What Are Attorney Contingency Fees? | How are contingency fee percentages determined?

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What Are Attorney Contingency Fees?

What Are Attorney Contingency Fees?

Mar 12, 2021

Personal injury victims deserve the best legal representation but are often hesitant to pursue a consultation with an attorney due to the potential fees. For injured victims – whether due to a car accident, bicycle accident, slip and fall, dog bite, sex crime, or other incident – hiring an attorney to fight for your rights and seek a financial damages award can involve an hourly fee or a contingency fee.

Hourly fees are fairly straightforward. Whenever an attorney or paralegal works on your case, you’re essentially “on the clock,” and there is no ceiling for how much you could pay out-of-pocket. Depending on the duration of the case, the total fees incurred can add up to a significant amount of money. Before you hire a lawyer who charges by the hour, make sure to ask if he or she divides that hour into 15-minute or six-minute increments. This can be especially important when making phone calls or receiving case updates.

For example, a five-minute phone call would cost $100 when a lawyer who charges $400/hour breaks any applicable time into 15-minute increments. By comparison, a lawyer operating on the same hourly rate but offering six-minute billing increments would charge $40 (1/10 of the hourly rate of $400) for that same call. Over the course of a case, where hundreds of billable hours are often involved, this can add up to a considerable difference in the total fees owed by a client.

What are legal contingency fees?

The general definition of a contingency fee is a sum of money a lawyer receives on the condition that the case is successful. Legal contingency fees typically apply to personal injury cases. Unlike hourly fees, contingency fees are only payable if there is a favorable result in your case. An attorney’s contingency fee is often one third of a final damages award or verdict, but this can vary on a case-by-case basis. It is always recommended that you discuss the details of your contingency fee agreement with your attorney in advance.

What is a legal contingency fee agreement?

A contingency fee agreement is simply a payment arrangement allowing an injury victim seeking legal recourse to obtain representation by a lawyer, regardless of whether or not they have the financial means to pay that lawyer in the initial stages of a case. In a contingency fee arrangement, your lawyer agrees to accept a fixed percentage of the damages award recovered, which is the final amount paid to the client. Rather than paying an upfront fee and having additional fees due at specific periods throughout the legal process, a contingency fee agreement establishes that any fees will only be paid if and when a successful resolution to the case is reached and financial compensation is recovered.

If you do not win your case and recover monetary damages, you will owe nothing if you and your attorney entered into a contingency fee agreement in advance.

What costs and expenses are included in a contingency fee agreement?

How are contingency fee percentages determined?

Attorney contingency fees can vary from firm-to-firm and also fluctuate depending on the specific details related to your case. Most contingency fee agreements provide the lawyer a percentage of between 33 and 45%. As the potential client, you always have the right to negotiate a specific percentage or alternative agreement. In most personal injury cases, a lawyer will receive 33% (one third) of a final settlement or verdict. For example, if you receive a settlement offer of $300,000 from the at-fault party in a car accident and entered into a contingency fee agreement, you will receive $200,000 and your lawyer will receive $100,000.

In some cases, the contingency fee percentage paid to the attorney is determined by the merits of the case and will vary based on the amount of time it takes for the case to reach a conclusion. This is referred to as a “sliding scale” option. In such sliding scale agreements, where a contingency fee can increase according to what’s known as “tiers,” the following structure applies:

In cases that settle quickly – where a settlement is reached prior to a formal complaint being filed with the applicable court – the attorney will likely be entitled to a “first tier” percentage. A typical first tier percentage is 33%, however some cases may warrant a lower figure. In cases where a formal complaint must be filed in court, the fee percentage to which the attorney is entitled may increase.

In cases that do not reach a resolution and proceed to a trial, the attorney’s fees may increase once again. Essentially, if a case requires significant hours and proceeds to a lengthy trial, a client can expect the fee percentage to increase slightly from the first tier. Typically, that increase is somewhere between the initial 33% (one third) agreement and the potential high-end of 40%.

