When you're making a car accident injury claim, whether to hire a car accident attorney is an important decision that can make a significant difference in how much you're able to recover for your losses. A number of key factors go into choosing the right attorney for you, but price may not be as important as you think, given that most car accident attorneys work under a "contingency fee" agreement. In this article, we'll discuss how these fee agreements work, and a few related considerations.
A contingency fee agreement is by far the most common kind of fee arrangement when an attorney takes on a plaintiff in a car accident case (and any kind of personal injury case, for that matter).
With this kind of arrangement, the attorney does not get paid unless he or she is able to obtain some kind of financial recovery for the client. When the attorney gets paid, it’s usually a certain percentage of the total recovered amount. The industry "standard" for contingency fee percentages in personal injury cases such as car accidents is one-third or 33 percent. However, depending on the state the attorney practices in, the timeline upon which the case settles, as and the complexity of the legal matter, a contingency fee percentage can range between 20% and 40%.
Things get a little bit more complicated when you factor in the litigation costs and expenses necessary to resolve a personal injury claim. For a car accident attorney to litigate a case, there will usually be expenditures for things like:
Throughout the course of a case, these fees can really add up, usually to at least a few thousand dollars, but easily reaching $20,000 or more.
Depending on the fine print of the contingency fee arrangement, the attorney may cover these expenses as soon as they become due, and they may be deducted from any personal injury settlement obtained for the client. One variable to consider is whether the expenses are deducted before or after the attorney receives his or her contingency fee percentage.
For example, let’s say the contingency fee arrangement states the attorney will receive 30% of the amount recovered, and the case settles for $200,000 with $20,000 in litigation costs and expenses. If the attorney gets paid before taking out the expenses, the attorney will receive $60,000 and the client will receive $120,000. But if the attorney gets paid after taking out the expenses, he or she will receive $54,000 and the client will receive $126,000. The latter scenario is more common in contingency fee arrangements, but in many states, either scenario is legal, as long as the attorney makes it clear to the client which method will be employed.
This is another commonly-used billing method in the legal world, although it's not employed much by car accident attorneys who work on the plaintiffs' side. Hourly billing is much more common for car accident defense attorneys. With hourly billing, the attorney receives a set amount of money per hour of work completed, regardless of whether the client wins the case. The hourly rate will hinge on the legal market the attorney is in, as well as the attorney’s skill and experience level, but a client can expect to pay an attorney anywhere from $100 to $500 per hour.
The flat fee arrangement is exactly how it sounds – an attorney charges a flat fee for a specific amount of legal work. The flat fee billing method is even less common with car accident attorneys, but will sometimes arise when the client only needs the attorney for a specific task, such as preparing and sending a demand letter. For more than a small, set amount of legal work, it’s very unlikely a car accident attorney will use a flat fee billing arrangement, due to the unpredictability of litigation.
In this hybrid approach, a client pays an attorney a retainer at the start of the case, and if the plaintiff wins, the attorney receives a contingency fee. A retainer is a lump sum payment that serves much like an advance. In car accident cases, the retainer can range from a few hundred to a few thousand dollars.
Once the case ends, the attorney takes the contingency fee percentage, but subtracts from it the original retainer amount. For example, if the attorney’s contingency fee percentage is 30%, the retainer is $1,000 and the amount recovered for the plaintiff is $40,000, the attorney would get $11,000.