Here’s everything you need to know about when and how to negotiate contingency fees with your personal injury attorney, so you can get more of your settlement compensation.
While most lawyers work for an hourly rate or flat fee, personal injury attorneys represent victims on a contingency fee basis, meaning the attorney’s fees are only paid if your claim settles or you win a verdict in court.
Most injury victims couldn’t afford an attorney if they had to pay out-of-pocket for legal fees and costs. Injured and unable to work, it’s hard enough to pay the bills without worrying about how to pay for an attorney.
Contingency fee rates for most cases range from 33 to 40 percent of your settlement or court award. However, you do have the right to negotiate lower rates with an attorney before deciding to hire them to represent you.
Standard Contingency Fee Rates
Attorneys who specialize in personal injury cases, also called trial lawyers, take a financial risk by representing clients on a contingency fee basis. They may spend weeks or months working on your case and end up with nothing.
The 33 to 40 percent contingency fee structure allows personal injury attorneys to expect a reasonable return on the time and money they invest for their clients – both the winners and the losers.
Courts and state bar associations have reviewed contingency fee arrangements found them to be fair for both attorneys and clients.
Some claimants think these fee percentages are too high, but there are reasons to justify them.
First, when an attorney accepts a case, they are committing to several months or even years of work. They will deal with one or more insurance claims adjusters, witnesses, investigators, expert witnesses, and more. That’s a serious time investment.
Second, all costs related to pursuing the case will be advanced by the law firm, with no guarantee of reimbursement. Some attorneys take the loss on legal costs if they are unable to get your claim settled or lose in court.
The difference between legal fees and costs:
Fees are the wages paid to an attorney for their work. Personal injury attorneys are typically paid a percentage of compensation recovered for the client.
Costs are the expenses that add up while working an injury case, like copy costs, court filing fees, hiring expert witnesses, deposition expenses, and more.
Although most personal injury cases are settled out of court, many are not. Moreover, when a case doesn’t settle or is lost at trial or arbitration, the attorney not only loses the money advanced for costs but often ends up with a substantial loss of income.
All the same, there are times when it’s wise and appropriate to negotiate attorney fees.
When to Negotiate Attorney Fees
Rarely will an attorney, or any other professional, offer to reduce their fees. If you want to negotiate the fee schedule with your attorney, you must be the one to bring it up.
The time to discuss a fee reduction is at your initial consultation. You won’t be able to negotiate lower fees after you’ve already signed a contract.
You can successfully negotiate contingency fees for injury cases if you are well organized and ready to give the attorney a good reason for the reduction.
Some of the best reasons for reducing attorney fees include:
- Lowered risk for the attorney
- Small anticipated net settlement
- Legwork completed by the client
- Potentially high verdict with punitive damages
Before you sign an attorney fee agreement, be sure you fully understand how the settlement will be broken down. If the attorney won’t take the time to explain the terms of the agreement, or fails to adequately answer your questions, move on to the next attorney.
Always ask the attorney if their fees are negotiable, and talk to more than one attorney. If your case is solid and you ask the attorney for a fee reduction, you may be pleasantly surprised when they agree. The reduction may not be a lot, but every percentage point taken off is money in your pocket.
How to Justify Reduced Attorney Fees
Attorneys, like doctors, charge rates that reflect the specialized, professional services they can offer after years of expensive education and training.
Time spent working on an injury case that fails in court is a significant loss of income for an attorney, so contingency fees also help protect the financial stability of the law firm against potential losses. After all, you never know what a jury will do.
Lower Risk for the Attorney
If your case is a slam dunk, meaning the insurance company has accepted full liability for their insured and the only remaining issue is the value of your injuries, there is much less risk for the attorney.
You’ll probably get a higher settlement with an attorney than on your own if the attorney accepts the case for a lower contingency rate. It’s worth it to have the fee discussion when you first meet with the attorney.
Another way to lower risk for the attorney is to agree to pay for costs out of your own pocket as they occur. Ask the attorney what kind of costs they expect for your case. If you can afford to pay the estimated costs as they arise in your case, you’ll have a strong reason to ask for lower attorney fees.
Small Net Settlement
Some attorneys will agree to reduce their fees when the net amount payable to the client would otherwise be unreasonably low. Although reducing a contractually agreed fee is not required by law, these attorneys believe it’s unfair for their clients to receive so little, especially after all the pain and suffering they endured.
It’s important to know all you can about your case and its estimated settlement amount before you sign a fee agreement. Unless your attorney offers to lower their rates, it will be up to you to ask.
Before retaining an attorney, ask for an estimate what your settlement might be. If most of your injuries were soft tissue, like muscle sprains and whiplash, and your medical and related treatment bills are high, there’s a good chance after costs and fees are deducted you may be left with very little money.
