Personal Injury

What Is a "Contingency Fee" Agreement?

By David Goguen, J.D., University of San Francisco School of Law
Most personal injury lawyers represent their clients under a "contingency fee" agreement. Here's what that means for you and your case.

If you’ve decided to file any kind of personal injury claim and you've started to research attorneys to potentially represent you (or if you’ve just watched cable television in the wee hours), you’ve probably seen personal injury lawyers use advertising language along the lines of "If you don’t win, you don’t pay." This is shorthand for a lawyer representation contract known as a "contingency fee" agreement. (When it comes to "costs," this shorthand is also not entirely true in every situation; more on this below.)

Under a contingency fee agreement, your attorney agrees to handle your personal injury case without asking for any money up front, and you agree to hand over a certain percentage of any compensation you receive. So, the "contingency" here is whether you receive any money -- via personal injury settlement or after a successful trial in civil court. If you do receive compensation, your attorney takes his or her fee out of that amount.

Here are some things to keep in mind when it comes to contingency fees in personal injury cases.

What’s the Percentage?

The most common percentage for contingency fees in personal injury cases is probably 33 percent, or roughly one third. Some personal injury lawyers might charge a little more, taking a percentage closer to 40 percent. Whatever the percentage is, it should be clearly evident in any agreement you sign.

It’s important to note that your lawyer may use a "sliding scale," under which the contingency fee percentage goes up as the case progresses. For example, the contract might state that your lawyer gets:

If you’ve got questions about your prospective attorney’s contingency fee percentage, make sure you iron out any concerns before you sign anything. (Learn more about how much a personal injury attorney might charge.)

Watch Out for Costs

"Costs" in a personal injury case are almost always handled separately from fees. "Costs" mean all the small and large expenses to keep your case going, including filing fees, document preparation costs, and money paid to any expert witnesses that help out with your case.

Many lawyers will pay the costs associated with a personal injury case out of the firm’s books, and will later reimburse the firm out of any settlement or award you receive. This is in addition to whatever contingency fee you agreed upon. It also matters when the costs will come out of your compensation. Will the costs come out of the lump sum before the attorney takes his or her percentage, or after? That can affect the final numbers, so check the fine print.

And if your personal injury case doesn’t end up being successful -- meaning you don’t receive any settlement at all, or you end up losing at trial -- you may still be on the hook for the costs of your case. On the other hand, some personal injury attorneys and firms will agree to absorb the costs themselves in that situation. It depends on the wording of your agreement. So, be sure you understand what you’re signing as it relates to costs? Who pays them initially? If it’s the lawyer, will costs be taken out of your settlement or court award? When? If you lose your case, will you have to pay the costs out of your own pocket?

Learn more about your contract with your personal injury lawyer.

If You’ve Been Sued for Personal Injury

Up until now we’ve discussed how a plaintiff’s attorney is paid in most personal injury cases. But what about the other side of the case? How is an attorney paid to defend someone who is alleged to have caused an accident and is now facing a personal injury lawsuit?

Obviously, no contingency fee agreement is possible in this scenario. If the client "wins," that means he or she is found not liable for the accident. So instead, a personal injury defense lawyer is retained (hired) and will usually be paid by the hour -- typically anywhere from $150 to $500 an hour. As with contingency fees, the hourly rate may go up if the case reaches trial.

Keep in mind that if you’re being sued for an accident that is covered by an insurance policy, the insurance company will decide how to hire -- and more importantly, pay -- an attorney to defend the lawsuit. Learn more about the role of insurance in a personal injury case.

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