Lawyers' Fees and Your Personal Injury Settlement
In most personal injury cases, a lawyer will charge a contingency fee. In a contingency fee arrangement, a lawyer’s fees will be deducted from the final settlement in your case -- or from the final verdict at trial. Most personal injury lawyers will also deduct any expenses that were covered by the lawyer. The lawyer’s contingency fee percentage will typically vary based on the stage of your case. In the sections that follow, we'll cover some things to keep in mind when it comes to your injury settlement and how your lawyer will be paid.
Contingency Fee Percentages
The typical personal injury lawyer will charge a contingency fee to handle your case. Some state statutes limit the percentage that a lawyer can take as a contingency fee. Most contingency fees are between 25 and 40%. In the majority of cases, a personal injury lawyer will receive 33.33% (or one third) of any settlement. For example, if you receive an offer of $30,000 from the wrongdoer or his insurance company in your case, you will receive $20,000 and your lawyer will receive $10,000. (Learn more about hiring and firing your attorney and when it makes sense to represent yourself.)
Settlement Before Filing a Lawsuit
Most states provide shifting fee limits based on the stage of the case. Your lawyer should send a demand letter to the person or business (wrongdoer) that injured you. The letter will explain the injuries and demand payment. If you have a good case, the wrongdoer will typically make a counteroffer and there will be further negotiations. This all occurs before you file a lawsuit (file a formal complaint in court). Where you settle before filing a lawsuit, it is likely that the lawyer cannot receive more than 33% of the settlement.
Settlement After Filing a Lawsuit
The wrongdoer may not take settlement negotiations seriously or may fail to answer your demand letter altogether. At this point, if you have a strong case, you will file a lawsuit. In many states, if your settlement occurs after filing the lawsuit, your lawyer is permitted to receive a higher percentage of the settlement, usually 40%. Where your case settles for $30,000, but this time after you file the lawsuit, your lawyer can recover $12,000. Additionally, before choosing to reject a pre-suit settlement offer, you should consider the expenses of a personal injury lawsuit. As your case progresses, it will likely get more costly.
Costs and Expenses
Many personal injury lawyers will cover costs and expenses and then deduct them from your share of the settlement. Other lawyers will charge you for costs and expenses as they become due. Where you are responsible for paying for each cost and expense, your case will likely not proceed until you make the payment.
Costs and expenses in a personal injury case include:
- medical records
- police reports;
- expert witness fees;
- filing fees;
- depositions; and
- trial exhibits.
Costs and expenses may be high, especially if settlement does not occur until close to trial. The lawyer’s final percentage with all fees, costs, and expenses may end up totaling between 45 and 60% of the settlement.
For example, suppose you settle your personal injury case after the lawsuit is filed for $30,000. There were various costs and expenses that your lawyer covered totaling $4,000. The lawyer will receive 40% of the settlement amount as lawyer’s fees which is $12,000. The lawyer will also deduct $4,000 for costs and expenses from the $30,000 settlement. In this case, the lawyer will receive $16,000 of the final settlement amount.
Your Lawyer Will Receive the Settlement Check
It is common practice for the settlement check to be sent to the lawyer. This ensures that your lawyer will get paid for the legal services performed. Many personal injury lawyers only take contingency cases and, therefore, risk not getting paid if they do not receive the settlement check. The lawyer will contact you when he or she receives the settlement check. The lawyer should also explain the amount he or she will be deducting from your settlement check to cover lawyer’s fees and costs and expenses.
If you dispute certain charges, the lawyer should place the disputed amount in a trust account. However, the lawyer should still send the undisputed amount to you.