Quick answer: A contingency fee is a way of paying a lawyer: instead of an hourly rate, the lawyer receives a percentage of what you win or settle for, and generally is paid only if the case succeeds. Under the American Bar Association's model rules, the agreement has to be in writing and state how the fee is figured and which expenses you owe. Percentages vary by agreement, and some states set limits.
On this page:
- What a contingency fee is
- Fees and costs are different
- The agreement must be in writing
- How states limit the percentage
- What you actually keep
- Questions to ask before you sign
- Next steps
What a contingency fee is
The Legal Information Institute describes a contingent fee as a method of compensation for legal services: instead of billing a fixed hourly rate, the lawyer receives a percentage of the client's monetary award. It is generally paid only if the lawyer successfully represents the client, and the amount depends on the result and often on the phase of the case in which it settles. Contingency fees are particularly common in personal injury cases, where the Institute puts the typical fee at around 33% of the recovery, within a wider range of 20% to 50%.
Supporters of the model argue that it lets people who could not otherwise afford counsel bring a claim, gives the lawyer an incentive to seek a good result, and shifts the risk of losing to the lawyer; critics argue it can lead to settling too soon or fees that are high relative to the risk. Which lawyer to hire, and whether you need one at all, is covered in whether you need a lawyer for a minor injury claim.
Fees and costs are different
The percentage covers the lawyer's work. Costs, such as filing fees, records and expert reports, are separate. The Institute points out that because a lawsuit includes costs other than lawyer fees, a plaintiff may still be required to invest upfront money even when the lawyer works on contingency. Ask how costs are handled, and whether the percentage is figured before or after costs are taken out, because it changes what you keep.
The agreement must be in writing
According to the Institute, Model Rule of Professional Conduct 1.5(c) requires a contingency fee agreement to be in writing and signed by the client, to state the method by which the fee is determined, and to clearly notify the client of any expenses for which the client will be liable. When the matter ends, the lawyer must give the client a written statement of the outcome. States adopt their own versions of the rules, so check yours.
How states limit the percentage
In many places the percentage is set by agreement, and professional conduct rules require fees to be reasonable. Some places go further:
- New Jersey caps contingency fees in tort claims. Its Advisory Committee on Professional Ethics explains that Court Rule 1:21-7(c) caps the fee at 33 1/3 percent, with lesser percentages for additional amounts recovered, and that fees must in any case be reasonable under RPC 1.5.
- Florida protects claimants in medical liability claims: the claimant is entitled to no less than 70% of the first $250,000 and 90% of all damages above $250,000, exclusive of reasonable and customary costs (Art. I, Section 26, Florida Constitution).
The Attorney Fee Calculator shows the fee rules, caps and your net for your state.
What you actually keep
Take a made-up $100,000 settlement with a one-third fee. The fee is $33,333. If costs are $3,000 and a medical lien takes $5,000, you keep about $58,667. Real numbers depend on your agreement, your state and the liens involved; the guide on what a medical lien is explains the last piece, and the Settlement Value Calculator helps estimate the settlement itself.
Questions to ask before you sign
- What percentage applies, and does it change if a lawsuit is filed or the case goes to trial?
- Is the percentage calculated before or after costs are deducted?
- What expenses am I responsible for, and do I owe them if we lose?
- How are medical liens and reimbursement claims handled?
- Is everything in a written agreement that I have read and signed?
Next steps
Compare the fee in any agreement you are offered against your state's rules. The personal injury calculators cover every state, and our methodology page explains how each figure is verified. For advice on your own case, talk to a licensed attorney in your state.