How much do lawyers take from a settlement?

TL;DR

• Contingency fees usually range from 33% to 40% of the total settlement, depending on whether the case resolves before or after a lawsuit is filed.
• Litigation expenses, such as court filing fees, expert witness fees, and medical records, are deducted separately from the settlement award.
• Whether attorney fees are calculated before or after deducting case expenses significantly impacts your final net payout.
• Certain legal areas have statutory limits on attorney fees; for example, California medical malpractice claims limit fees to 25% for pre-filing settlements and 33% after filing.

The amount that personal injury lawyers take from a settlement depends on the contingency fee agreement. It is generally around 33 percent. It can increase if the case goes to trial. Many states have laws that regulate the percentage used. They also may require a clear and unambiguous contingency fee agreement.

What is a contingency fee?

A contingency fee is one of the ways for lawyers to get paid. Lawyers who charge a contingency fee earn a portion of the amount that gets recovered. If nothing is recovered in the case, then the lawyer does not get paid.

Other ways for lawyers to charge their clients for legal representation are:

• an hourly rate for time spent on the case,
• a flat fee for a particular legal service, and
• on retainer, where the client pays a lump sum upfront and the lawyer deducts an hourly rate from it.

If your lawyer is charging you on contingency, the details of the arrangement will be in the contingency fee agreement.

What is a contingency fee agreement in a personal injury case?

The contingency fee agreement is a part of the contract that you sign with your lawyer when you hire them to represent you in a personal injury case. The agreement states how the lawyer will be paid, as well as other details about the payment.

Contingency fee agreements should include the following information:

• how the contingency fee is calculated,
• whether the fee will change based on when the case is resolved or on how much is recovered,
• how the other expenses of litigation, like court costs, will be deducted, and
• any upfront costs that the client will be responsible for covering.

It is important to understand the contingency fee agreement before signing it to secure the lawyer’s legal advice.

Do personal injury lawyers charge on a contingency fee basis?

Yes, most personal injury attorneys charge on a contingency fee basis. They use contingency fees for several reasons:

1. many accident victims would not be able to afford a lawyer if attorneys did not charge a contingency fee,
2. victims generally have other expenses, like medical bills, to pay at the start of a case,
3. it aligns the interests of the lawyer and the victim, who both stand to benefit from a higher settlement, and
4. it reduces the victim’s risk and provides them peace of mind, knowing that they will not have attorneys’ fees to pay if their case is lost.

If you approach several personal injury lawyers and none of them offer to work on a contingency fee basis, it can be a sign that your case is weak.

What percentage do personal injury attorneys usually take?

Personal injury attorneys usually take around 33 percent, or one-third, of the proceeds of the case. A few lawyers may charge as little as 25 percent or as much as 40 percent. The exact amount will be stipulated in the contingency fee agreement.

The contingency fee agreement may also include other variables that change the percentage, such as:

• sliding scales based on the amount recovered, and
• different percentages based on when the case is resolved.

Sliding scales based on the settlement amount

Some contingency fee arrangements charge different rates based on the size of the settlement. An example of this fee structure could look like:

• 50 percent of the first $2,000 recovered,
• 40 percent of the next $2,000,
• 35 percent of the next $21,000, and
• 25 percent of the amount over $25,000.

Some lawyers like this arrangement because they make more for cases that recover small awards, many of which take nearly the same amount of time as cases that lead to larger settlements.

Rates based on when the case ended

Another contingency fee arrangement is to charge a fee percentage that is based on the stage in which the personal injury claim is resolved. An example of this type of contingency fee may be:

• 25 percent of settlements obtained before the personal injury lawsuit is filed,
• 28 percent of settlements made after arbitration,
• 33 percent of settlements struck after the lawsuit is filed but before trial, and
• 40 percent of settlements or verdicts after the trial has begun.

Are there laws regulating contingency attorney fees?

Many states have laws or regulations that limit what contingency fees attorneys can charge. Many of them include a cap on the percentage. They may also require the contingency fee agreement to be clear and easy to understand.

An example of a state law that caps contingency fees is in Texas. There, contingency fees for personal injury attorneys cannot exceed 35 percent without prior approval by law.[1] Other states, like California, do not have rigid caps like these.

However, most state bar associations forbid attorneys’ fees that are unreasonable. They also require contingency fees to be clearly communicated to the client.[2]

Some types of cases may have additional rules about contingency fees. In Florida, for example, there is a provision in the state constitution that entitles victims of medical malpractice who are paying their lawyer a contingency fee to receive at least:

• 70 percent of the first $250,000 recovered, excluding costs, and
• 90 percent of the damages over $250,000, excluding costs.[3]

Finally, some laws regulate the attorneys’ fees that can be charged in cases that invoke those laws. For example, the Federal Tort Claims Act (FTCA) caps attorneys’ fees at:

• 20 percent of an administrative settlement, and
• 25 percent of a judgment or compromise settlement.[4]

What if court costs are taken from the personal injury settlement check first?

Your attorney’s contingency fee may not be the only thing that comes out of a personal injury settlement. The costs of litigation are frequently deducted as well. Which amount gets deducted first can change how much you receive.

The costs of litigation include expenses like:

• court filing fees for documents or motions,
• copy costs,
• expert witness fees,
• document production expenses, like for your medical records or police reports, and
• deposition costs.

In some cases, they can be significant. If they are deducted after the legal fees, you will receive less of the settlement amount.

For example: Mary reaches a final settlement in her car accident claim with her insurance company for $100,000. The costs of litigation were $10,000 and her lawyer charged a 30 percent contingency fee. If the attorneys’ fees are deducted first, then Mary’s lawyer takes $30,000 and Mary gets $60,000. If litigation costs are deducted first, then her lawyer gets $27,000 and Mary receives $63,000.

The order of deductions should be stipulated in the contingency fee agreement. If it is not, you should ask the law firm for an explanation.

In addition to court costs, medical liens are also deducted from a settlement amount. Clients need to keep this in mind when making a decision about a settlement offer.

How much do lawyers usually charge hourly?

It depends on several factors, including:

• the area of personal injury law,
• the complexity of the case,
• the legal market (fees tend to be higher in urban areas than in rural ones),
• if a large settlement offer is unlikely, such as in an auto accident case that only caused property damage,
• whether the outcome is especially uncertain and the lawyer would rather avoid the risk, and
• whether the client prefers to pay the lawyer’s fee upfront in order to keep more of the potential winnings.

Hourly rates for most personal injury lawyers can range from $100 per hour to $500 per hour.

Legal References:

[1] Texas Government Code 2254.106(d).

[2] See American Bar Association, Model Rules of Professional Conduct: Rule 1.5 – Fees.

[3] Florida Constitution, Article I, Section 26.

[4] 28 USC 2678.

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