Why Personal Injury Work is Normally Done on Contingency

When you shop around for injury lawyers in Salt Lake City or Provo, Utah, you will soon find out that virtually every personal injury attorney handles cases on a “contingency” basis. “Contingency” is when the lawyer takes a percentage of any recovery as his or her fee instead of billing you by the hour. For most attorneys, these contingency fees start at around one-third (i.e. 33-1/3%) of the total recovery obtained for you. If you do not win or get any settlement, your attorney will usually not take a fee (though you may still need to pay for costs — this depends on the contract you signed when you hired your attorney).

If you were to hire an attorney for a divorce, to represent you in a criminal charge, or to draft a contract for you, you would be expected to pay the attorney a “retainer” (often a fancy word for a deposit) and then be billed at an hourly rate. This has been the method of payment most common to the legal profession since before the days of Abraham Lincoln, who is quoted as saying “A lawyer’s time and advice are his stock in trade.

In the first phone calls or meetings with my potential clients, I always offer to help injury clients at my normal hourly rate, but I have never been taken up on it. No injury client has ever wanted to deposit money (a “retainer”) and have me bill against it when they could have me handle their case on contingency. The question is then posed: why is this?

Lawyer’s hourly rates often vary widely, ranging from less than $150 per hour to over $2,000.00 per hour, depending on the experience, reputation, business, and nature of work done by the lawyer. When hiring a lawyer on an hourly basis, you will also often be paying for the Lawyer’s assistants’ and paralegals’ time as well, often at a rate of around $50 or even more than $75 per hour. Indeed, lawyers charge so much because they often spend hundreds of thousands of dollars over many years in order to get an education to be able to give legal advice and handle cases for clients.

As you can imagine, these legal bills can add up quickly, especially when your case is different than many others and requires research as to what other courts have held in similar situations. Legal bills also add up quickly when an opposing party decides to make an issue of every small thing in a case. Every time an opposing party files a motion or almost any document with the court, your side will need to respond, which often takes well over ten pages of writing, all of the time spent in associated legal research, and then an appearance in court for most responses. Furthermore, when the other side refuses to cooperate by handing over relevant documents, or failing to agree that certain evidence is inadmissable in court, this is a motion that must be brought by you to have the Court rule on the issue.

I have seen cases where hourly legal fees on each side in a relatively-simple civil dispute that went to trial far exceeded $60,000.00.

This brings us to the first reasons why contingency fees are usually used for personal injury cases:

  • Most people cannot afford to pay $60,000.00 (or even a fraction of that to get the attorney started, say $10,000.00) up front in the hope that they will obtain a good result at trial.
  • This problem of not being able to afford an attorney is called “access to justice.” This “access to justice” problem is solved in criminal cases because every citizen of the United States has a constitutional right to have an attorney represent them for criminal cases involving potential jail time, and the Court will appoint a lawyer to represent the person if they cannot afford an attorney. No such constitutional right exists for civil disputes (like in injury cases). This means that if a person cannot afford an attorney or find an attorney who will handle their civil case for free or on contingency, they will not be able to get an attorney to represent them.

  • This inability to pay thousands of dollars to an attorney is often compounded by the fact that, when a person is injured, they are paying substantial medical bills, paying for car repairs, paying deductibles, and paying for prescriptions. This is even made worse because injured parties are often unable to work and earn money because of their injuries.
  • Not only are injured people not able to pay the bills they normally have to pay (like rent, their electric bill, etc.), but they now are expected to pay thousands of dollars that they never thought they would need to pay to medical providers and many others. On top of this, if it were not for contingency fees, to get access to the courts, the injured person would then be asked to pay thousands of dollars to fight against insurance companies who have billions of dollars to defend against claims.
    This brings us to the next big reason that contingency is used in injury cases:

