After sustaining an injury in an accident, you may hesitate at first to hire an attorney. As you will see below, this is the absolute last thing that you should do because you need an attorney for a personal injury claim. There are no two ways about it because hiring an attorney could improve your chances of receiving financial compensation and how much you may get. In other words, the question that you should be asking yourself is not so much whether you can afford an attorney but whether you can afford to be without one.
The problem that many people with personal injury claims contend with is that money is a definite short term issue for them. Not only are they dealing with medical bills, but they may also be missing time from work because of their medical condition. There may be little to no money coming in and plenty of it going out, causing financial distress.
Injured people are often in no financial condition to lay money out for a lawyer without any promise of recovery. Moreover, people may hesitate to pay for a lawyer and file a claim if they think that it ends with a stack of legal bills. Basically, the people who need the money the most also need legal representation the most.
Personal Injury Cases Do Not Require Money Upfront
The good news for people who sustained an injury in an accident is that money for a lawyer is the least of their concerns. This is because of the traditional way that the personal injury law system works for accident victims. You do not need to worry about paying out money for legal bills because paying fees and costs upfront is not necessary to get an attorney. Allow us to explain.
There are different types of attorneys in practice. One type of lawyer works on an hourly basis. They will ask for a large upfront payment called a retainer. Then, they will draw from that retainer for the legal work that they do for you. Every time they work on your behalf, they are billing for that time, and it comes from your retainer. When that money runs out, they will ask for another retainer.
Many people believe that this is how all lawyers operate, and they hesitate to hire one as a result when they are worried about finances. However, personal injury lawyers generally do not operate on a retainer.
The Difference Between Hourly Billing and Contingency
In truth, most lawyers do operate on an hourly basis. Some cases, such as family law and criminal cases, have to involve hourly billing because it is against the rules to have a fee arrangement in these cases that may encourage certain results.
However, personal injury lawyers work on contingency. In broad terms, the payment that they receive comes out of the money that you recover in your case. Contingency agreements are how a personal injury lawyer works, and it is exactly how you can afford a lawyer, even if you have no money. We will explain exactly how this type of arrangement functions so you can have the peace of mind that money will not be an issue in your personal injury case.
How a Contingency Fee Agreement Works
When you hire a lawyer on a contingency basis, you will sign a representation agreement with them right at the very start of your case. This document will lay out all the legal terms of your relationship with your lawyer. It is a contractual agreement, so it is binding on both you and the lawyer.
One of the major terms of the representation agreement is how your attorney will receive payment. For your protection and theirs, this is all specified in great detail in advance. The rules that attorneys must follow to practice law require them to have all of the fee agreements spelled out and in writing in advance. This agreement must spell out everything about money and your financial arrangement. Neither party can add anything additional to the agreement after they sign it.
When it comes to the contingency fee, your agreement will express the terms of the percentage that your lawyer will receive if you are successful in your case. For your personal injury action, “success” means that you have had some sort of financial recovery, including any kind of settlement or jury award. For purposes of a contingency agreement, a settlement is either a check from the insurance company or an agreement to end any lawsuit that you filed.
There Are No Attorney’s Fees if You Do Not Win
You will not have a lawyer’s bill if you lose a personal injury case. You may need to cover some administrative costs depending on your representation agreement, but you will not owe your lawyer tens of thousands of dollars or more if you lose. That is precisely what a contingency agreement prevents.
In terms of the actual percentage that your attorney will receive, it all depends on your agreement and how your case ends. It is common for the attorney to specify a couple of different numbers, depending on how far your case goes and how much effort it requires.
At this point, you are probably wondering what percentage of your settlement or jury verdict the attorney would receive.
A contingency percentage will vary from lawyer to lawyer, and in some cases state or federal law caps them. Many contingency agreements will contain a percentage amount for cases that settle and a higher percentage amount should the case go to trial. They charge a higher percentage because court cases that go to trial take much more effort on the part of your attorney, and your lawyer assumes even more risk that they may not get paid.
In any event, you will almost always make more money from a successful claim, even after paying the contingency fee, than you would without hiring a lawyer.
