Jason Stephens | December 16, 2020 | Personal Injury
The lawyer’s fee is a key question you need to answer before hiring a lawyer to handle your personal injury case. Although every case is different, the fees charged by personal injury lawyers follow some general principles and rules.
Here are some facts you should know about how much lawyers cost.
How Attorneys Charge for Legal Services
Clients compensate attorneys based on the work they do.
Lawyers use a few different billing styles:
- Contingency fee: Lawyers who charge a contingency fee are compensated based on the results they produce. A contingency fee is based on a percentage of the settlement or damages awarded if the lawyer wins a case.
- Flat fee: Lawyers usually charge a flat fee for projects that require a predictable amount of work. For example, a business lawyer might charge a flat fee to form a corporation.
- Hourly fee: Lawyers who bill an hourly fee will track their hours and bill periodically for the time spent on your case. Lawyers usually charge an hourly fee for cases or jobs that require an unpredictable amount of work.
Most lawyers charge a contingency fee to handle a car accident or another personal injury case.
Contingency Fee Arrangements
Broadly speaking, a contingency fee is a legal fee that depends (or is “contingent”) on the outcome of a case.
Most contingency fees share a few characteristics:
- No upfront payment: Most contingency fee agreements require no fee advance or upfront payment for the lawyer to get started on the case. This is logical because the fee is contingent on the outcome of the case.
- No fee for a loss: If the lawyer fails to secure a settlement or damages award, no fee is due. As a result, the lawyer has an incentive to win the case and, equally importantly, win as big as possible.
- No out-of-pocket legal fees: The lawyer’s contingency fee is paid from the settlement proceeds or damages award. This means that the lawyer is not paid until you are paid.
Texas lawyers who charge a contingency fee must provide clients with a written fee agreement. This fee agreement should address each of these issues. If it does not, you should consult with your lawyer to be certain you are comfortable with and thoroughly understand the fee arrangement.
Variations on Contingency Fee Agreements
Lawyers have some flexibility in crafting contingency fee arrangements. Some of the ways that contingency fee arrangements might vary include:
The written fee agreement will identify the costs, if any, that the lawyer will charge against your compensation. For example, a fee agreement might allow a lawyer to deduct court filing fees, courier fees, process server fees, and stenographer fees from your settlement or damages award.
The percentage of the settlement or damages award that makes up the lawyer’s fee, will vary from lawyer to lawyer and case to case. Lawyers typically charge anywhere between 25-40% as a contingency fee.
The fee agreement will state whether the lawyer charges a different percentage depending on whether the case settles or goes to trial. Although few lawyers use this type of agreement, you should be aware that they exist.
Lawyers can vary on how their contingency fee is calculated. The main difference in the calculations will be whether it’s based on the net recovery or gross recovery. This difference can change the fee drastically.
For example, suppose a lawyer charges a 30% contingency fee and has $1,000 in costs to be deducted. If the case settles for $20,000, you might receive $13,000 or $13,300 depending on whether the costs are deducted off the top or after the lawyer’s fee is deducted.
- Gross award calculation: Attorney paid $6,000, or 30% of $20,000. Then the $1,000 in costs is deducted, leaving you with $13,000.
- Net award calculation: $1,000 in fees deducted from the $20,000 settlement. The attorney’s 30% fee is then calculated using the net award of $19,000. The attorney is paid $5,700, leaving you with $13,300.
Again, all these issues should be addressed in the written contingency fee agreement required by the State Bar of Texas. If you are confused by the terms of the agreement, make sure to discuss them with the lawyer before signing it.
Mechanics of a Contingency Fee
When you enter into a contingency fee agreement with a lawyer, the lawyer will commence work immediately. Although the lawyer is not compensated directly for the time spent on the case, the lawyer is compensated for the outcome. Moreover, the lawyer is only paid when the case comes to an end, and you receive compensation. As a result, the lawyer has an incentive to resolve the case as quickly as possible and for the highest amount possible.
When the case settles or a jury awards damages, the insurance company for the person or business that caused your injury must either pay or file an appeal. In most situations, the insurance company will not spend the additional money to appeal a jury award and will send a check to your lawyer.
Once your lawyer receives the check, the lawyer will deposit it into the lawyer’s trust account. The lawyer will generate a billing statement that lists the costs and shows how the lawyer’s fee was calculated. The amount of the check that remains after the costs and fees are deducted will be forwarded to you.
Attorney Services Covered by the Attorney Fee
The attorney fee will usually cover all the services rendered by the attorney during the case, including:
- Legal consulting: The lawyer will usually have at least a few discussions with you about your case to collect information and provide legal advice.
- Gathering evidence: The lawyer’s staff will gather evidence, such as accident reports, witness statements, medical records, and photos of the accident scene.
- Negotiating: The lawyer will negotiate with the insurance company and attempt to reach a settlement. The negotiations will include written correspondence, phone calls, e-mails, and meetings.
- Litigating: If a settlement cannot be reached, the lawyer will need to file a lawsuit by preparing legal pleadings. After the lawsuit is filed, the lawyer will prepare for trial by deposing witnesses, exchanging documents with the insurance company, and dealing with various legal issues through motion work. Once trial begins, the lawyer will present your case to a jury.
Despite all of the work a lawyer may do to resolve your case, a contingency fee guarantees that you will receive the bulk of the settlement or damages award.
Hiring a Lawyer
Understanding how much a lawyer costs is just one part of choosing a lawyer. However, because the lawyer’s fee will directly affect your compensation, you should be clear about how the fee is calculated. This will help you compare lawyers and choose one who provides the best fit for your needs.