We have all heard of contingency fees – Personal Injury attorneys advertise and say “We Don’t Get Paid Until You Get Paid” — they are talking about Contingency Fees. When you hire an attorney to represent you for “injuries you suffer in a car accident that wasn’t your fault,” you will enter into a Contingency Fee Agreement with the attorney. The basic agreement is that you don’t have to pay the attorney any money up front. When your case is resolved, the attorney will take a percentage of the money right off the top. A common contingency fee is 30 percent, but you see them higher and lower. Lawyers who advertise frequently get into “bidding wars,” stating that they charge a lower percentage  and you will end up with more money. Buyer Beware!

Read the fine print. An example is an attorney who advertises on television that he charges a low 20 percent contingency fee in personal injury cases. However, when you meet with the attorney, the real arrangement is something quite different. Yes, there is a 20 percent clause in the agreement — if the case is settled with the insurance company within one week. The fee then goes up to 25 percent for the balance of the first month. Then, if a lawsuit is filed with the court, it jumps up again, to 30 percent. Once again, Don’t Check Your Common Sense At The Door. Remember, 20 percent of a quick, low-ball settlement may not be very much.

Although you are not paying up front, the percentage is not the only money you will owe. In addition to taking the fee off the top, the attorney will charge you for “costs.” These are the expenses incurred by the attorney while representing you. These can include court filing fees, photocopy charges, fax machine charges, fees paid to medical experts to review and summarize your medical records, etc. You should know how these charges will be calculated because they can add up without your realizing it.

You also may have “liens” on your case by medical care providers. These can be physicians, chiropractors, radiologists and other medical professionals who agree to wait for payment until your case is resolved. It seems nice to get medical care without paying up front, but these medical bills will have to be paid out of your money before you get paid. If you are not careful, and if your attorney does not negotiate with your medical providers before paying them, what seems like a “big settlement” can seem pretty small when you get what’s left over after everyone else gets their cut. You may have insurance that will pay these medical bills, either through your regular medical insurance or your auto insurance policy — if you have insurance, you should use it.  You may have to pay back your medical insurance after all is said and done, but remember that insurance companies get big discounts from the providers, so this could save you money in the end.

Contingency fees are also the common practice in malpractice cases (against doctors, lawyers or other professionals). The costs incurred in these cases can be very high, especially when the lawyers have to hire expert witnesses. If your case is unsuccessful (i.e., you actually lose in a trial) or cannot be settled out of court for enough money, you could become personally liable for the costs incurred by the attorney. Just because the attorney agreed to wait to get paid for the expenses, they have not agreed never to get paid if you lose. I have seen situations where attorneys actually obtain judgments against former clients for payment of the costs in their case! Not a pretty picture, but it happens.

When your case is resolved by the attorney and the money is received from the insurance company, you should be provided with a written accounting of exactly where every penny is going. The bottom line is the amount of money that you will be getting. Be sure you know what that bottom line is going to be before you agree to a settlement. There is no going back.