Almost every personal injury lawyer in the United States works on a contingency fee, which means the lawyer is paid a percentage of whatever the case recovers and is paid nothing if the case recovers nothing. The percentage is commonly about one third of the recovery for a case that settles before a lawsuit is filed, and it often rises if the case goes into litigation or trial. On top of the fee, the lawyer is reimbursed for case costs, and any medical liens and unpaid bills are paid out of the recovery as well. What you actually keep is the recovery minus the fee, minus the costs, minus the liens.
This post explains each piece of that math, in order, so you can read a fee agreement and know what your net is likely to be.
What is a contingency fee?
A contingency fee is a fee that is contingent on the outcome. Instead of billing you by the hour or charging a flat amount up front, the lawyer agrees to take a set percentage of the money the case brings in. If the case wins or settles, the lawyer takes that percentage. If the case recovers nothing, the lawyer takes no fee.
The arrangement exists because most injured people cannot pay an hourly lawyer while they are out of work and facing medical bills. Contingency fees let a person with a strong claim and no cash hire a lawyer, because the lawyer is betting on the case rather than billing the client. The trade is that a winning case pays the lawyer more than the same hours would have earned at an hourly rate, which is how the lawyer is compensated for taking the risk on the cases that lose.
Contingency fees in injury cases are permitted in every state, and they are regulated by each state's rules of professional conduct, which are based on the American Bar Association Model Rules. The governing rule is usually a version of Model Rule 1.5, which requires that any fee be reasonable and that a contingency fee be set out in a signed writing. Some states and some claim types add specific limits, discussed below.
How much do personal injury lawyers take?
The most common contingency percentage in a straightforward injury case is about one third, which is 33 and one third percent of the gross recovery. Many firms use a sliding scale that increases with the stage the case reaches. A typical structure looks like this.
- About one third if the case settles before a lawsuit is filed.
- About 40 percent if the case settles after a lawsuit is filed or goes to trial.
- A separately negotiated percentage, sometimes higher, if the case is appealed.
These numbers are conventions, not laws. The exact percentage is whatever you and the firm agree to in writing, and it does vary by state and by firm. A few states cap contingency fees in particular categories. Medical malpractice is the clearest example. Some states impose a sliding statutory cap on the lawyer's share in malpractice cases, and a number of states limit or specially regulate fees in claims involving minors, which a court often has to approve. Workers' compensation fees are also capped or set by statute in most states. For an ordinary car-accident or premises-injury claim, though, the one-third-rising-to-40-percent pattern is the norm in most of the country.
One detail matters more than people expect: whether the percentage comes off the gross recovery or off the recovery after costs are deducted. Taking the fee off the gross, before costs, yields a larger fee than taking it off the net, after costs. Both approaches are used. The fee agreement says which one applies, and it is a fair question to ask before you sign.
Fees versus case costs and expenses
The contingency fee is the lawyer's compensation. Case costs, sometimes called expenses or disbursements, are different. They are the out-of-pocket amounts the firm spends to build and prove the case, and they are reimbursed to the firm separately from the fee.
Case costs in an injury matter commonly include court filing fees, fees to obtain medical records, charges for expert witnesses and their reports, deposition transcript and court-reporter fees, accident-reconstruction or investigation costs, postage and copying, and sometimes the cost of medical illustrations or trial exhibits. In a case that settles early these costs may be modest. In a case that goes to trial with several experts, costs can run into the tens of thousands of dollars.
Most contingency firms advance these costs as the case proceeds and then recover them from the settlement at the end. The important question is what happens to advanced costs if the case loses. Under the ABA model rule, a client remains ultimately responsible for litigation costs, but many firms in practice agree to absorb the costs if the case recovers nothing. Whether your firm writes off unrecovered costs or bills you for them should be stated plainly in the agreement.
What does "no win, no fee" actually mean?
No win, no fee is the marketing phrase for a contingency arrangement, and it is accurate as far as the lawyer's fee goes. If there is no recovery, there is no attorney fee. It does not automatically mean there is no cost to you at all. The fee and the costs are two separate buckets, and a "no win, no fee" promise speaks to the fee bucket. Read the costs paragraph to learn what you owe for expenses in a loss, because firms differ on that point.
How do medical liens and bills come out of the recovery?
After the fee and the costs are accounted for, the next claims on the recovery are usually medical. A medical lien is a right that a provider, a health insurer, or a government program holds to be repaid out of your settlement for the care that treated your injuries.
Several kinds of claimants can assert a lien or a reimbursement right. A hospital that treated you may file a statutory hospital lien. A health insurer that paid your bills may have a subrogation or reimbursement right under your plan. Medicare and Medicaid have federal reimbursement rights that have to be resolved before a case closes, and Medicare in particular requires that its interest be addressed as a condition of settlement. A treating provider who agreed to wait for payment may hold a letter of protection, which is a promise to pay that provider from the proceeds.
These claims are paid from the recovery, which reduces what reaches you. The work of getting liens reduced is a real part of the value a good injury lawyer adds, because lien holders will often accept less than the full balance, especially when the recovery is limited by low policy limits. The amount a lien is negotiated down directly increases your net.
A simple illustration shows how the order of operations works. Suppose a case settles for 90,000 dollars, the fee is one third, case costs were 5,000 dollars, and medical liens total 20,000 dollars. If the fee comes off the gross, the fee is 30,000 dollars. Subtract 5,000 in costs and 20,000 in liens, and the client nets 35,000 dollars. If a lawyer negotiates the liens down to 12,000 dollars, the client nets 43,000 dollars on the same settlement. The headline number is the same. The net is not.
The written fee agreement
The contingency fee has to be in a signed written agreement, and the agreement is where every number above is fixed. Under the standard professional-conduct rule, the writing must state the percentage or percentages that apply, how the percentage is calculated, whether it is taken before or after costs, and what expenses the client is responsible for. Read the whole agreement before signing, and keep a copy.
The agreement is also where you learn how the firm handles the things that are easy to overlook: whether the percentage steps up at litigation, how costs are treated if the case loses, who decides whether to accept a settlement offer (that decision is yours, not the lawyer's), and how the file and any unused cost advances are handled if you change lawyers.
Questions to ask before you sign
A short list of direct questions will tell you almost everything about the economics of the representation.
- What is the contingency percentage, and does it increase if a lawsuit is filed or the case goes to trial?
- Is the fee calculated on the gross recovery or after case costs are subtracted?
- Who advances case costs, and do I owe those costs if the case does not recover anything?
- How are medical bills and liens handled, and will the firm work to reduce them?
- Can you give me a written estimate of likely costs for a case like mine?
The answers belong in the written agreement, not just in conversation. A reputable firm will put them there without being pushed, because a clear fee agreement protects the lawyer as much as the client.
The bottom line on net-to-you
The percentage on the sign is only the first deduction. A realistic estimate of what you will keep starts with the gross recovery, subtracts the contingency fee, subtracts reimbursed case costs, and subtracts the medical liens and bills that have to be repaid. Two cases with the same settlement number can deliver very different amounts to the injured person depending on the fee structure, the size of the costs, and how hard the liens are negotiated. Understanding the order of those deductions before you sign is the difference between being surprised at the end and knowing roughly where you stand from the start.