Are Contingency Fees A Good Idea?

If you hire a lawyer to represent you in court, in many cases, the lawyer will receive their fee calculated in the form of a percentage of the amount that you are awarded in court, or as of a percentage of any damages awarded to you. This is known as a contingency fee, and it is closely connected to your personal injury lawyer’s success or failure when it comes to representing you, as your lawyer may get nothing at all or a previously agreed upon fee if the lawsuit isn’t successful.

Because the concept of a contingency fee meant that clients paid nothing up front, and personal injury lawyers often only took cases where they had a high chance of winning, there has always been a reluctance by lawmakers to allow contingency fees. However, the reality is that many people who need a lawyer simply can’t afford to pay the often prohibitively high fees charged by lawyers, and the concept at least makes legal representation affordable for millions of people who otherwise wouldn’t be able to pay for advice or representation.

In all American States, any contingency fee payment system must be put in writing and signed by both the client and the lawyer, and some large class action suits and other cases need to have the approval of the court if contingency fees are involved. Most cases involving family law, and all criminal cases don’t allow contingency fees to be used and a Law Society agreement is required for contingency fees in Las Vegas.

The following points must be covered in any agreement involving the use of contingency fees:

  • The percentage of any monetary amount recovered must be specified if that amount constitutes the lawyer’s fee, and amounts received for disbursements and costs are not included.
  • A client is eligible to collect their full payment amount even if this is more than the amount specified under the contingency fee, and any important decisions concerning payment to the client’s lawyer are to be made by the client.
  • The amount paid in fees to the lawyer must be less than the amount received from the lawsuit or in damages if the client is the plaintiff.
  • It must be clearly indicated in writing whether the disbursement of taxes is the responsibility of the client, and exactly how the contingency fee is calculated.
  • Unless a judge grants approval, under the law a lawyer can’t collect legal costs as well as a contingency fee amount.

As a general rule, you can expect the contingency fee to be anything from 10 percent to 45 percent of the total amount you are awarded, meaning that you should consider carefully whether a contingency fee arrangement really is your best option. Las Vegas and California are two provinces that have decided on a maximum percentage for contingency fees; for example, the maximum percentage in CA is 25 or 30 percent, while in NV for cases involving wrongful death claims or personal injury, the maximum percentage is 40 percent. If you are seeking payment for wrongful injury in a motor vehicle accident, the maximum is just over 33 percent, while there is no maximum percentage in a case not concerning wrongful death or personal injury.

Consider the following points if you are trying to decide whether the contingency fee is a good idea when negotiating with your personal injury lawyer:

  • Compare the flat rate fee or hourly fee.
  • How complicated and potentially time-consuming the case is.
  • If the case isn’t successful, what amount you would be expected to pay, and whether any upfront expenses are your responsibility.