In personal injury and medical malpractice lawsuits clients pay their lawyers with contingency fees.
Although an hourly or flat fee arrangement is legal, such fees are unheard of.
A contingency fee means that the lawyer’s fee is contingent upon obtaining a recovery for the client. In other words, if there is no recovery, there is no fee owed. In typical personal injury cases (except medical malpractice), the attorney’s fee is 1/3 or 33.3% of the net recovery. In effect, the attorney is a partner with the client, and the attorney has an interest in getting the best recovery possible for the client. The more money for the client means the higher fee for the attorney.
There is a misconception that the attorney takes 1/3 from the top and that the rest goes to the client. Such is not so.
The typical 1/3 contingency agreement says:
The lawyer agrees to advance the expenses for the prosecution of the case, such as the costs of medical records, doctors’ narrative reports, expert’s fees, court filing fees, and court reporter fees. These case costs can run many thousands of dollars depending upon the amount of damages, liability, and the complexity of the case.
Even though the lawyer advances those costs, the client remains obligated to repay the attorney regardless of the outcome of the case.
Such case expenses will be reimbursed to the attorney from the gross recovery.
After the costs are deducted and reimbursed to the lawyer, the attorney’s fee is 1/3 of the net recovery. The remaining 2/3 of the net recovery goes to the client. If the client has any liens or unpaid medical bills, they get deducted from the client’s share.
Here is an example:
The gross settlement is $32,000.
The attorney advanced case disbursements of $2,000. This amount get repaid to the attorney.
After the deduction of the $2,000 (paid to the attorney), the net settlement is $30,000.
The legal fee of 1/3 is taken from the net settlement of $30,000. Therefore, the lawyer’s fee is $10,000.
$20,000 is left for the client.
If you have any questions as to legal fees, review your fee agreement, and talk to your lawyer.
Mark E. Seitelman, 12/1/10, www.seitelman.com.