Personal injury lawyers handle cases on a contingent fee basis. This means that the attorney’s fee in a case is determined by the amount of recovery to the injured plaintiff. The standard attorney’s fee in a personal injury case is 33 1/3% of the total recovery. This is known in the business as a contingency fee. The recovery can come from a verdict, settlement, or judgment. There are generally two methods to calculate an attorney’s fee in a personal injury case. A lawyer should present the injured plaintiff with both options at the time of signing the retainer.
The first option for the attorney’s fee involves the law firm covering the expenses of litigation. Under this option, the attorney’s fee is taken from the overall recovery, before any expenses are accounted for. Then, after the attorney’s fee is taken, the recovery is reduced by the firm’s expenses in handling the case. The injured plaintiff will received the balance, or “net recovery.” If there is no money awarded in the case, the firm cannot recover expenses from the injured plaintiff. The lawyer must take the loss. For example, lets say the total settlement in a case is $100,000 and expenses are $10,000.
In that scenario, under option number one, the attorneys fee would be 33 1/3% of $100,000 which is $33,330. The net settlement is thus $66,670 to the injured plaintiff, less the $10,000 in expenses. Under option number one, the injured plaintiff would receive a net settlement in the amount of $56,670. The second option for the attorney’s fee involves the client paying money into an account up front. This money is used to cover the costs of handling the case. Under this option, the attorney’s fee is taken from the net amount recovered, after reducing the overall recovery by case expenses.
If there is no recovery in the case, the injured plaintiff cannot recover expenses from the attorney. He or she must take the loss. For example, lets again say the total settlement is $100,000 and expenses are $10,000. In that scenario, under option number two, the net settlement is $90,000 (100,000 less expenses). From there, the attorney fee of 33 1/3% is taken in the amount of $30,000. That would leave a net settlement to the injured plaintiff in the amount of $60,000.
Most injured plaintiffs choose option number one for obvious reasons. The main reason is that under option number one, expenses in handling the case are covered by the attorney, not the injured plaintiff. Litigating a case can be extremely costly. Indeed, the costs of court appearances, filings, and experts can add up to tens of thousands of dollars. Most people cannot pay that money up front. Also, under option number one, if a case does not result in a recovery it is the firm, not the injured plaintiff, that bears the cost of expenses paid. In summary, when signing a retainer, an injured plaintiff should always have a detailed discussion with their attorney as to the fee involved. Doing so ensures they pick the option that best accommodates his or her situation.