To many, an attorney’s contingency fees may seem high. However, studies indicate that personal injury victims actually receive significantly more money for their claim when represented by a qualified lawyer, as opposed to attempting to handle the case on their own. One thing to keep in mind when considering whether or not a contingency fee agreement is the best option for you is that if an attorney accepts your case, he or she is therefore willing to accept the risk that no compensation could potentially be received for legal services and expenses if the case is unsuccessful. By accepting that risk, the attorney is likely of the belief that a successful resolution leading to a fair financial damages award can be achieved. Accordingly, at DLG we only accept cases we believe can be won. When we accept your case, you can be confident that we will fight to recover a maximum damages award.

What costs and expenses are included in a contingency fee agreement?

Most personal injury lawyers cover case costs and expenses as they arise. When the case concludes, a total amount of costs and expenses is then deducted from the client’s share of the settlement or verdict. In rare cases, a personal injury lawyer may charge a client for costs and expenses once they are due. Dordulain Law Group does not charge clients for costs or expenses when they are due, but rather after a case has reached its final conclusion, and only if we prevail in securing money for the client. At no time will one of our clients ever owe DLG money merely for pursuing a case.

Examples of costs and expenses that may accumulate throughout a personal injury case include:

  • medical records
  • expert witness fees
  • police reports
  • filing fees
  • postage
  • investigators
  • depositions
  • transcripts
  • trial exhibits

Ready to file a claim and pursue justice through a financial damages award? Our expert attorneys are available online or by phone now.

What are the pros and cons of contingency fee agreements?

Contingency fee agreements can be viewed in different lights depending on the facts of a case. For example, if you’re involved in a car accident and suffer some moderate injuries, a quick insurance settlement for $25,000 may be possible. However, if your injuries led to substantial medical bills and other financial losses exceeding that figure, any legitimate attorney would reject such an offer. At Dordulian Law Group, we fight on behalf of every client for a maximum damages award that makes the client “whole” and ensures their financial losses are covered. Our goal is to get you back on your feet without undue worry over financial stressors. If you’ve suffered an injury, you deserve to be appropriately compensated for physical pain, emotional trauma, pain and suffering, and more. We fight for every ounce of available financial compensation for your accident and resulting injuries.

It’s important that clients ask questions during the consultation phase when screening potential personal injury attorneys. Always request an estimate for how much your case is worth, and use that as a guide throughout the legal process. Comparing various estimates among multiple attorneys is advisable. Inquire as to whether or not the attorney has handled similar cases involving similar circumstances, and what sort of settlements or verdicts they have been able to successfully obtain for their clients in the past.

At DLG, we’ve recovered over $100 million in settlements and verdicts for our clients throughout the years. We’re here to do the same for you, serving as your dedicated advocate.

Is a contingency fee agreement the best option for me?

A study by the Insurance Research Council (IRC) found that settlements were 40% higher when claimants had private legal representation. IRC research also indicates that the average insurance payout is 3.5 times higher for clients who have hired a private attorney than for those representing themselves. Finally, the IRC report found that 85% of all money paid by insurance companies for bodily injuries is received by clients who have secured representation from a private personal injury attorney.

Whether or not a contingency fee agreement is the best option for you depends on multiple factors. If your case will likely reach a successful conclusion in a matter of weeks, an hourly rate – if you can afford it – may be the best course of action. However, many of us are unable to afford up front fees or out-of-pocket expenses, particularly when there is no ceiling on such costs.

The best way to ensure that a contingency fee agreement is fair is to research the personal injury attorney you are planning to hire. It’s important to determine whether or not the attorney has experience successfully handling your type of case in the past. Additionally, it’s important to determine whether or not the attorney is open to proceeding to trial if a settlement is not reached. At Dordulian Law Group, our founder and president, Samuel Dordulian, has decades of trial experience, including 13 years as a Deputy District Attorney for Los Angeles County. We are always prepared to take a case to trial, regardless of how it may impact our ultimate fee. If it is in the best interest of the client and will likely lead to an increased damages award, we will take the case to trial.

