Most personal injury attorneys charge a contingency fee. Personal injury clients do not have to put money up front to retain a lawyer to represent them in their personal injury case. Personal injury lawyers will only make money if they settle or win a personal injury lawsuit.
A contingency fee is when an attorney does not require any upfront payment from a client, but instead will collect a percentage of any settlement or lawsuit award issued in the case. Contingency fees for personal injury attorneys in Texas are governed by the Texas Disciplinary Rules of Professional Conduct. Under the Texas Disciplinary Rules of Professional Conduct, contingency fees are only allowed in civil cases. A contingency fee agreement must be given in writing to a client and signed by the client before the attorney renders any services for the personal injury matter.
How are Contingency Fees Determined?
Contingency fees are a percentage of the amount that is recovered through a settlement or personal injury award. The percentage usually ranges between 30 to 40 percent. The percentage can be less or more depending on when a settlement is reached, or whether a settlement is never reached but an award is won at trial. Under the Texas Disciplinary Rules of Professional Conduct, the contingency fee percentage and how much of a percentage at what point in the case will be used must be determined before representation begins and be in the contingency fee agreement that the client must sign.
Shifting Contingency Fee Percentages
The percentage that a personal injury attorney will earn usually increases the further into the case a settlement is reached. The lowest percentage is earned if a settlement is reached before a lawsuit is filed. A middle percentage is earned if the case settles after the lawsuit is filed, but before going to trial. The highest percentage is earned if the personal injury case goes to trial and a personal injury award is issued.
Consider this example: A contingency fee agreement stipulates that the attorney’s fee will be 33% if a settlement is reached before a lawsuit is filed, 36% if a settlement is reached after a lawsuit is filed but before the case goes to trial, and 40% if the case goes to trial and a personal injury award is issued for damages. The case does not settle, but goes to trial and verdict for the client is issued for damages in the amount of $40,000. In this case, the attorney’s fees would be $16,000 (40% of $40,000) and the client would get $24,000 after the attorney’s fees are paid.
Who Pays the Expenses Incurred and When are They Paid?
Personal injury cases will come along with certain expenses. The expenses will increase if a lawsuit is filed in the case. Typical expenses involved in a personal injury case include:
- Filing fees – certain documents filed with the court require a filing fee.
- Serving the parties – the Sheriff will charge a fee to serve the other party.
- Court reporter fees – a court reporter may be required if depositions are taken.
- Transcript fees – there will be transcript fees from depositions and if the case goes to trial.
- Expert witness fees – expert medical testimony may be required.
- Copying costs – medical records, witness statements, police reports, as well as many other documents may be necessary.
- Police reports.
- Medical records.
- Investigator fees and expenses – many personal injury attorneys work with trained investigators to help investigate the claims and to find evidence to support the client’s case.
- Postage costs.
- Trial exhibits.
Some personal injury attorneys pay all expenses and costs and recoup the costs out of the settlement or personal injury award on top of receiving their contingency fee percentage. Other personal injury attorneys make the client pay all costs and expenses as they occur. A potential client can ask the attorney before representation begins of how costs and expenses will be paid and what the client’s responsibility will be. Costs and contingency fees should be determined in advance. If the attorney pays all expenses upfront then expenses can be deducted before fees are calculated and deducted from a settlement or personal injury award or after fees are calculated and deducted. This should be determined before representation begins as well.
Example of a contingency fee and expense arrangement for a personal injury case:
Before the representation begins the client and attorney agree on a sliding scale contingency fee agreement of 30% if the case settles before a lawsuit is filed, 35% if the case settles after the lawsuit is filed but before trial, and 40% if the case goes to trial and a personal injury award is received. It is also agreed that the attorney will front the cost of the expenses and the costs will be deducted before fees are calculated.
The attorney settles the case after a lawsuit is filed but before the case goes to trial, so the contingency fee will be 35%. The settlement was for $20,000 and the expenses incurred were $2,000. After the expenses are deducted the attorney will receive an additional 35% of $18,000. The attorney will receive $2,000 for expenses and $6,300 in contingency fees making a total of $8,300. The client will receive $11,700.
If the agreement had been for the expenses to be deducted after the fee was calculated then the client would ultimately receive less money. The attorney would receive a total of 35% of the $20,000, which is $7,000 and then an additional $2,000 totaling $9,000 and the client would receive only $11,000. The client would come out with $700 less from the settlement.
Personal injury clients usually do not have to pay for a personal injury attorney’s services upfront. Personal injury attorneys work on a contingency fee basis and some personal injury attorneys will pay all expenses related to the case and recoup the cost after a settlement or personal injury award for damages is issued. Contingency fee agreements allow the injured to bring a lawsuit without the worry that they may have to invest a substantial amount for no guarantee that the case will end in their favor.
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