Almost all personal injury and wrongful death cases in the United States are handled on a contingent fee basis. That means that the lawyer is paid only in proportion to the amount recovered for the client. If there is no recovery, the lawyer is not paid. If money is recovered from the other side, the lawyer is paid an agreed percentage of that recovery plus reimbursement of the lawyer’s out of pocket expenses.
Years ago, when I was handling business-to-business commercial collection cases for small businesses in my hometown, I always gave those business clients the option of paying me by the hour or a percentage of the amount I collected. They always chose the percentage, even though I repeatedly made an effective hourly rate many times what they would have paid me if they had taken the other choice. But they still chose the percentage fee every time.
Many times I have offered new clients in personal injury and wrongful death cases the option of paying my hourly rate every month rather than a percentage of the recovery payable out of the check from the insurance company at the end of the case. Because nobody has ever taken me up on that, I quit mentioning the option.
There are at least four advantages of contingent fees.
- The contingent fee is the one device in law that gives injured people of moderate financial means a fighting chance in the courtroom against giant corporations and insurance companies. Hardly anyone dealing with the effects of a major injury could afford to pay an experienced lawyer $200 to $400 per hour or more for a couple of years of challenging litigation.
- Contingent fees help to weed out cases that lack substantial merit. Experienced lawyers will not waste their time on a lawsuit that does not have enough merit to justify investment of their time. We may take a calculated risk on hard cases where there is an intellectually honest but untested legal theory. However, any lawyer who repeatedly bets on cases that have no value may soon go broke.
- Contingent fees perfectly align the lawyer’s incentive with results for the client, and the lawyer’s pay is directly proportional to results obtained for the client. A lawyer who knows she will not be paid unless successful is highly motivated to get the optimal result for the client. By contrast, an hourly fee arrangement can encourage delay, inefficiency, and unnecessary action unless there is an incentive to earn future business from the same client. When law firms set billable hour quotas, the incentives often do not align with client outcomes.
- Expenses of litigation as well as fees can be prohibitively high for injury victims. Lawyers who work for contingent fees typically also advance the expenses of litigation (filing fees, accident reconstruction, expert witnesses, court reporters, videographers, medical illustrations, exhibit preparation, travel costs, etc.), knowing that most clients are unable to do so, and are reimbursed for the costs out of money recovered for the client. Experienced in the rough estimation of costs and benefits, and knowing they will get that money back only if they win for the client, sensible lawyers are motivated to be prudent and spend only as much as necessary.
Contingent fee percentages vary among lawyers and types of cases, but a range of 33 1/3% to 40% is typical. Occasionally, a lower percentage may be offered for cases subject to early resolution and higher percentages may be justified when cases are especially risky or involve appeals after trial.
Ken Shigley is an Atlanta trial attorney focused on serious personal injury and wrongful death cases. He is currently chair of the American Association for Justice Motor Vehicle Collision, Highway & Premises Liability Section. Previously he served as president of the State Bar of Georgia and chair of the board of trustees of theInstitute for Continuing Legal Education in Georgia. He is lead author of Georgia Law of Torts: Trial Preparation and Practice and a board certified civil trial attorney of the National Board of Trial Advocacy.