Negotiating Attorney Fees for Personal Injury Settlements

The 33 to 40 percent contingency fee structure was developed so attorneys could expect a reasonable return on the time and money they invest for their personal injury clients – both the winners and the losers. Contingent fee percentages have been reviewed by courts and state bar associations and found 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, she makes a commitment of several months to several years of work. She’ll be dealing 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 come out of her own pocket, with no guarantee of reimbursement. The attorney is essentially paying her bills with an educated gamble on the outcome of the case.

Although most personal injury cases are settled, many are not. And when a case doesn’t settle or it’s lost at trial or arbitration, the attorney not only loses all the money she put into the case, but often ends up with a substantial loss of income.

Notwithstanding the above points, there are times when negotiating attorney fees is appropriate.

When to Negotiate Fees

There are some attorneys who will agree to reduce their fees, especially 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.

Some attorneys recognize when a client will end up with a small net settlement amount and adjust their fees accordingly, but there are many more who don’t. That’s why 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, it will be up to you to persuade her.

Here are two situations when it may be appropriate to negotiate attorney fees:

  1. You did a substantial amount of administrative work prior to retaining the attorney (ex. organizing documents, gathering police reports and witness statements, etc.). If you did a ton of work prior to hiring the attorney, you have a valid reason for her to lower her fee. That’s work she won’t have to do and money she won’t have to spend. Depending upon the amount of legwork you performed and the attorney’s estimate of your final settlement amount, she may reduce her fee accordingly.
  2. Your estimated final settlement payout won’t leave you enough to cover your expenses.

Before retaining an attorney, ask if she can estimate what your settlement might be. If most of your injuries were soft tissue and your medical and related treatment bills are quite high, there’s a good chance after the costs and fees are deducted you may be left with very little money.

Example of Negotiating Attorney Fees

Jim’s medical and chiropractic bills amount to $4,000. Because soft tissue injuries don’t demand 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 her 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.

Remember, it’s YOUR case. You were injured and you endured the pain and suffering. You have a right to be fairly compensated for your injuries.

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 the fees are negotiable. There’s a lot of competition among personal injury attorneys. If your case is solid and you ask the attorney for a fee reduction, you may be pleasantly surprised when he or she agrees. The reduction may not be a lot, but every percentage point taken off is money in your pocket.

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