How are Costs and Attorney Fees Handled In Personal Injury Cases?
- Personal Injury
Most personal injury cases are handled on a contingency fee basis. That means the client pays attorney fees out of a portion of the money that is recovered at the end of the case. In this post, I will explain the difference between attorney fees and costs, contingency fees versus paying your attorney by the hour, and some of the benefits of the contingency fee.
No Recovery, No Fee
You may have seen advertisements from lawyers touting some variation of “We don’t get paid unless you get paid.” This is also true for most injury cases handled at Ready Law. But the fact that potential clients always have plenty of questions about how this works indicates more explanation is needed.
A contingency fee means attorney fees are dependent on recovering money in your case. My fees are a percentage of the total amount recovered. In personal injury cases, I don’t ask for any attorney fees in advance, and if I don’t recover any money for your claim, I simply don’t get paid. When I speak with potential clients about how this works, most of them ask this same question in two or three ways. For some, it’s hard to believe that an injured person can retain an attorney and have that attorney put in months of work and pay nothing out of pocket. But that is the reality of how the contingency fee works. No recovery, no fee really is the best description of this fee structure.
Attorneys in injury cases usually take a percentage of the total amount recovered for you. That includes money recovered from all the opposing parties, all their insurance policies, and any other insurance policies you may collect money from as a result of your injury.
What’s Left after Everyone Else Gets Paid/Repaid?
No recovery, no fee is a better description of how the contingency fee system works than “If you don’t get paid, we don’t get paid.” That last statement is almost always, but not alwaystrue. In some cases, you are required to repay money paid on your behalf by a third party. That usually also comes out of the money you recover. More often than not, if you’re repaying someone out of money I win for you, it’s a health insurance company. Sometimes it can be a healthcare provider, the government, or even an employer, depending upon how your health insurance is structured. This is known as paying a lien or subrogation right. I will be posting more about whether it makes sense for injury victims to have to repay health insurance companies in future posts. For now, you need to know that subrogation means you sometimes you have to pay others, in addition to your lawyer, out of your winnings in an injury case. So what’s left for you? You should talk to your lawyer about that early in your case, before you decide whether pursuing a lawsuit is worth it for you, or if it’s just going to make money for lawyers and health insurance companies.
Costs are case-related expenses. All case-related expenses that are not attorney fees are referred to as costs. If your attorney hires an independent medical examiner, some other expert witness, pays for a transcript of a hearing or deposition, etc., these are all considered costs. Both sides of an injury case will incur costs. Some cases have relatively low costs limited to the cost to order medical records early on. Other cases, such as cases involving a claim of medical malpractice, are notoriously expensive.
Attorneys may ask clients to pay some costs directly. Others may pay costs on the client’s behalf, keep a record of those costs, and then take them out of any recovery at the end of the case, along with their attorney fees. Either way, an attorney should be able to discuss the costs of your particular case with you in advance, and at least give you an idea of whether your case is likely to involve high costs.
At Ready Law, I pay most costs for my clients, and then take the costs back out of the final recovery, just like fees. If I lose a case and there is no recovery, I simply lose those costs as well. This approach minimizes the risk to the client, and I feel that is appropriate, because part of my job is to evaluate the claim and determine whether I believe a recovery is likely. It is evident that I believe in a case if I am willing to invest money into it in addition to time and work. However, there are a few exceptions to this. Sometimes clients will seek treatment with a healthcare provider and promise to pay the provider after the case is over. This is called treating on a lien and it is more common in cases where the client doesn’t have enough health insurance. The treatment providers in this case will bill the client directly, and will expect to be repaid regardless of whether the client recovers money in their case.
If a lawsuit is filed, sometimes courts will make one side pay all or a part of the other side’s attorney fees and costs as well. When you are talking with an attorney about the value of your case and whether a particular case is worth the time, effort, and energy of taking to trial, it is important to talk about more than just how much the attorney thinks a case is “worth.” The better question for a client might be how much he or she may get after all fees and costs are paid.
Contingency Fees = Access to Justice
In Colorado, all clients who choose to pay their injury attorney out of money they recover are choosing to pay that way. Attorneys who offer representation based on a contingency fee are required to also offer clients the option of paying a retainer and hourly rate instead. This is something that has to be in every fee agreement clients sign to retain their attorney.
Many injured clients do not have access to thousands of dollars to pay a retainer and fees in advance. The kind of work that injury lawyers typically put into a case would quickly price out most people who need injury lawyers, in part because those people are also trying to pay for medical care, and many are unable to work while they are recovering. Without the option to pay a percentage of the recovery, many injured people would have no access to justice, and many wrongdoers would never be held accountable.
Contingency fees also require lawyers to carefully evaluate a claim. Before I put months of effort into a case, and invest money into filing and pursuing a lawsuit, I have to carefully and objectively evaluate whether that claim is valid and justified. Attorneys with expert knowledge of the law and the court systems and an objective view of the claim for damages are best positioned to make that determination.
Contingency fees shift the financial risk from victims to attorneys, increasing access to justice for all. That shift also reduces the number of groundless lawsuits, and for both reasons, contingency fees benefit the public and even make our communities safer.
If you or someone you know has been injured by the negligence of another, the question is no longer whether you can afford an attorney to help you. Rather, the focus rightly centers on the strength of your case. The issues covered in this post are only briefly touched on here, and hopefully this helps readers think about some of the issues they should be considering right at the start of an injury case. To discuss any of these in more detail, or to find out how this might apply to you or your case, contact Ready Law right away.
You can schedule a free, no-obligation consultation with me directly just by clicking here, or by calling my office at 303-993-5512.