Contingency Fees Are Similar Between Lawyers
You will find that, while every lawyer does not have the same contingency percentage, they will be largely similar. There is a reason for that. Your attorney cannot charge you an excessively high fee. This is a rule they must follow to remain practicing as a lawyer.
In the end, the amount of the contingency fee must be reasonable. The reasonability depends on:
- The nature and type of the case
- The reputation of the lawyer
- How much work the lawyer needs to do
- The case’s likelihood of success
- What other attorneys charge for similar cases
Your Lawyer Cannot Change a Contingency Agreement
An attorney cannot change the terms of your contingency agreement after both parties signed the document. Hypothetically, if the case turns out to be much harder than the lawyer originally thought, they are still obligated to represent you based on the original terms that they signed. They are not allowed to come back to you for more money if your case turned out to be more than they bargained for when they accepted it. The uncertainty of the outcome is why they may build several different scenarios into the representation agreement.
At the same time, you also cannot change the agreement to give your attorney less if your case ends up being easier than you and your attorney thought. In certain rare instances, the insurance company may make a strong initial offer. Nonetheless, the only way a party could lower the lawyer’s contingency fee based on how the case proceeds is if you and the lawyer agree ahead of time.
Of course, this happens very seldom because insurance companies are notorious for lowballing. Regardless, if your case settles, the attorney will still receive the contingency percentage laid out in your initial agreement. However, in some cases that go to court, the judge may review the contingency agreement before the final payment since they must sign off on any settlement agreement.
At the end of the day, the contingency fee must reflect the work that the attorney feels is necessary to handle your case to the best of their ability.
How Your Lawyer Receives Payment
Whenever you settle your case, part of the proceeds of the settlement will go to the attorney. In other words, you will receive a check for your share of the proceeds, and the attorney will get a check at the same time. You are not paid the proceeds only to write a check to the attorney.
In addition, the lawyer may use some money from your proceeds to reimburse themselves for court filing costs and some costs of deposing witnesses. The reimbursement comes off the very top of the settlement. The retainer agreement must clearly lay out the fees for which you are responsible.
Consider the example below.
- You get an initial settlement offer from an insurance company for $35,000.
- You hire a lawyer, file a lawsuit, and settle your case for $100,000. You have a contingency agreement that states that your lawyer receives 33.3 percent of a case should it settle. Your lawyer paid witness and court filing fees of $4,000.
- At first, the money drops into an escrow account that the attorney controls.
- The $4,000 comes off the top of the settlement proceeds and is paid from the escrow account, reducing the total amount to $96,000.
- From the remaining balance, you receive $64,000. Your attorney receives a check directly from the escrow account. You collect $29,000 more than you would have without your lawyer’s help.
The Logic Behind Contingency Agreements
Now that you understand how a contingency agreement works, it is also important to understand some of the logic and theory behind them. A contingency agreement means that your personal injury lawyer assumes the risk that they may not receive payment for their time. This acceptance is all part of the game for personal injury lawyers. The contingency system influences how they will handle their own business because they have bills of their own to pay and families to support.
Your prospective attorney is assessing your case from the moment that you come in the door to figure out whether they will receive payment for their time. The last thing that they want is to put in months and possibly years for your case only to come away empty-handed. It would drastically hurt their income.
Therefore, if your case appears far-fetched, and you have seemingly little chance of recovery, the attorney may refuse to take your case. The rule of thumb is that if you can easily find a personal injury attorney for your case and people are clamoring to represent you, the chances are that there is some merit to your claim.
You Retain Control of Your Case With a Contingency Agreement
With a contingency agreement between you and the attorney, you might think that your attorney’s interests may not completely align with your interests. However, attorneys are legally obligated to act in their client’s interests first and foremost at all times.
If you decide that you do not want to accept a settlement offer because you want to hold out for more, it is entirely your right to do so, even if your attorney advises you to accept the offer. You do not lose control over your case just because your lawyer has a vested financial interest in a certain outcome.
In fact, your lawyer may even have an incentive to fight for more money because it means that they get paid more. However, if the offer is reasonable and fair, your attorney would have a professional obligation to advise you to accept it.
In summary, affording a lawyer is the last thing that you need to worry about when you have so many other things to deal with in the wake of an accident. Money worries should not stop you from getting the legal help that you need to receive the compensation that you deserve.
