What is a Contingency Fee? What Percentage Do PI Lawyers Take?
Whenever there’s an event that seems like it would require a lawyer–someone gets arrested, someone has a dispute with their landlord, someone gets in a car accident–one of the first things people worry about is cost. Do I really need a lawyer? If so, how much will hiring a lawyer cost? Many people have heard that personal injury lawyers tend to take a “contingency fee,” but there is a lot of confusion around what that means. Read on to learn about contingency fees and how they work in PI matters, and reach out to a knowledgeable Poughkeepsie personal injury lawyer for advice and assistance after a negligence-based injury.
Defining Contingency Fee
There are a variety of different ways that lawyers can charge clients for their services. Your attorney may charge by the hour for work performed on your matter. They may charge by the task–for example, drafting a certain type of contract may be charged at a flat rate. They may charge by the matter, such as establishing a flat fee for handling a no-contest divorce. Personal injury lawyers usually charge a contingency fee.
When lawyers work on contingency, that means that they are paid out of the eventual proceeds of the case. Instead of the client paying up-front and continuing to pay periodically for the work the attorney performs as the case continues, the lawyer will be paid upon conclusion of the matter. The amount the lawyer is paid will depend upon the amount recovered in the case.
From the lawyer’s perspective, contingency fees are a bit of a gamble; their pay is based upon winning the case and upon getting a good result for the client. For clients, contingency fees can be a huge boon. Contingency fees make lawyers accessible for everyday people who otherwise might lack the means to pay; they only owe the lawyer if the lawyer gets them a favorable result.
What if We Settle?
Your attorney’s contingency fee will come out of the proceeds of the case. The proceeds can be derived from winning at trial through a jury verdict or before trial through settlement. If your attorney negotiates a favorable settlement with the negligent party, insurance company, and other liable parties, your attorney will be paid a percentage of that settlement.
What Happens if We Lose the Case? Do I Owe Anything?
The contingency fee arrangement is set up to align your interests with your attorney’s; you both want to win. If the case is dismissed and no monetary settlement is reached, then you likely owe your attorney nothing. The only exception might be court costs, expert witness fees, and other litigation expenses that your attorney covered during the matter. Typically, such costs and fees are taken out of the case proceeds to repay the attorney for fronting the costs of the matter out of their own pocket.
There are generally two options to approaching litigation expenses: Either the client bears the risk or the attorney does. In one arrangement, the attorney’s fee will come from the “net recovery” of the case, meaning that they take a percentage of the recovery remaining after the litigation expenses are paid. Under that arrangement, if the case is lost, the client would need to reimburse the attorney for litigation costs, but if the case is won, the client’s recovery is higher.
Under the other arrangement, the attorney’s fee is taken as a percentage of the “gross recovery,” and the litigation costs and expenses are deducted after the attorney takes their cut. If the case is lost, the client pays nothing, and the attorney absorbs the cost of the case. Most clients prefer this option.
Here’s an illustration of how the two arrangements would play out. For this example, we’ll assume the total (“gross”) recovery of the case is $100,000, with $10,000 in litigation expenses.
- Option 1: Gross Recovery
- Gross: $100,000
- Expenses: $10,000
- 1/3 contingency fee: $33,333
- Client’s portion (⅔ of the gross recovery, less expenses): $56,667
- Option 2: Net Recovery
- Gross: $100,000
- Expenses: $10,000
- Net recovery: $90,000
- 1/3 contingency fee: $30,000
- Client’s portion (2/3 of the net recovery): $60,000
While the client takes home more of the case proceeds in Option 2, the client also assumes more risk. If the case had been lost, the client would have been responsible for reimbursing the attorney the $10,000 for litigation expenses. Talk to your attorney about their fee structure in your initial consultation to find out how litigation costs are handled and what options you may have.
What Percentage is Normal for a Personal Injury Case?
Although there are many different fee structures that lawyers can employ, personal injury lawyers tend to operate on contingency. The percentage collected by lawyers varies from state to state, typically between 33% (1/3) and 40% of the case proceeds. In New York, personal injury lawyers usually take 33%. For some types of matters, the percentage is likely to be lower.
If you’ve been hurt due to someone else’s negligence in the Hudson Valley, get help seeking the damages you may be owed for your injuries by contacting the Poughkeepsie offices of personal injury lawyers at the Law Office of Taran M. Provost, PLLC, serving Orange County, Dutchess County, Ulster County, and throughout the mid-Hudson Valley.