  • Insurance companies have billions of dollars to defend against claims and very little incentive to pay the true value of your claim if you do not have an attorney.
  • If you have watched the movie “The Rain Maker,” you will understand how insurance companies act in their own self-interest. Insurance companies receive billions of dollars in premiums every year and often have many millions of dollars sitting in bank accounts. Insurance companies are self-interested, and so they will do whatever they can to save money. This means that they will fight against claims and find bad reasons to deny claims or, at best, pay less on claims than they should. Every dollar that they do not pay out on a claim is profit for them. When people do not have an attorney, the insurance company will usually pay substantially less than they should pay on a claim (or sometimes even get away with paying nothing). If an insurance company thinks that you will not fight the claim as hard, they will offer you less money. If the insurance company has a lawyer (they always do once you file suit) and if you do not have a lawyer, chances are that you will lose your case. Even if you study all of the legal issues in your case for years, chances are that a defense attorney will have tools and will know how to beat your case without it ever even going through trial. Winning without a lawyer in a large civil suit against someone who does have a lawyer is so uncommon that it was made into a full-length feature-film in the movie “Flash of Genius.”
    You need an attorney if you have been injured, or you are telling the insurance company that your case is not worth anything.

  • Defense attorneys are paid by the hour by the insurance companies.
  • Imagine that you get paid $350 per hour when you perform work on a case. You would have no incentive, whatsoever, to resolve a case before you spend a substantial amount of time on the case and make a ton of money for yourself and your firm. While insurance companies may put limits on attorney’s fees for the various defense firms, these limits often allow for many, many hours of work on the case, and the defense firms can often get increases in these limits by coming up with a good reason.
    I have often been shocked at what insurance defense attorneys try to make an issue of and how they waste everyone’s time and the insurance companies’ money. In one case, a defense attorney wasted a substantial amount of everyone’s time arguing that the defendants were not liable for causing an accident with a properly parked, unoccupied vehicle. This was even after the driver admitted to police who appeared at the scene that he had caused the accident by turning unsafely.
    Defense attorneys have no incentive to not make every possible argument that may give them some sort of an advantage. They are paid by the hour by insurance companies that have billions of dollars. If a defense attorney can get an advantage by requesting that you re-file your lawsuit, or by arguing you filed your suit in the wrong venue or any other minor thing, they will do it, and they will be paid well to do it.
    Because defense attorneys have no reason to encourage the insurance company to resolve your lawsuit before they bill an inordinate number of hours against the case, they waste everyone’s time with motions, long depositions, and needless discovery disputes. If you are paying your attorney on an hourly basis, you could potentially expect to see your total legal bills approach or even exceed six figures.

  • Finally, going through the process of litigation is extremely expensive, and the costs must be paid up front.
  • When you file a lawsuit, you pay a filing fee to the Court. This fee has to be paid by someone.
    If you need an expert witness to help your case, their fee (often tens of thousands of dollars) must be paid, regardless of the outcome of your case.
    When you serve process on Defendants, there are fees associated with hiring the process server.
    Getting medical records from your medical providers often costs hundreds of dollars.
    Personal investigators are often needed, and can be quite expensive.
    Copies, postage, travel expenses, etc. all add to the costs.
    In essence, there are many costs associated with litigation that are on top of everything else, and they must be paid up front, regardless of the outcome of your case. The law firm you hire will often pay for many of these costs up front, without asking you for any money up front, and will often “eat” the costs if your case is not successful.

As you can see, litigation is very expensive, and most injured parties are unable to pay the substantial fees that are involved up front to an attorney, or even the costs of filing suit. This creates a situation where most people would be unable to get an attorney to represent them against insurance companies who have billions of dollars to spend on defending against your case. Contingency fees allow attorneys to take your case and do everything they can to maximize your recovery. Contingency fees give incentive to your attorney because your attorney has a vested interest in the case. The more money you get from the insurance company, the more money your attorney will get in fees.
An attorney who will only earn money if you win will fight harder than one who will get paid regardless of the outcome of your case.
While it is true that attorneys who work on contingency often get paid far more than their normal hourly rate due to getting a percentage of the recovery, they are taking a risk by giving their “stock in trade” (their time, experience, and advice) and their money (at least the time-value of it when fronting costs) in exchange for a chance to get a percentage of your recovery.

In other words, contingency work helps injured people get legal representation without having to pay up front (especially when the injured person is unable to work and earn money due to the injury), but they also appropriately compensate the attorney due to the risk taken by the attorney.

For these reasons the personal injury field is almost exclusively done on contingency.

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