How Contingency Fees Work

Most personal injury lawyers, and many employment and some other lawyers, work on contingency: they get paid only if you recover money, and their fee is a percentage of what you recover. It lets people with no money up front hire experienced lawyers, and it gives the lawyer a reason to maximize your recovery.

Typical percentages

A common range is about 33% to 40% of the recovery. Many agreements use a sliding scale, for example one-third if the case settles before a lawsuit is filed and a higher percentage if it goes into litigation or to trial, because that takes much more work. Some areas have legal limits: workers' compensation fees and Social Security disability fees are capped by law, and some states cap fees in medical malpractice cases.

Fees vs. costs

These are different, and the difference matters:

• The fee is the lawyer's percentage.
• Costs are the expenses of the case: filing fees, medical records, expert witnesses, depositions, investigators. In a serious case they can run into the thousands or more.

Most firms advance the costs and get repaid from the recovery. Ask two things: whether you owe the costs if you lose (many firms waive them, but not all), and whether the percentage is calculated before or after costs are deducted.

A worked example

Say your case settles for $90,000, with a 33⅓% fee, $5,000 in costs, and a $10,000 health-insurance lien:

• Fee calculated before costs: $30,000 fee, then $5,000 costs and $10,000 lien leaves $45,000 for you.
• Fee calculated after costs: $85,000 × ⅓ = about $28,333 fee, leaving about $46,667 for you.

Small wording, real money.

Questions to ask before you sign

1. What's the percentage, and does it change if the case is filed or goes to trial?
2. Is the fee taken before or after costs?
3. Who pays costs if we lose?
4. Will you negotiate medical liens down?
5. Who will actually work on my case day to day?
6. Can I get a written closing statement showing every deduction?

Contingency agreements must be in writing in most states. Read it, and don't sign on the spot if you're pressured.

Is it negotiable?

Sometimes. A case with clear liability and big damages that's likely to settle quickly may justify a lower percentage. It never hurts to ask.

Find a personal injury lawyer near you; most offer a free case review. Related: what your case may be worth.

This guide is general information, not legal advice. Fee rules vary by state and practice area.