What Is A Contingency Fee?
When I meet with an injured client, they almost always ask “How much is this going to cost?” I explain that our firm, Mandy Rodriguez Law, takes all personal injury cases on a contingency basis. The next question the client asks is “What is a contingency fee?”
“Contingent = Dependent”
Think of the word “contingent” to also mean dependent. The personal injury attorney’s fees are contingent/dependent on whether a personal injury case is settled or money is awarded after a trial. In other words, the personal injury attorney only gets paid if the personal injury client does. A contingency fee is a percentage of the settlement money the personal injury attorney recovers for the personal injury client.
A contingency fee simply means that a personal injury client does not pay any money upfront or during their personal injury case. It is only after a personal injury case is settled, or awarded money after a trial, that any money is paid to the personal injury attorney. In other words, a personal injury client can hire a personal injury attorney and not pay any money upfront or during the case. The personal injury attorney is only paid a contingency fee if and when the personal injury case is settled, or awarded money after a trial.
In Texas, personal injury attorney’s contingency fees are regulated by the Texas Disciplinary Rules of Professional Conduct [TEXAS DISCIPLINARY RULES OF (texasbar.com)]. These rules state that contingency fees are only allowed in civil cases, such as personal injury claims. In addition to these rules, an agreement that should be signed by the personal injury client and personal injury attorney, also called a Fee Agreement, details all of the contingency fees and must be signed before a personal injury attorney begins working on a personal injury case.
How Are Contingency Fees Determined?
Contingencies fees in Texas are a percentage of the amount the personal injury case settles for or is awarded after a trial. Contingency fees can range from 33% to 45%. The range of the contingency fee percentages relies on several factors, including the phase the personal injury case is settled; such as before a lawsuit is filed, before trial or after trial.
For example:
Before filing a lawsuit: This is the first phase a personal injury case can possibly be settled. Here, the personal injury attorney sends a demand and negotiates a settlement. During this phase, the contingency fee would most likely be at the lowest point, perhaps 33%.
After filing a lawsuit but before trial: This is the second phase a personal injury case can possibly be settled. If the personal injury case is not settled by sending a demand and negotiating a settlement, then a lawsuit must be drafted and filed. Here, the contingency fee would increase and negotiations would continue to attempt to settle the personal injury case.
After going to trial: This is the third phase a personal injury case can be settled. If after filing a lawsuit, the personal injury case is still not settled and goes all the way through a trial and verdict, this will be an even higher contingency fee.
Here’s an example of how a contingency fee agreement may look.
Let’s assume a personal injury case settles before filing a lawsuit and the contingency fee is 33%; and if your personal injury case is settled after filing suit, but before trial, the contingency fee is 40%; and if your personal injury case is settled after a trial begins, the contingency fee is 45%.
Now, let’s use some real dollar amounts to further demonstrate:
Before filing a lawsuit: The contingency fee is 33% and the case settles for $30,000.00 during this phase, the personal injury attorney’s contingency fee is $10,000.00.
After filing a lawsuit but before trial: The contingency fee is 40% and the case settles for $30,000.00 during this phase, the personal injury attorney’s contingency fee is $12,000.00.
After going to trial: The contingency fee is 45% and the case settles for $30,000.00 during this phase, the personal injury attorney’s contingency fee is $13,500.00.
With each phase to get a personal injury case settled, there is more work involved for the personal injury attorney and therefore the contingency fee percentage increases to compensate for the additional work.
Who Pays For The Expenses Of Your Personal Injury Case?
Personal injury cases often have various costs, known as case expenses. Not to worry, the personal injury attorney will also pay for these costs as well and will only get reimbursed when the personal injury case settles or there is an award after a trial. In other words, these expenses are only paid if the personal injury case is won. No win, no pay.
Personal injury case expenses can increase if a lawsuit is filed, but don’t worry—the personal injury attorney will still pay these costs upfront so the personal injury client doesn’t have to.
Here are some examples of personal injury case expenses:
Filing fees: Courts charge a fee to file and record legal documents related to your case.
Service of process fees: The Sheriff or a process server charges a fee to serve the other person in your personal injury lawsuit, this person is usually the person who caused the injury.
Court reporter fees: If depositions (interviews under oath) are taken, a court reporter will need to be present to transcribe and record the testimony. Their services come with a cost and may increase if the deposition is also videoed.
Expert witness fees: In some cases, expert witnesses, such as medical professionals or accident reconstruction experts, may be required to testify or provide reports, which can add to the costs. These experts are entitled to be paid for their written reports and for their time testifying during a deposition and at trial.
Copying costs: Medical providers charge to locate and provide copies of medical bills and records. In addition, witness statements, and police reports also have a fee to obtain copies.
Investigator fees: In some personal injury cases, private investigators are needed and are hired to gather evidence. They also charge for their written reports and time spent in depositions and at trial.
Trial exhibit costs: Creating documents and preparing exhibits for trial can also add to the expenses for a personal injury case.
When Does A Personal Injury Client Need To Pay The Expenses?
Personal injury case expenses are deducted after calculating the attorney fee. This is done by calculating the personal injury attorney’s contingency first, and expenses are deducted afterward.
If a personal injury case settles for $30,000.00 and the contingency fee is 33%, then the personal injury attorney’s contingency fee would be $10,000.00. If the expenses were $500.00, this would leave the personal injury client with $19,500.00.
Why Do Personal Injury Attorneys Use A Contingency Fee System For Personal Injury Cases?
If personal injury attorneys did not take personal injury cases on a contingency basis, many would not have the financial resources to seek justice or have access to medical treatment. Taking personal injury cases on a contingency basis provides a huge advantage to everyone seeking justice when they have been injured.
Personal injury cases can be expensive to investigate, negotiate, obtain witness documents, hire experts and those expenses increase if the personal injury case goes to trial. Personal injury attorneys make it possible to have access to legal representation. By working on a contingency fee basis, personal injury attorneys make it possible to hire an attorney without worrying about the upfront expense and financial burden.
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