“Personal injury lawsuits, also called torts, arise when one individual harms another individual or his or her property.” [See HALT Consumer Alert: Your Personal Injury Lawsuit] In tv and phone book ads, PI lawyers have long contended that they can get you much more money than if you go it alone, especially against insurance companies. Nonetheless, most of those same law firms then only take cases involving “serious” injuries [meaning serious money], leaving many injured persons to fend for themselves anyway. When they do take you as a client, they virtually always insist that you accept the local “standard” contingency fee, on a take-it-or-leave it basis.
- The good news, if you have a personal injury claim, is 1) there are many instances when it is perfectly sensible to handle a PI claim yourself, and there are numerous sources of self-help advice; and 2) if you decide to hire a lawyer, you have the right to negotiate for a fee other than the “standard” fee you will be offered (see below the fold).
The HALT brochure mentioned above gives a brief, plain-English overview of personal injury lawsuits. Although it does not try to show you how to bring your own case, it will help you understand some important concepts, such as Causation and Fault, Damages and Compensation, Defenses, Statutes of Limitation, Procedural Issues such as Proving your case, Presence of Insurance Companies, Lawyer Fees, and Alternatives to suing. It also has a short “Need a Lawyer?” section, where it suggests several options other than hiring a lawyer to handle every aspect of a PI case (including unbundling the legal services and going to small claims court).
If you need to handle your claim without a lawyer, or want to consider doing so, you should be willing to do some homework and research (e.g., reading our Should You Go It Alone? page). FreeAdvice.com is one place to acquaint yourself with some of the basic concepts of person injury law. For example, it answers the following questions:
- What law governs my ability to recover damages?
- What is a ‘tort?’
- What is ‘strict liability’?
- What is ‘negligence’?
- Can negligence depend on who was doing what?
- What is ‘comparative negligence?’
- What is ‘proximate cause?’
- What is ‘intervening cause’
- How is the amount of damages suffered determined?
- How is the value of property damage determined?
Nolo.com offers a more extensive look at the issue and process of handling your own personal injury case, with a comprehensive Personal Injury Resource Center, which includes numerous articles and FAQs (by category). Two very helpful articles for anyone thinking of self-representation are When You Can Handle Your Personal Injury Case and When You Need a Lawyer to Handle Your Personal Injury Claim. Nolo’s states
“With basic information about how the accident claims process works, a bit of organization, and a little patience, you may be able to handle your own personal injury claim without a lawyer — and without your insurance company’s unfairly denying or reducing your compensation. If so, you can wind up with considerably more compensation for your injury because you won’t have to pay costly lawyers’ fees.”
You should read the entire article to get a better idea why and when (what types of cases and with how much effort) you may be able to successfully engage in PI self-help. As for saving money, it notes that “Except in serious or complicated cases, a lawyer is usually able to negotiate for you only an extra 10% to 25% above what you can obtain for yourself, once you understand the claims process. But a lawyer will take 33% to 40% of your recovery as a fee, and in addition charge you for “costs” — charges for administrative services such as making copies and holding conference calls, plus any fees associated with a lawsuit, which lawyers sometimes begin sooner than necessary. Subtract the lawyer’s fees and costs from the extra amount of the settlement a lawyer might get, and you’ll see how much better you can do on your own.”
Remember, however, that Nolo also advises that “A few types of injuries and accidents almost always require that you consult a lawyer,” including Long-Term or Permanently Disabling Injuries, Severe Injuries (“measured by the amount of your medical bills, the type of injuries you have, and the length of time it takes for you to recover”), Medical Malpractice, Toxic Exposure, and When an Insurance Company Refuses to Pay
The Nolo PI Resource Center provides many resources to help you handle your own claim. Among them are pieces covering:
- How Much Is Your Personal Injury Claim Worth?
- Dealing with Insurance Companies (an extensive FAQ)
- Chart: Statutes of Limitations in All 50 States
- First Steps in Settling Your Injury Claim FAQ
- Choosing Your Evidence (small claims focus)
- All of the above information is available free online. If you want serious guidance for handling your own claim, check out Nolo’s How to Win Your Personal Injury Claim, by Joseph L. Matthews.
Your RIGHT to NEGOTIATE FEES Based on RISK
Most Americans have seen lots of television commercials, yellow-pages ads, and roadside billboards from personal injury lawyers seeking to attract PI victims. However, only a miniscule portion of the population has ever seen any mention in such an advertisement of a) the actual percentage contingency fee charged, b) the option of using hourly or fixed fees instead of a contingency fee, or c) the willingness to negotiate fees that are tailored to the situation of each case. Instead, PI ads boast that there are no fees unless you win (that is, the fee is “contingent” upon your receiving money) and hide in small print that you will have to pay costs. When you get to their offices, almost every law firm in town offers a fee agreement with the same “standard” percentage fee (usually 33% or more), which tends to be the maximum fee permitted in that jurisdiction without special permission from a court.
