According to the New York City Bar Association, a contingency fee is only paid to an attorney when a case is won. This is the kind of fee charged by most personal injury lawyers in New York. It means that if you lose your case, you will owe no attorney’s fee.
Advantages of Contingency Fee System
There are some definite advantages to this type of fee arrangement. First, if you find a lawyer who will take your car accident or other personal injury case, you can be assured that he or she thinks there is a reasonable chance of succeeding. Most attorneys do not accept cases that they think will lose – they won’t get paid!
It also means that the other side in a personal injury case – an insurance company, an individual or institution – will be more likely to settle than if you had approached them directly. Once you have an attorney who is willing to work on a case, the other side knows that your legal representative thinks there is a chance of winning. This means that the other side is more likely to make a fair settlement offer.
An important feature of this fee system is the way it allows people who could otherwise not afford an attorney to take legal action when they have been wronged. Contingency fees expand access to the civil justice system.
How Are Contingency Fees Calculated?
Contingency fees are usually a certain percentage of the settlement or judgment, and a typical amount is 33 percent of the award. However, contingency fees can also be negotiated. An attorney could charge one percentage for sending a demand letter before the lawsuit is filed and a different percentage if the case goes to trial. Another way of doing this is to charge one percentage for smaller award amounts and a different percentage for higher amounts. Whatever the arrangement, it’s important for the client and attorney to agree to the fees before any retainer agreement is signed.
This does not mean that a client receives the entire award minus the agreed-upon attorney’s fee. Most attorneys advance case costs such as postage, filing fees, expert fees, fees for obtaining medical records and other expenses related to bringing a lawsuit. These charges are deducted from the total amount of the award to reimburse the attorney. The contingency fee is then based on the net award – the total verdict or settlement minus the costs. For example, if a case settled for $80,000 and case expenses were $20,000, the attorney’s fee would be 33 percent of $60,000, or $20,000. The client would receive $40,000.
Contingency fees work like this: Once the case is won or settled, the defendant sends a check to the attorney representing the plaintiff for the amount of the award. The attorney then deducts the case expenses and his or her fee and sends a check for the remainder to the client. It is usual for the attorney to receive the verdict or settlement check. This insures he or she will be paid.
If the case is not won, the client may still owe the attorney for the costs of the case.
In addition to the other benefits of the contingency fee system, these fee arrangements provide an incentive for attorneys to seek maximum compensation for clients. The more a client wins, the more an attorney is paid. It’s basically a win-win for injured clients and for the lawyers who represent them. A New York City personal injury attorney can tell you more about contingency fees.