Although any of the three main types of fee agreements is possible, car accident lawyers routinely charge a contingent fee.
This means that the client is not charged an up-front fee but, instead, pays the lawyer a percentage of the amount recovered either as a result of an out-of-court settlement or a trial.
Since the fee is contingent on success in the case, if there is no recovery, the client does not owe the lawyer a fee. However, you may still have to pay court costs and other case expenses.
Although contingent fees are charged in virtually all car accident cases, and although there are similarities among those agreements, contingent fee agreements are not uniform. The main variables are:
- 1. The percentage charged.
2. Whether the percentage is calculated based on your “gross recovery” or your “net recovery.”
3. What services are included.
4. Whether you have to pay “costs.”
Let’s look at each of these variables more closely . . .
Contingent Fee Agreement Percentages
Lawyers typically propose to charge a fee between 25% and 40% with 1/3, or 33 1/3%, being the most common fee charged in car accident cases.
A common variation is a percentage that changes based on how and when your case is resolved. For example, the fee might be 1/3 if the case is resolved without filing a lawsuit in court but it would increase to 40% if it is resolved after a lawsuit is filed.
Another variable that can change the percentage is whether an appeal is filed. Although they are not common in car accident cases because the law is well-settled, appeals can occur. You should make sure your contingent fee agreement with your lawyer spells out any change in the fee if there is an appeal.
These are the questions to ask your lawyer prospect:
- “Will you charge a contingent fee?”
“What percentage is your contingent fee?”
“Will your percentage change if we have to file a case in court?”
“Will your percentage change if we actually have a trial?”
“Will your percentage change if there is an appeal?”
Contingent Fee Agreement Percentages Can Be Based On Your “Gross Recovery” or “Net Recovery”
Another variable in contingent fee agreements is whether the percentage charged is based on the total, or gross, amount you recover or on the net amount that comes to you after payment of case related expenses and medical bills.
For example, if you recover $9,000, have case-related expenses of $500 and have medical bills of $2,500, what actually ends up in your pocket under a 1/3 contingent fee would vary substantially depending on whether you have a gross recovery or a net recovery contingent fee agreement.
Under a gross recovery contingent fee agreement, you would pay a legal fee of $3,000. This is calculated by taking 1/3 of your “gross recovery” of $9,000.
However, if your legal fee was calculated based on your net recovery, you would only pay a legal fee of $2,000. To calculate this fee, you first subtract expenses of $3,000 from the total recovery of $9,000 leaving a “net recovery” of $6,000. One-third of $6,000 is $2,000.
Obviously, you would prefer a fee based on the lower net recovery; however, the gross recovery type of contingent fee agreement is more common.
This is the question to ask the lawyer:
- “Is the percentage of your contingent fee calculated based on my gross recovery or my net recovery after payment of costs and medical bills?”
Services Covered By Your Contingent Fee Agreement
A contingent fee is usually calculated based on your recovery for your injuries.
Normally, there is no separate fee for resolving your claim for damage to your vehicle or for submitting PIP or medical payments claims.
Usually, these are considered part of the service, and there is no additional fee for helping with them.
You want your contingent fee agreement to specifically state that your lawyer will include working on your property (vehicle) damage claims and submitting no-fault claims (such as PIP or medpay) as part of her service and will not charge any additional fee for doing so.
Your contingent fee agreement should also state whether the fee will increase if there is an appeal, as I discussed above. Appeals are a great deal of work, so you can expect most lawyers will want a higher percentage fee if there is an appeal.
So these are the questions you ask a lawyer you are considering hiring:
- “Is your fee based on a percentage of my personal injury recovery only?”
“Will you work on my car damage claim if necessary?”
“If you work on my car damage claim, will you charge any additional fee?”
“Will you assist me in filing no-fault claims such as PIP and medpay?”
“Will you charge an additional fee for working on my no-fault claims?”
Payment Of Costs Under Your Contingent Fee Agreement
There are almost always out-of-pocket expenses that have to be incurred to present a car accident claim.
The most common case-related expenses are . . .
- Accident reports
- Medical records
- Court filing fees
- Expert witness fees
Police agencies commonly charge for copies of accident reports and, these days, almost all health care providers charge a fee for producing copies of their records.
Investigators are not necessary in most cases; however, when they are hired, they usually charge hourly fees, plus costs, and their fees can run into thousands of dollars quickly.
If a decision is made to go to court, there is a filing fee for the case.
In some states, the court also charges for issuing witness subpoenas.
As part of the pre-trial process, depositions are common. A deposition is an out-of-court question and answer session where the lawyer who scheduled the deposition questions the opposing party, or some other witness, about the facts of the case. Depositions are recorded and the reporter who transcribed the deposition charges a per page charge for the deposition transcript. Deposition charges vary based on the jurisdiction and, of course, on the length of the deposition.
Virtually every car accident case requires at least one expert witness, your primary physician. Your doctor must come to court and explain your injuries, how they were caused by your car accident, the treatment you received and your prognosis. Doctors’ fees for testifying in court vary widely from specialty to specialty and from jurisdiction to jurisdiction. The fee could be less than $1,000 or as much as $5,000.
Some cases require other experts, such as accident reconstruction experts. They normally charge hourly fees, plus costs, similar to the investigators that I discussed above.
Your contingent fee agreement must be clear on the question of who pays these expenses, you or your lawyer.
Many car accident lawyers will pay these expenses as they are incurred but you will be obligated to repay the lawyer out of your recovery.
If you lose your case, most contingent fee agreements require you to repay your lawyer for the out-of-pocket expenses.
Although you do no expect to lose your case, it is an advantage to have a contingent fee agreement that does not require you to repay the expenses if your case is lost.
These are the questions you should ask your potential lawyer:
- “Will you advance the out-of-pocket costs of presenting my case?”
“If my case is lost, do I have to repay the out-of-pocket expenses you advanced?”
Tips On Negotiating Contingent Fee Agreements
Here are some tips from someone who has entered into countless contingent fee agreements from the lawyer side of the desk.
- Get it in writing. This is not because you and your new lawyer do not trust each other. It is for clarity, to make sure there are no misunderstandings. Some states require contingent fee agreements to be in writing.
- Realize that lawyer contingent fee agreements are not carved in stone. A lawyer can change the terms of her contingent fee agreement if she wants.
- The bigger your case, the more likely the lawyer will reduce the percentage charged or modify his contingent fee agreement in other ways. That’s just common sense.
- If you have substantially prepared your case before hiring a lawyer, it is reasonable to ask the lawyer to reduce her fee. After all, you have done much of the preparatory work for the lawyer.
- If you have a case that can be settled quickly and easily, propose an hourly fee or, better, a fixed fee. For example, if your injuries clearly entitle you to more than the available insurance coverage, and the person who caused your accident has no personal assets that can be used to compensate you, you should negotiate for a fixed fee that is less than a typical contingent fee percentage yet pays the lawyer a reasonable fee for his time and expertise.