How No-Win, No-Fee Injury Claims Work

By Your Health Magazine Contributor

Your Health Magazine Contributor

. https://YourHealthMagazine.net

More Legal and Health Articles

How No-Win, No-Fee Injury Claims Work

Emergency visits for injuries are very high each year. Based on data from the CDC, in 2022 there were over 43 million emergency department visits for injuries, poisoning, and adverse effects. However, many injured people cannot easily afford hourly legal fees, which is one reason contingency arrangements are common.

That model goes by several names. Attorneys refer to it as a contingency fee, while advertising often labels it a no-win, no-fee arrangement. Under either name, the attorney is paid only from money the client actually recovers.

The Basic Deal

Contingency fees allow a client to pay an attorney a percentage of the money recovered through a winning judgment or settlement, rather than an hourly fee. If the case is lost, the attorney does not collect a fee. The California State Bar website explains this fee structure on its page dedicated to fees and billing.

The paperwork is important. Under the American Bar Association’s Model Rule 1.5, which many states use as the template for their ethics rules, a contingent fee agreement has to be in writing and signed by the client. It must explain how the attorney’s fee will be calculated, including any different percentages that apply at settlement, trial, or appeal. The agreement must also identify expenses the client may be responsible for and whether those expenses are deducted before or after the attorney’s fee is calculated.

California’s bar adds that, in most cases, the agreement with an Alhambra personal injury lawyer or any other attorney must also state that the fee is negotiable between the lawyer and the client, since no statute sets it.

Who Takes Cases This Way

For the lawyer, the math works because the wins cover the losses. A firm that takes on a case also takes on the risk of months or years of unpaid work.

Screening also protects attorneys and the client by providing an evaluation of the strength and worth of a potential claim, including an analysis of the liability and injuries of the other party as well as the available coverage of any potential insurers. Screening is used by attorneys to decide whether to represent an injured party. There are numerous cases that have valid injuries that lack representation, often because either liability or available insurance is inadequate.

Contingency fee structures are used most often in cases that involve claims for personal injuries, like slip and falls, car accidents, and malpractice cases. Other types of cases include wrongful death, employment, and breach of contract disputes. Because these claims seek money damages, the attorney can be paid a percentage of any award under the written fee agreement.

Most firms advance expenses, including filing fees, court costs, and expert witness expenses, and then reimburse those costs from any money recovered in a lawsuit. Rates may vary among different firms. The rates may also increase at different stages in the course of a lawsuit, such as when a lawsuit progresses from settlement negotiations to trial.

The Catch in the Word Fee

No fee does not always mean no cost. Lawsuits carry expenses that have nothing to do with the lawyer’s time. Filing fees, medical records, deposition transcripts, and expert witnesses can cost serious money.

The California bar warns that win or lose, a client may have to pay some or all of the court costs and other expenses, which can be quite high. Some firms advance those costs and recover them only from a settlement, but that choice belongs in the written agreement, not in a sales pitch. The ABA rule requires the agreement to tell the client about any expenses owed, whether or not the client prevails.

The order of deductions matters too. Take the case of a $90,000 settlement. If expenses are $9,000 and the attorney fee is one-third, and if that attorney fee is calculated as a percentage of the $90,000 gross settlement, then the attorney gets $30,000. That leaves $60,000. $9,000 of that is used to pay expenses, leaving the client with $51,000.

Next, suppose expenses of the lawsuit are taken off the top of the recovery first. The lawyer gets $27,000 from the $81,000 that remains, and the client receives the remaining $54,000.

Now there is a difference of $3,000, but in this scenario, the client is the winner.

Where Contingency Fees Do Not Apply

Some areas of law are not subject to contingency fees. Rule 1.5 of the Model Rules prohibits lawyers from charging contingency fees for criminal defense cases and for family law matters where the fee depends on securing a divorce or on the amount of alimony, support, or a property settlement.

When the Case Ends

Under Model Rule 1.5(c), clients have a right to a written statement showing the outcome of the matter, the amount paid to the client, and how that amount was determined once a contingent fee arrangement concludes. With these billing statements, clients can confirm the accuracy of any fees charged. They could also check if the disbursements were according to the agreement. 

The State Bar of California oversees a mandatory fee arbitration program, usually run through local bar associations, to handle clients’ disputes over lawyer billings.

Arrangements where there are no win fees allow the courts to be open to everyone regardless of whether they can pay hourly. How much gets to the client is determined by the percentage and what expenses are paid first.