Many people suffer personal injuries due to the negligent actions of other parties every day in the United States, and not every victim will have the financial flexibility to hire an attorney. This is especially true for attorneys who use traditional billing and charge based on time spent working on a client’s case. Some complicated legal cases can take months or even years to resolve, potentially leading to astronomical legal fees. Fortunately, many personal injury attorneys believe in making legal counsel more accessible and use different billing structures like contingency fee agreements.
A contingency fee ensures that an attorney’s client does not pay any legal fees if the attorney loses the client’s case. The attorney’s payment is contingent upon the client’s success. This is mutually beneficial; contingency fee billing encourages lawyers to be more discerning in the cases they take. This cuts down on the number of frivolous cases that use up court system resources and time. Plaintiffs who would otherwise be unable to pay have access to legal representation.
How Does a Contingency Fee Work?
Typically, a client must pay for an attorney’s time spent working on a lawsuit as well as the expenses incurred while handling the case. These expenses could include travel to meet with witnesses, appear in court, or conduct depositions. Other expenses could include copying fees, courthouse fees, and more. Some attorneys send clients periodic bills for time and expenses throughout a case, but attorneys who use contingency fee billing do not collect anything until their clients win their cases.
A contingency fee ensures a client will not have to pay any up-front fees for legal counsel. The attorney will outline his or her contingency fee agreement during an initial consultation, allowing the potential client to fully understand his or her obligations when it comes to legal fees. The contingency fee agreement will also stipulate how much of a share of the final case award or settlement the attorney will take as his or her contingency fee.
Most attorneys who use contingency fee billing use a percentage scale, but some states have laws specifically outlining how attorneys may bill their time. A general contingency fee could state that upon winning a case the attorney receives 25% to 50% of the cash award. While this may seem like quite a lot, remember the attorney receives nothing if he or she loses the case.
Additionally, setting legal fees to a fixed percentage instead of a rolling tab generally work out in the client’s favor. For example, a lawyer who charges by the hour could wind up charging a client thousands of dollars over the course of just a few weeks. If the client does not win a substantial recovery, it is possible the proceeds of the lawsuit may only break even with the cost of legal representation or wind up costing the client more.
Be Clear About Contingency Fees
Anyone thinking of agreeing to legal representation under a contingency fee should carefully read the terms, conditions, disclaimers, and exclusionary clauses of the legal contract. Some attorneys may claim to offer contingency fee billing but require a set amount per week to continue working on the case.
Other attorneys may tier their contingency fees based on the total amount of damages in a case per state laws. For example, some states only allow a certain percentage for the first $100,000 of a case’s value, then a different percentage for the next $100,000, and so on to ensure clients receive fair settlements and case awards with their contingency fee agreements.
Ultimately, contingency fee agreements make legal counsel more accessible to those who could not afford it otherwise. A high-income individual who sustains only a several hundred dollar loss may think little of the situation but the same amount could be a devastating loss for a lower-income person. A contingency fee agreement helps ensure this person would still recover compensation and be able to afford legal representation when he or she needs it most. For any questions, you may have about your agreements, make sure to contact your local Alabama attorney for details!