreements also provide for different percentages depending on whether the case resolves before litigation, after a lawsuit is filed, or after additional work such as a trial or appeal.

In Texas, a contingency-fee agreement must be in writing and explain how the fee will be calculated. It must also explain how litigation and other case expenses will be handled.

Attorney's Fees and Case Expenses Are Different

One important distinction is the difference between an attorney's fee and case expenses.

Attorney's fees compensate the lawyer for legal services. Case expenses are costs incurred in developing and pursuing the claim. Depending on the case, those expenses might include:

• Medical-record charges

• Filing fees

• Court reporter fees

• Deposition expenses

• Expert-witness fees

• Investigation costs

• Charges for obtaining records or evidence

The written fee agreement should explain whether expenses are deducted before or after the attorney's percentage is calculated and how those expenses are ultimately handled. Texas ethics rules specifically require contingent-fee agreements to address this issue.

That is why someone considering hiring a personal injury lawyer should not hesitate to ask:

What is the contingency percentage? What expenses might be incurred? And how will those expenses affect my final recovery?

A good fee agreement should answer those questions clearly.

Why Are Contingency Fees Common in Personal Injury Cases?

A serious injury can create expenses at exactly the wrong time. Someone may be facing medical bills while also missing work and dealing with the effects of the accident.

A contingency arrangement allows an injured person to retain counsel without paying hourly attorney's fees as the case proceeds.

It also means the lawyer assumes the risk that substantial time may be invested in a case without ultimately earning an attorney's fee if there is no recovery.

Not every legal matter is appropriate for a contingency fee, and not every personal injury claim will be accepted. An attorney still needs to evaluate the facts, potential liability, injuries, available evidence, and practical ability to recover compensation.

Questions About the Cost of Hiring a Personal Injury Attorney?

At Lyman Law, we explain the fee arrangement before a client decides whether to hire the firm so there are no surprises about how attorney's fees and case expenses will be handled.

If you were injured because of someone else's conduct and want to understand your options, you can contact us for a free case review.