What I hope to do with the rest of this posting is to explain for PI clients that there is no such thing as a required contingency fee percentage, and that every client has the right to negotiate a fee that is based on the risk the lawyer is assuming (at the start of his or her representation) of performing a significant amount of work, and/or using exceptional skills, without being adequately and reasonably compensated.
- RISK: The main components of the risk are, of course, how likely the client is to succeed with the claim, how much is likely to be awarded and collected, and how much work and resources the law firm is likely to put into the case. The risk is lower, and the fee should therefore be lower, when the case is likely to be a winner with a big jackpot, and when relatively fewer hours and dollars will be expended to win. The skill requisite to perform the legal service properly should also be taken into account when deciding upon a reasonable fee.
Recently, Connecticut lawyer Joshua A. Winnick did a rare and courageous thing: he “ran a television advertisement offering to represent car accident victims in exchange for a 15 percent contingency fee, which is more than 50 percent less than the traditional 33 percent contingent fee.” In an op/ed piece in The Connecticut Law Tribune, Winnick revealed his disappointment that “Most plaintiffs lawyers whose views on my fee have come to my attention are against it, presumably because they are against lawyers being paid less money for the work they do.” (Commentary: Putting a Price on Plaintiffs Work, Dec. 28, 2006; via Overlawyered.com) After stating that “One of the goals of my advertising campaign is to reform the tort system in the marketplace, without the need for legislation, ” Winnick had this to say about the one-third contingency fee that most PI lawyers treat as sacrosanct and that most consumers appear to believe is set by law:
“[My ad campaign takes a step toward freeing the tort system from the yoke of the 33 percent contingency fee — the ‘one size fits all’ fee that plaintiffs lawyers pretty much charge all accident victims. No one can explain where the 33 percent fee came from, why it is fair or why it makes economic sense to charge 33 percent, as opposed to a lesser amount, in every case.”
The truth is that the one-third contingency fee does not make economic or ethical sense. It is only fair when the PI lawyer is taking an extremely high level of risk — a risk that warrants his being paid a multiple many times greater than a reasonable hourly rate
- The concepts discussed in this posting are treated in great detail, with examples and links to authorities and relevant materials, in a 4-part series at my f/k/a weblog — Contingency fees: Part I: Market Failure; Part II: Risk Matters; Part III: Do “Standard” Fees Exist?; Part IV The Lawyer’s Ethical Duties.
As is discussed fully in the f/k/a Risk Matters essay, many leading legal ethicists and commentators, along with consumer advocacy groups and professional associations, have agreed that a contingency fee should be based on the degree of risk in the particular case (rather than charging all [uninformed?] clients the same percentage merely because some risk is being taken by the lawyer of not being compensated). For example, the Federal Trade Commission, Bureau of Consumer Protection gives this advice in a brochure called Facts for Consumers: Hiring A Lawyer.
- “[B]efore agreeing to a contingent fee, consider that: . . . . The size of a contingency fee, usually a percentage of any money you receive to resolve the case, is always negotiable.
- Remember that there’s no particular percentage of a consumer’s recovery that constitutes a “standard” or “official” fee.
- “The size of the contingency fee should reflect the amount of work that will be required by the attorney. Some cases are straightforward; others can be novel or uncertain. You may want to ask whether the case is likely to settle quickly and whether government agencies will gather significant amounts of evidence.”
The Naderite group Public Citizen, a strong ally of the Association of Trial Lawyers of America against the tort reform movement, and sponsor of major-impact tort suits, told the Utah Supreme Court in July 2003:
“It is widely accepted that contingency fees should vary depending on the riskiness and complexity of the individual case; indeed, that is what the ethical rules currently require (even though almost universally honored in the breach).”
Professional associations of lawyers have also explicitly supported the risk principle for contingency fees. As discussed at length in the f/k/a piece Ethical Duties, the most comprehensive ethical opinion from the American Bar Association on contingency fees, Op. 94-389, and its predecessors (e.g., ABA Formal Opinion 93-373 and ABA Informal Opinion 86-1521), set forth two basic requirements for the ethical use of contingency fee arrangements — the lawyer must:
(1) fully inform the client of all relevant factors, so that agreements can be entered into knowingly and intelligently; and
(2) treat each case and client separately, when deciding on the appropriateness of the arrangement and the reasonableness of the agreed-upon fee.
Because the lawyer will be far more knowledgeable than the client, the expectation of Op. 94-389 is that the lawyer will make a good faith, professionally-informed estimate of anticipated effort and risk (of non–recovery or inadequate compensation), and explain that evaluation to the client, prior to their coming to an agreement on a contingency fee.
- Note: as discussed here, the Arizona ethical rule on lawyer fees now states that “the degree of risk assumed by the lawyer” is a factor to be considered when determining the reasonableness of a contingency fee.
Most PI clients (and apparently their lawyers, too) would probably be surprised to hear that the largest and most powerful bar association of PI lawyers, the American Association for Justice [formerly the American Trial Lawyers Association (ATLA)] made the following statement to the Utah Supreme Court (at 12) regarding the Common Good Early Settlement Fee Proposal, in 2003:
“The percentage charged in contingent fees may vary from case to case depending on the circumstances, including but not limited to, the risk of recovery, the impact of the expense of the prosecution, and the complexity of the case.”
