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Contingency Fees Explained

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Jeff Sevey

There are times when people need an attorney but are afraid to reach out and get the help that they need. The usual reason is that they feel they can’t afford an attorney. So, they forego getting the advice and advocacy they need because they don’t want to waste their time and the lawyer’s time discussing an issue that they can’t pay for.

When it comes to getting representation for the damages you’ve suffered due to a car accident, this doesn’t have to be the case.

The vast majority of California car accident attorneys work on what is called a contingency basis. This means that the attorney will take your case with no advance payment required. They will act as your advocate and use their expertise and knowledge to get you the best possible result. The only time that they will receive payment is when your case has successfully been concluded, either through settlement or judgment. Usually, the attorney involved will receive between 33% and 40% of the total amount recovered. If you aren’t successful, they don’t get paid and you owe them nothing for their time.

Contingency fees were developed as a means to allow injured people equal access to legal representation. In the past, if you were injured, the only way you could obtain legal counsel was to pay for it by the hour. The usual arrangement was for the client to pay a “down payment” in the form of a retainer fee. The lawyer’s hourly rate was then deducted from the retainer. Of course, most people couldn’t afford to pay this cost, so they went without counsel. Wealthy individuals and corporations did not have this problem. They could afford legal counsel and, in the case of a dispute, often had a lawyer already on retainer.

When it came to personal injury cases, though, this created an inequality. Because the affluent could afford lawyers, they were more likely to recover damages for their injuries than someone who was less financially well-off. Even worse, when a rich person or corporation was accused of causing damages, they were far more likely to avoid having to pay for the damages they caused because of their access to counsel.

The solution to this inequality was the contingency fee arrangement. People who previously couldn’t afford a lawyer could now hire one and pay him or her out of the money for damages that the lawyer recovered for them. In other words, contingency fees leveled the legal playing field in personal injury law.

California law requires that all contingency fee agreements between an attorney and client meet specific requirements. First, the agreement must be in writing and the client (or his or her legal representative) must receive a duplicate copy of the agreement that has been signed by all parties.

Next, the agreement must contain a statement of how all costs and fees associated with settlement or trial of the matter will be handled. For example, if the attorney paid for all the filing costs for the lawsuit, the agreement must specify that those fees will be returned to the attorney out of the recovery. In some cases, the costs of litigation can be substantial, so understanding upfront how those costs will be paid and repaid, is essential.

The agreement also has to state how/if the client will be required to pay any attorney fees that are related to the case at hand, but not covered by the contingency fee. In car accident cases, this most commonly arises when medical providers place liens against the client’s settlement or verdict for the cost of services rendered. If the attorney has agreed to negotiate with those providers to lower their lien costs, then how the attorney is going to get paid for that effort has to be spelled out in the agreement.

In a car accident case, the agreement also has to contain a statement that the attorney’s fee has not been set by law, but has been instead negotiated between the client and the attorney. This is required to demonstrate that both parties voluntarily agree to the contingency fee involved.

A contingency fee agreement that doesn’t meet all of these standards is automatically considered null and void under the law. However, while all contingency fee agreements must contain the required language and information, not all of the cases behind them are equal.

Sometimes, a case will resolve itself quickly through settlement and the client will recover a large amount of money relatively easily. Under these circumstances, the client can become resentful and feel that the attorney was unfairly compensated for what appeared to be a small amount of work.

On the other hand, sometimes a case will drag on for years. Under these circumstances, the client can become frustrated with the amount of time involved and the mounting cost of the legal fees involved.

What must be remembered in all cases is that without contingency fee arrangements, there would be almost zero chance that the average person would recover anything for their injuries in a car accident case. Insurance companies are wealthy and powerful. They spend millions of dollars every year lobbying state and federal legislatures in an attempt to change the laws of the land in their favor. They have hundreds of lawyers on salary and retainer. The only job of most of these lawyers is to limit the amount of money that the insurance company is forced to pay out due to claims made against policies it has issued.

Contingency fee agreements allow the average person to fight against big insurance on a level playing field. They allow injured people to have their day in court so that they can recover the damages for their injuries that they rightfully deserve. In California car accident law, contingency fee agreements benefit the injured people who need relief the most.

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