In personal injury cases, attorneys and their clients have a fair amount of freedom when it comes to choosing a fee arrangement. How a personal injury attorney gets paid is usually dictated by which side of the case the attorney represents: the plaintiff (the injured person bringing the claim) or the defendant (the person who is alleged to have caused the injury).
The most important thing to know here is that the vast majority of plaintiff’s attorneys practicing personal injury law will receive payment under a contingency fee agreement.
This means the attorney doesn’t receive a fee for legal services unless the attorney is able to obtain a recovery for the client. Typically, this fee amounts to a certain percentage (around 33%) of the amount recovered from a personal injury settlement or court judgment after trial.
While the contingency fee arrangement is relatively straightforward, there are a number of variations, such as:
For attorneys who defend their clients in personal injury lawsuits, the majority of fee arrangements revolve around the billable hour. For example, if an attorney spends 32.5 hours on a case and charges $250 per hour, the attorney’s fee will be $8,125.
Like the contingency fee arrangement, hourly billing is fairly simple, although modified hourly fee arrangements exist, including:
On the plaintiff’s side, because most plaintiff’s attorneys work on a contingency basis, if the plaintiff obtains a recovery from the defendant, the plaintiff’s attorney’s fee comes from the amount paid by the defendant to settle the case (or the amount the defendant is ordered to pay by the court after a trial).
On the defendant’s side of personal injury litigation, if a liability insurance policy applies to the underlying accident, the policy will not only indemnify the defendant for any judgment or settlement they must pay the plaintiff (up to policy limits, of course), it will also provide a legal defense in case the defendant gets sued. That means the insurance company will choose and pay for an attorney to represent the defendant.
If no insurance policy covers the underlying accident, the defendant will need to pay out of pocket for an attorney's services.
Most liability insurance policies, such as those purchased by individuals and businesses to protect their vehicles, homes, and businesses, include a duty to defend provision. This requires the insurance company to provide a legal defense to the policyholder if they become involved in a lawsuit concerning an event that triggers coverage.
This duty to defend is very broad. It requires the insurance company to pay for the policyholder’s defense attorney in lawsuits even if there is only a chance that the underlying cause of action falls within the insurance policy’s scope of coverage. Until it’s clear the policyholder is being sued for conduct that is not covered by the policyholder’s insurance policy, the insurance company usually must pay for the policyholder’s defense attorney.
This duty to defend can sometimes create a conflict because the defense attorney may have two interests to consider. On the one hand, the defense attorney owes a duty to the policyholder. But it’s the insurance company that actually pays the attorney, and the attorney probably wants to keep the insurance company happy (so they continue sending more work the attorney's way. And on occasion, what’s best for the policyholder is not necessarily best for the insurance company. It's important to keep in mind that in this scenario, the attorney is ethically and professionally obligated to do what’s best for the client (the policyholder) and not the insurance company.
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