Example of Negotiating Attorney Fees
Jim suffered whiplash after a rear-end collision. His medical and chiropractic bills amount to $4,000. Because soft tissue injuries don’t qualify for high multiples, Jim’s attorney may only be able to settle his case for a multiple of two, which is $8,000.
If the attorney’s costs are $300, that leaves $7,700.
After deducting a standard fee of 33.3 percent ($2,564), the remaining amount is $5,136. After Jim’s attorney pays his medical and chiropractic bills of $4,000, his net settlement amount is only $1,136.
Unless he can convince his attorney to lower her fee, Jim will be left with only that small amount to show for all the pain and suffering he endured.
In a case like this, it would be reasonable for Jim to ask his attorney to reduce her fee to 25 percent. That would lower the attorney’s amount to $1,925. After medical and chiropractic bills are deducted, Jim’s net payout is $1,775, which is quite a bit better than $1,136.
You’ve Already Done the Legwork
When you arrive for your initial consultation with a personal injury attorney and have collected and organized an accident case file, you are in a strong position to negotiate the attorney’s fees.
Assuming you have a fairly straightforward injury claim against the at-fault person’s insurance company, like after a car accident or a slip and fall, your accident claim file might include:
- Your medical bills and records
- Witness statements
- A copy of the police report
- Correspondence with the insurance company
- Photographs or video of the accident scene and your injuries
- Wage loss verification
If you did a ton of work before hiring the attorney, you have a valid reason for them to lower their fee. That’s work the attorney won’t have to do and money they won’t have to spend.
Your case file will make it easier for the attorney to estimate the value of your claim and decide if the claim will likely settle without a lawsuit.
Depending upon the amount of legwork you performed and the attorney’s estimate of your final settlement amount, they may reduce their fee accordingly.
Negotiating a Sliding Fee Scale
It’s easier on everyone when an injury claim can be settled directly with the insurance company.
When a lawsuit is filed, the attorney’s heavy lifting gets underway. That’s why personal injury attorneys commonly charge around 33 percent to settle your claim outside of court, with a rate increase to 40 percent if a lawsuit is filed.
In many cases, filing a lawsuit is just the push an insurance company needs to put a fair amount of compensation on the table. Yes, a lawsuit was filed, but the case is settled before anyone appears in court and before any significant litigation work was done.
In most states, after a lawsuit is filed the party who is being sued (the defendant) must be served with a notification and has at least 20 days more to respond to your complaint. A month or more can easily go by before the defendant’s deadline to respond. In the meantime, your attorney may settle your claim with the defendant’s insurance company.
Understanding how the threat of a lawsuit can encourage a quick settlement, you might be able to negotiate a 33 percent contingency fee that only rises to 40 percent after the defendant responds to your lawsuit.
High Verdicts with Punitive Damages
Some injury cases, like medical malpractice, birth injuries, and dangerous drug claims are extremely complex and require a lawsuit from the start. There may be multiple defendants in the lawsuit who share the blame for the victim’s injuries and suffering.
Complicated high-dollar cases are very expensive to litigate, with extremely high costs for medical and technical experts, and extensive discovery.
Only highly specialized law firms can handle complicated cases with high costs. While there is always the risk of losing in court, if they win, they can win big.
Jury verdicts can reach hundreds of thousands of dollars, and if the at-fault parties are found to be egregiously negligent, the jury might award punitive damages that can go into millions of dollars.
The attorney may be willing to agree to a sliding scale in anticipation of a high punitive damages award. For example, the attorney might take 33% of the first $250,000, 25% of the next $750,000, and 15% of anything over $1 million.
Challenges to Fee Negotiations
Most attorneys won’t take your case on a contingency fee basis unless they think your case has a decent chance of winning fair compensation. However, even if they take your case, the higher the risk, the less likely an attorney will consider a fee reduction.
There’s a higher risk when:
- You might share some blame for the circumstances leading to your injuries
- You’ve had similar previous injuries
- The insurance company won’t accept liability
- There isn’t much evidence to support your claim
If you live in a busy metropolitan area with trial attorneys on every corner, you have a better chance of negotiating fees than if you’re in an area with only a few qualified attorneys.
Keep in mind that cheaper is not always better. Attorneys with a proven track record of winning big verdicts against insurance companies have plenty of clients ready to pay standard contingency fees.
When hiring an attorney, always have a written fee agreement that you’ve carefully read and understand. Your attorney should be more than happy to explain any parts of the agreement before you sign.
Severe injury victims almost always recover higher compensation when represented by counsel, even after paying the attorney’s fees. Most attorneys don’t charge for the initial consultation, so don’t wait to find out what an experienced personal injury attorney can do for you.
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