Some mega-firms are referred to as “settlement mills” because of their tendency to quickly settle cases without taking the time to investigate all available options. Insurance companies love settlement mill firms because they know their payouts will be lower and the time spent on a particular claim will be reduced when compared with firms who are always prepared to go to trial. At DLG, our team includes professionals who have previously worked for the major insurance companies. We know all the tactics and will fight them aggressively to ensure you receive a maximum damages award with no money left on the table.

If you experienced a premises liability injury, don’t wait to file a claim. Contact our expert attorneys online or by phone for a free consultation today.

What is the Model Rule 1.5 for legal services fees?

Rule 1.5 of the American Bar Association (ABA) Model Rules of Professional Conduct prohibits fees that are “unreasonable.

There are eight factors listed in the American Bar Association’s Model Rule 1.5 that are intended to help determine what is reasonable versus unreasonable for a fee percentage in various cases:

  1. The time and labor required for the matter, the novelty and difficulty of the questions involved, and the skill necessary to handle the matter properly
  2. The likelihood, if apparent to the client, that taking on this matter will preclude other employment by the lawyer
  3. The fee customarily charged in the locality for similar legal services.
  4. The amount involved and the results obtained
  5. Time limitations imposed by the client or by the circumstances of the case
  6. The nature and length of the professional relationship with the client
  7. The lawyer’s experience, reputation and ability
  8. Whether the fee is fixed or contingent

If you feel you have agreed to or paid an unreasonable fee to a personal injury lawyer, disciplinary bodies such as the California Bar Association and American Bar Association are available to handle complaints. When evaluating fees and expenses for individual cases, these bodies typically apply the eight standards listed above. However, those standards are not exclusive, nor pertinent to every case.

Are contingency fees tax deductible?

Whether or not contingency fees are tax deductible depends on so many ever-changing variables that it’s really not possible to reach a conclusion with any certainty until you examine all the facts of a unique case in detail. Given the various laws that vary according to state and federal jurisdictions, it is recommended that you discuss contingency fee tax deductions with an experienced accountant or tax lawyer.

In terms of a settlement, tax laws are a bit clearer. According to the IRS, if you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount of the settlement is non-taxable. The IRS, however, recommends that you do not list any settlement proceeds as part of your earned income.

If you’ve been injured at work, contact our certified workers’ compensation specialists online or by phone for a free consultation today.

When can I expect to receive my settlement check?

The times it takes to receive a settlement check can vary depending on the facts of the case. Generally speaking, once a settlement has been reached a personal injury victim can expect to receive a check within approximately six weeks. Delays aren’t uncommon, but in the majority of cases this is the anticipated turnaround time. There are multiple steps involved in the process of issuing a settlement check. Those steps include:

1- Signing a release: A release must be signed in order for the defendant or their insurance company to issue a settlement check. The release will state that no further legal action will be taken to pursue additional damages for the incident in question. This simply protects the liable party from being sued more than once for the same injury or accident.

2- Processing a release: Once the release has been signed, the insurance company or at-fault party will process the document and eventually issue a settlement check. The settlement check is traditionally sent to your personal injury attorney and made payable in both of your names.

3- Depositing a check: After the check is received, your attorney will deposit it into a special trust or escrow account. Once the check clears, your personal injury attorney will distribute the settlement money.

4- Deducting legal fees and paying you directly: After your attorney pays off any outstanding liens and subtracts legal costs (e.g. billable hours, court reporting costs, expert witness fees, filing fees, etc.), you will receive the settlement check for the applicable amount.

Why choose DLG for your California personal injury claim?

Dordulian Law Group is California’s premier personal injury firm serving victims of car accidents, sexual assaults, slip and falls, pedestrian accidents, dog bites, wrongful deaths, and much more. Our experience in all types of personal injury cases is unparalleled, and we are committed to ensuring you receive every penny to which you are entitled following an unfortunate accident.

Call us today at 818-322-4056 or contact us online for a free consultation. We’re here to answer any question you may have 24/7. Don’t put your case in the hands of a firm where you’ll be nothing more than a number. DLG is not a settlement mill. We will fight aggressively against the at-fault party or insurance company with everything we have, ensuring your best interests are always protected.

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