Long-term disability (LTD) attorneys generally charge little or no money up-front and instead handle cases on a "contingency" basis. Under a contingency fee agreement, the attorney is compensated from the proceeds of your case (in other words, the long-term disability benefits you win). The attorney usually gets 25% to 40% of your settlement amount or monthly benefits. If you don't win your case, your attorney does not collect a fee. So for example, in a case where you win $30,000 in past-due benefits, your attorney might charge anywhere from $7,500 to $12,000.

Understanding and Negotiating Your Lawyer's Fee

Before agreeing to a contingency fee, make sure you're clear on the exact percentage of your award the attorney will receive. Remember that everything is negotiable: if your attorney offers to take your case for 40%, consider making a reasonable counter-offer, perhaps at 25%. If you can't come to an agreement on the fee, call another firm and do some comparison shopping. But don't forget that you generally get what you pay for. Hiring an inexpensive attorney with no experience is a false economy.

If your case settles and you obtain a single lump sum settlement for past and future long-term disability benefits, it's easy to determine your lawyer's fee. But what if your LTD insurance carrier approves you for monthly LTD benefits? Will your lawyer receive a percentage of only the past-due benefits, or the future monthly amounts as well? Do you want to be paying your lawyer a sizable chunk of your monthly check for as long as you receive benefits? Think very carefully before agreeing to pay your lawyer any portion of future benefits; it can cost you dearly.

Will My LTD Carrier Ever Pay My Attorney's Fees?

ERISA. The law governing most group LTD plans, the Employee Retirement Income Security Act (ERISA), contains a provision whereby a federal court can order your LTD insurer to cover your attorney's fees. Such an award is at the discretion of the judge, and it's by no means automatic. LTD carriers will not cover attorney's fees unless a judge specifically orders them to do so.

A recent Supreme Court case, Hardt v. Reliance Standard Life Insurance Company, made clear that you don't necessarily need to be the "prevailing party" to receive attorney's fees. Rather, you need to demonstrate "some degree of success on the merits," a standard which has seen inconsistent application since the Court's decision in 2010. Still, most courts consider five factors in deciding whether to award attorney's fees:

• Did the opposing party act in bad faith?
• Is the opposing party able to pay an award of attorney's fees?
• Will an award deter others from engaging in similar conduct?
• Did the party requesting fees obtain a benefit for other plan participants through the litigation?
• What were the merits of the parties' positions?

If you are awarded attorneys' fees, note that the award won't cover the attorney's time spent on the administrative appeal within the insurance company, only the hours spent on litigation in the district and appellate courts.

Individual plans. Those with individual LTD plans or group plans not covered by ERISA operate under the "American Rule," which states that each party pays for his or her own attorney. This rule is rarely set aside absent extraordinary circumstances.

Who Pays the Expenses Related to Your Case?

Most disability law firms will front the money for litigation-related expenses, but will require you to reimburse them for these costs when your case concludes. Expenses typically include the following:

• costs of obtaining medical records or expert opinions
• travel expenses
• depositions
• filing fees
• postage
• copying costs, and
• long-distance phone calls.

The expenses are charged separately from the attorneys' fee, and you'll likely be required to pay them even if you lose your case. Read the lawyer's expense agreement carefully before signing it, and be wary of agreeing to reimburse your attorney for "overhead" or anything else unrelated to your particular case. When your case has ended, you should receive an itemized list of expenses along with your bill.

Is Your Attorney's Fee Excessive?

Although attorneys sometimes go unpaid under contingent fee agreements, other times a lawyer will work on a case for only a few hours (or less) and, per the agreement, be entitled to several thousand dollars. This strikes many clients as unfair, and even lawyers themselves debate the ethics of it. Many state bar associations prohibit lawyers from charging fees that are clearly excessive or unrelated to the amount of work performed, even with a contingent fee.

If you feel your attorney's fee is grossly disproportionate to the amount of work performed, you should first discuss the issue with your lawyer. Some lawyers will reduce the fee on their own; others won't. To file a complaint about an excessive attorney's fee, contact your state bar association.

For most long-term disaiblity claimants, giving their attorney a percentage of their past-due benefits is well worth it. Read our article on why you should hire an LTD lawyer to find out why.