“Attorneys should exercise sound judgment and use a percentage in the contingent fee contract that is commensurate with the risk, cost, and effort required. . . . Attorneys should discuss alternative fee arrangements with their clients. Id. at 13. The passage is not merely information given to clients, but is taken verbatim from a resolution on professional ethics regarding the use of contingent fees, adopted by ATLA’s Board of Governors in 1986. This resolution continues to be ATLA’s policy regarding the ethical obligations of its members.” [emphasis added]
Many State trial lawyers associations adopted the same standard after ATLA did. (For an online example, see Georgia’s use of ATLA’s “Keys to the Courthouse.”)
- In its pamphlet Negotiating Your Lawyer’s Fee, HALT advises consumers to “Remember that lawyer’s fees are not set in stone” and “Be suspicious of lawyers who tell you that their fees are not negotiable . . .” In its Your Personal Injury Lawsuit, the law reform group has a section on fees with a list of information before you attempt to negotiate or agree to a contingency fee. Two important suggestions: 1) “Bargain for alternatives. For example, suggest paying a reasonable hourly rate plus a small premium if the attorney wins an amount substantially larger than what you were offered originally.” and 2) “Suggest that the percentage fee decline as the size of the award goes up. For instance, one-third for the first $50,000, one-fourth for the next $50,000 and one-tenth for any amount above $100,000.”
Despite the historical, ethical and economic arguments for basing contingency fees upon the risk, complexity, and cost of a case, the average personal injury client will not find a welcome reception from PI lawyers when they broach the subject or want to negotiate fee levels. And, they certainly shouldn’t expect a PI lawyer to initiate the conversation.
States such as Florida and California explicitly require lawyers to inform clients of the right to negotiate continency fees. Nontheless, the attitude of lawyers in those states appears to be “you have the right, but I don’t do it.”
Injury victims will have to press their case, and insist that lawyers negotiate the contingency fee and give them the information needed to make informed choices — especially if you have a strong case, you should shop around. The following Bill of Rights might be helpful for knowing and stating your rights when contracting for a contingency fee or other type of fee in a personal injury situation. It is a composite of the requirements set forth in ABA Op. 94-389, along with factors included in the current Model Code of Ethics, the Florida contingency fee regulations, and a bill of rights formulated by HALT. Bringing a copy along when shopping for a PI lawyer might prove useful — and help you decide whose interests the lawyers is putting first. If enough consumers know and assert their rights, true marketplace competition may break out among PI lawyers.
The Injured Consumers’ Bill of Rights for Contingency Fees [click here for a printable version]
Before you, the prospective client, arrange a contingent fee agreement with a lawyer, you should understand this statement of your rights as a client.
1. There is no legal requirement that a lawyer charge a client a set fee or a percentage of money recovered in a case. You, the client, have the right to talk with your lawyer about the proposed fee and to bargain about the rate or percentage as in any other contract. If you do not reach an agreement, you may talk with other lawyers. Any contingent fee contract must be in writing.
2. In this jurisdiction, the maximum percentage fee that may be charged is _______%. Your lawyer must charge you a reasonable fee. The percentage fee charged to you should reflect the likelihood of winning, how much money is likely to be rewarded and collected, and how much work and expense the lawyer is likely to put into the case. Your lawyer’s expertise and the complexity of the case are also relevant.
3. Your lawyer should take all the following factors into account in evaluating your case and should discuss each factor with you, giving his or her best good faith evaluation:
- The likelihood of success
- The likely amount of recovery, if the case succeeds
- The possibility of an award of punitive damages — damages awarded because the injury was so avoidable or despicable — or damages that are multiplied by state statute, and how that will affect the fee
- The attitude and prior practices of the other side with respect to settlement
- The likelihood of collecting any judgment
- The availability of alternative dispute resolution
- The amount of time that a lawyer is likely to spend on the case
- The likely range of the fee if the matter’s handled on a non-contingency basis
- The client’s ability and willingness to pay a non-contingency fee
- The percentage of any recovery that the lawyer would receive as a contingency fee and whether that percentage is fixed or on a sliding scale (depending, for example, on whether a settlement is reached before a complaint is filed, or a trial is held or an appeal is needed)
- How expenses of the litigation will be handled.
4. You, the client, have the right to know in advance how you will need to pay the expenses and the legal fees at the end of the case.
5. You, the client, have the right to receive and approve a closing statement at the end of the case before you pay any money. The statement must list all of the financial details of the entire case, including the amount recovered, all expenses, and a precise statement of your lawyer’s fee.
6. You, the client, have the right to ask your lawyer at reasonable intervals how the case is progressing and to have these questions answered to the best of your lawyer’s ability.
7. You, the client, have the right to make the final decision regarding settlement of a case.
8. If at any time you, the client, believe that your lawyer has charged an excessive or illegal fee, you have the right to report the matter to the agency that oversees the practice and behavior all lawyers in this state. You can reach the agency at ___________________________ .
Client Signature date Attorney Signature date