What Percentage Do Lawyers Receive in a Settlement?

(Note: The following article is about general fee structure for various cases. Each state may have laws governing the maximum amount an attorney may charge for contingency and under what conditions. Please contact a local attorney to discuss the particular rules. Morris & Dewett only handles personal injury, and we work only on contingency.)

Being injured through another person’s carelessness or negligence can be devastating. Even worse is the long-term impact of medical bills, car repairs, lost work, and hours on the phone trying to explain things to insurance adjusters.

You need an attorney. But you’ve heard people say it’s a waste because whatever you get at trial or in a settlement will be used to cover your attorney’s fees. Is that true? Do the attorneys take your case and take your money? Luckily, no. The Bar Associations make sure that attorneys only take what is due for their work, and their clients have the right to know exactly what that is.

Contingency Fees in Personal Injury Cases

In nearly all civil and personal injury cases, attorneys are paid on a contingency fee basis. This means you will only be required to pay your attorney for their services if you receive compensation through a settlement or court. There is no set limit for attorney fees in contingency cases. However, in most states, they average about 30-40% of the final settlement or award. The final amount depends upon many things, such as your attorney’s hourly rate and the time they have to prepare for your case. 

According to U.S. Department of Justice statistics, fewer than 5% of all personal injury cases ever go to trial. Litigating a case is expensive and time-consuming, and most attorneys prefer to avoid it, choosing to reach a settlement outside of court instead. When cases do get to court, awards are split about 50/50 between plaintiffs and defendants.

The American Bar Association’s Rules of Professional Conduct have these requirements for a contingency fee agreement:

• It must be in writing and signed by the client
• It must state the method used to determine the fee
• It must indicate if the percentage will change if the case is settled, goes to trial, or is appealed
• It must state whether litigation and other costs will be deducted from the total recovery or award, and if so, whether the costs will be deducted before or after the contingency fee is calculated

If the attorney has advertised, “You don’t pay unless you win,” or similar language, the fee agreement must explain who is responsible for legal fees if the plaintiff does not prevail.

How a Contingency Fee is Calculated

When you approach an attorney to represent you in your case, they will calculate their contingency fee. To calculate their fees, they will take many things into consideration, including: 

• Hourly rate: Attorneys usually charge per hour, like other professionals. A highly experienced firm with a reputation for winning cases will command a higher hourly fee than one just starting out in the business. (Note: Morris & Dewett does not charge an hourly fee. We work only on contingency. You only pay if we win.)
• The time needed to prepare the case: Based on the details of your situation, the attorney will estimate how much time will be required to prepare your case.
• The amount of time available for the case: Attorneys hope that they have plenty of time to develop and prepare the case for trial. However, clients often don’t bring the case until the statute of limitations is almost up. In situations like that, the attorney may need to bring additional associates or paralegals in, pushing the costs higher.

Cases that Cannot Be Taken on Contingency

In many states, such as Texas, attorneys are governed by the state bar association’s Rules of Professional Conduct. These rules determine which cases can be taken on contingency and how fees can be assessed. Civil cases can be taken on a contingency basis, subject to state laws and bar association rules. Examples of other cases that cannot be taken on contingency include: 

• Criminal cases: If a criminal defendant cannot afford an attorney, the state provides one free of charge (6^th Amendment). 
• Family law cases: Family law cases include child custody cases, divorce cases, and more. Most state laws prohibit any action that would “promote” divorce or profit off prolonging the family law case. 
• Collections actions: Collection actions may be taken on contingency in some states, depending on the nature of the action.

Other Legal Expenses and Court Costs

Besides the attorney costs, there are other expenses associated with a personal injury case or any other court case. Most of these expenses are essential for the case and must be paid, either at the time they’re incurred or later once the settlement is reached or the award is granted. Expenses can include:

• Court filing fees
• Process service fees if documents must be served on defendants
• Court reporter fees, transcription costs, and document copying fees
• Fees to acquire police and medical reports
• Expert witness fees, investigation fees, and evidence fees if the case goes to trial

Attorneys may pay the fees and bill you for them or you may pay the fees as they occur. You should discuss these fees with your attorney prior to signing the fee agreement because it will affect your attorney’s settlement percentages.

Settling and Winning Your Case

Personal injury awards depend on a number of factors, all of which impact the amount of your compensation and whether your case is likely to go to trial. The stronger your case, the more likely the defendant will want to settle outside of court. Some of the factors that impact the strength of your case include:  

• The severity of your injuries and the impact on your daily life activities: A broken thumb has less of an impact than a broken back.
• The cost of treatment and length of recovery: The degree of recovery is a factor as well. Long-term and permanent disabilities can be more difficult to prove but can be covered in your total compensation. 
• Proof of liability: In personal injury cases, you must prove that the defendant broke their duty of care, leading to your injuries. The more you can shift responsibility to the defendant, the more your compensation will be. 
• The complexity of the case: If it appears the case will take a long time to litigate or have issues that will be difficult to explain to a jury, settling may be preferable to litigation.

A good attorney and firm with a reputation for winning personal injury cases may command a higher fee because they’re more likely to force a favorable settlement and win you fair compensation for your injuries. For these reasons, contingency fees are a significant part of the final award. They should never be more than roughly one-third of your total award. You should not be afraid to discuss the fee frankly with your attorney before any contingency fee agreement is written and signed in a personal injury case. If you have questions about whether hiring an attorney is the right choice for your case, schedule a free attorney consultation to discuss your case and your options. 

Sources:

1. U.S. Department of Justice. “Tort Cases in Large Counties.” chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://bjs.ojp.gov/content/pub/pdf/TCILC.PDF
2. American Bar Association. “Rule 1.5: Fees.” https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_5_fees/
3. United States Courts. “Facts and Case Summary – Gideon v. Wainwright.” https://www.uscourts.gov/educational-resources/educational-activities/facts-and-case-summary-gideon-v-wainwright