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What is a Contingency Fee? Contingency Fees Explained

You've may have seen or heard about contingency fees, but, don't have a clear understanding of what these are and how beneficial they are to consumers of personal injury claims. The basic concept of the contingency fee agreement is that a client does not pay upfront expenses. Further, a client does not pay legal fees unless and until the case is won and then the lawyer receives a percentage of the recovery as his or her fee. If the case is lost, there is no legal fee at all for the lawyer. It may be surprising to know that a large number of attorneys are willing to work diligently for no guarantee of payment. Not only will lawyers work hard, but often incur significant costs on a case which may never get repaid.

In the majority of professional transactions, you are charged a flat rate or an hourly rate for services performed.

For instance, if your car breaks down, the auto mechanic's shop will charge you for the parts and labor. The "labor" is an hourly fee for repairing your vehicle. Similarly, if your water heater needs to be replaced, you pay a plumber to do the job; and as in the case of the auto mechanic, you are charged for parts and labor. Like other professionals, attorneys are often paid a retainer fee and/or bill their client for hourly work. This is typical in business transactions or in criminal cases, divorces, DUIs, bankruptcy, or intellectual property work. However, personal injury cases are usually complex and costly and prohibitive to injured people pursuing a claim. Attorneys are expensive. Therefore, a contingency fee agreement is arranged between a law firm and you, the plaintiff, is valuable to in order to pursue a claim. Under a contingency contract, a lawyer will conduct litigation wholly or partly at his or her own expense and will paid only if he or she is successful in obtaining not merely a judgment but an actual recovery.

What is a Contingency Fee?

A contingency fee is simply a percentage of the amount you win in your case. It could be a personal injury claim or another type of plaintiff's case, but, it all works the same. When you enter into a contingency fee agreement, the law firm pays for the cost of litigating your case. The law firm's pay is "contingent" on the end result. If you prevail, the law firm receives a percentage of your settlement or judgment. However, if you don't win, the law firm doesn't receive a fee and typically does not get reimbursed for expenses incurred.

Contingency fees make sure that a lawyer's interests are closely tied with those of a client. The plaintiff will most likely receive better representation, as the lawyer has a higher incentive to do a good job. Tactics such as delaying cases or wasting time in order to "run the clock" are eliminated, as the lawyers themselves are spending the funds required to try the case. This saves everyone involved money; the plaintiff, the lawyers and the courts system itself. --Consumer Attorneys of California.org

Since personal injury cases can take weeks, months, or sometimes years to be resolved, your attorney agrees to litigate on a contingency basis rather than charging you an hourly rate for all legal work performed. Contingency fee cases are common for the following: car accidents, work-related injuries, medical malpractice, creditor collection harassment, product liability, environmental tort, and other various types of personal injury cases.

Contingency Fees Explained

You might wonder why a lawyer would agree to work without being paid for what could be an extended period of time to litigate a case. The reason is very simple, personal injury and other cases are expensive and this provides people who are injured a way to have their case litigated, regardless of their own financial means. Plaintiff lawyers are usually strong consumer advocates and work to protect those who might otherwise be taken advantage of in a lawsuit. If contingency fees did not exist, insurance companies and other corporations would easily be able to avoid their day in court. This is also why it's common for insurance companies and other corporate entities to lobby to eliminate the contingency fee model. Here are some other advantages of contingency fees:

  • It provides a lower risk to the client. In an hourly rate arrangement, a client could very well face substantial legal bills, especially if they are not successful in their case. Because of the many hardships often accompanying personal injury and other cases, a contingency fee arrangement greatly reduces the client's financial risk. Attorneys put up all money to litigate a case and the clients has not out-of-pockets costs.
  • Facilitates a better attorney-client relationship. Because an attorney agrees to represent a client under a contingency arrangement, he or she is paid only if the case is successful. As a result, a lawyer will work hard for his or her client to resolve the case quickly and for the most money.
  • A contingency fee agreement demonstrates confidence in the case. A contingency fee also demonstrates to a client that his or her attorney is confident the case can be won. If it were an hourly rate, the attorney would likely accept any case, and just collect fees through the process.
  • It helps to level the field for the client against his or her wealthy opponents. Insurance companies and corporations have the advantage of deep pockets in some instances But with contingency fee cases, clients are not forced to pay upfront fees and costs, which corporations would use to their advantage to draw-out the process in-order to win.

If you or a loved one has been injured through no fault of your own, you need to speak to an experienced legal professional right away. Time is not on your side, and, you need to know about your legal rights and if any compensation is due to you.

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