How Contingency Fees Work

Serious injuries deserve experienced attorneys

Someone recovering from a serious injury is usually losing income at the moment they most need legal help. A contingency fee arrangement exists to resolve that problem. The attorney is paid a percentage of what is recovered, and if nothing is recovered, no fee is charged. The arrangement is what allows a claimant of ordinary means to pursue a company or insurer with unlimited resources to spend on the defense.

What the Percentage Covers

The fee compensates the firm for the entire representation: investigating the incident, obtaining records, retaining and consulting with the physicians and other witnesses who will testify, drafting and filing pleadings, taking and defending depositions, negotiating with the insurer, and trying the case if it does not settle.

Percentages commonly rise as a case advances. A matter resolved before suit is filed carries a lower rate than one that requires litigation, and a case that goes to trial or appeal carries a higher one still. This reflects the work each stage demands. A written agreement must set out the rate for each stage before the representation begins.

Fees and Costs Are Different Things

This distinction causes more confusion than any other part of the arrangement, and it is worth understanding before signing anything.

The fee is the attorney’s compensation. Costs are the out-of-pocket expenses a case incurs: filing fees, deposition transcripts, medical record charges, accident reconstruction, physician witness fees, exhibit preparation, and service of process. In a case involving medical negligence, costs can reach five figures, since qualified physicians must review the treatment and testify about the standard of care.

Two questions determine what a client actually receives. First, whether costs come out of the recovery before or after the percentage is calculated, since the order changes the net figure. Second, whether the client owes costs if the case produces nothing. Firms answer that question differently, and the answer must appear in the agreement.

What the Rules Require

The District of Columbia regulates these agreements directly. Under Rule 1.5 of the D.C. Rules of Professional Conduct, a contingent fee agreement must be in writing and must state the method by which the fee is determined, including the percentages applying at settlement, trial, and appeal, the litigation and other expenses to be deducted from the recovery, and whether those expenses are deducted before or after the fee is calculated. The agreement must also clearly notify the client of any expenses for which the client will be liable regardless of the outcome.

The rule imposes a further requirement that clients frequently do not know about. At the conclusion of a contingent fee matter, the attorney must provide a written statement showing the outcome and, where there is a recovery, the remittance to the client and the method by which it was determined. A client is entitled to see the arithmetic rather than simply receive a check.

Amounts Deducted Beyond the Fee

A settlement figure is not what reaches the client. Health insurers, hospitals, and government payers may assert repayment rights against the recovery, and unpaid providers may hold balances. Negotiating those balances down can change the net figure substantially, which is why reducing medical bills is treated as part of the case rather than an afterthought. Where the recovery is large enough to require planning, managing settlement proceeds becomes a separate question from the claim itself.

Questions Worth Asking Before Signing

An initial meeting is the point at which to raise the terms rather than after the case is underway. Reasonable questions include what the percentage is at each stage, who advances costs, whether costs are owed if the case is unsuccessful, whether the fee is calculated before or after costs, who will handle the file day to day, and how settlement authority is exercised. A written agreement governs the fee, but the attorney-client relationship also sets expectations on communication and settlement authority that no percentage captures. Judging those things in advance is most of what separates a capable lawyer from a firm that will simply process the file.

The economics also mean a firm accepts cases selectively. A firm advancing its own resources has an interest aligned with the client’s, since it is paid only if the claim succeeds. The same economics explain why a firm may decline a claim worth less than the cost of proving it, which is worth understanding when deciding when to hire an attorney. The percentage applies to the total recovery, meaning both categories of damages rather than the medical bills alone.

Speak With a Washington, DC Personal Injury Attorney

Partner Adam R. Leighton is AV-rated by Martindale-Hubbell and has held leadership roles within the Washington, D.C. trial lawyer community, including service as President of the Trial Lawyers Association of Washington, D.C. The firm advances case costs and is paid only on recovery, which is why cases are evaluated carefully at intake and prepared as though they will be tried. That applies equally to truck accident representation and to every other matter the firm accepts. Contact our attorneys to discuss the terms in writing. Fees are contingent, and nothing is owed unless we recover.

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