In a personal injury case, Managing Lawyer Costs and Expenses
Learn about the fees and costs of hiring a lawyer to handle your personal injury case, as well as when it is appropriate to do so.The most common source of conflict between personal injury lawyers and their clients is cost disagreements.
You can save yourself a lot of trouble at the end of your car accident or personal injury case if you get your fee arrangement and other costs and expenses of handling your case straight from the start.
Contracts with contingent fees
Most people find it difficult to come up with a large sum of money in advance to pay a lawyer. Most people would find it difficult to pay an attorney on an hourly basis for the duration of an injury claim and potential lawsuit.
As a result, lawyers who handle personal injury cases have devised an alternative payment system in which they do not require any money from a client to begin a case and instead take a percentage of the client's final settlement or court award as their fee. Clients and lawyers alike can benefit from this arrangement, known as a "contingency" fee agreement.
Contingency fees are not cheap because the lawyer is taking a risk and you are not paying anything up front. A lawyer's fee in a personal injury case is typically 33 percent to 40% of the amount recovered for the client. When expenses are factored in, the client's take-home pay is frequently less than the amount the lawyer received from the insurance company. Remember that you can always try to negotiate a personal injury lawyer's fee; here are some suggestions.
Example of a Typical Contingency Fee
You and a lawyer sign a contingency fee agreement in which you agree to pay 33.3 percent of whatever compensation the lawyer obtains for you. After the lawyer has been reimbursed for any costs incurred while processing your case, the 33.3 percent is calculated. If a lawyer spends $1,000 on costs and receives a $10,000 settlement, the $1,000 is deducted from the $10,000, leaving $9,000. The lawyer would then take 33.3 percent of the remaining $9,000, leaving you with only $6,000 in your pocket.
Should You Make a Payment?
Before engaging a lawyer, you must decide whether the economics of your accident or injury case make it advantageous to do so.
For instance, employing a lawyer on a contingency fee basis is generally appropriate if the insurance company has refused to give you any compensation at all, or only a minimal "nuisance value" sum, yet the potential damages in your case are significant. You have everything to gain and nothing to lose.
On the other hand, if your claim is minor, it may be more cost-effective to continue handling it yourself, even going to small claims court or arbitration.
The decision will be based on how comfortable you are going to small claims court or arbitration without a lawyer, how technical the insurance company's defense is, and whether a lawyer is willing to take your case and confident that you will receive a certain range of compensation.
Finally, if the insurance company has made you a substantial settlement offer but you believe it is still too low, you must compare it to how much more a lawyer could realistically expect to get. It wouldn't make sense to hire a lawyer and pay out 33 percent of your settlement if you can only expect to get an additional 25%. In that case, you might try to work out a lower contingency or hourly fee arrangement with the lawyer. However, hiring a lawyer may be a good idea if the lawyer believes there is a good chance of getting enough additional compensation to cover the lawyer's fee.
In this situation, try to structure a fee arrangement so that you are guaranteed no less compensation than you would have received if you had just settled with the insurance company on your own.
Costs
"Costs" does not refer to the fees paid to your accident lawyer. Rather, costs refer to the expenses incurred by the lawyer's office in investigating your accident or injury claim, negotiating a settlement, and filing a personal injury lawsuit.
You will have to reimburse your lawyer for these costs, usually out of your final settlement amount, depending on the agreement you reach with your lawyer. Some expenses cannot be avoided. For example, if your lawyer is required to file a lawsuit to protect your rights, the filing fee is a necessary cost. If your claim does not settle in early negotiations with the insurance company and your lawyer is forced to file a lawsuit, these costs can quickly mount up, including the cost of hiring experts and the cost of recording depositions (see below). There are a number of costs issues that you and your lawyer should discuss and spell out in your written agreement.
The Costs and Lawyer Fees Relationship
If you pay a personal injury lawyer on a contingency basis, the fee agreement should specify whether costs are deducted from your final compensation amount before or after the lawyer calculates the fee percentage. If the lawyer calculates the fee percentage first and then costs, the lawyer's fee is higher and the compensation you receive is lower than if the costs are deducted first and then the fee percentage is calculated.
Before and After Costs of a Contingent Fee Calculation
In a case with $3,000 in costs and a settlement of $20,000, a lawyer will be paid a 33.3 percent contingency fee. If costs are deducted before fees, the $3,000 from the $20,000 settlement is deducted first, leaving $17,000. The lawyer keeps 33.3 percent of the total, or $5,667, leaving the client with $11,333. If the fee is calculated before costs are deducted, however, the lawyer receives 33.3 percent of the total $20,000, or $6,667. After deducting $3,000 in costs from the remaining $13,333, the client is left with only $10,333. The client lost $1,000 as a result of the second method of calculating fees and costs. Obviously, having the costs deducted before the lawyer's fee is calculated is to your benefit. Many lawyers do things this way on a regular basis. A lawyer you're considering hiring, on the other hand, might tell you that fees are "always" calculated first. If you hear this, tell the lawyer that other accident lawyers have told you that costs are usually deducted first. And you'll insist on taking your case elsewhere if this lawyer insists on fees first.
Costs that you agree on ahead of time
Many costs in a personal injury case are standard, and they are frequently included in a lawyer's initial written agreement. Copies, long-distance phone calls, and court filing fees are examples of common and unavoidable expenses. Other costs may not be as critical, but they can add up quickly. As a result, you and the lawyer should agree on what costs the lawyer must inquire about before proceeding to incur them.
Depositions, hiring investigators or experts, and scheduling special court proceedings are examples of these. Setting a dollar limit above which the lawyer must obtain your approval for any costs is the simplest way to deal with the issue of costs.
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