Contingency fees explained: how "no win, no fee" lawyers get paid

A contingency fee lets you hire a lawyer without paying upfront. The lawyer's fee is "contingent" on winning money for you, through a settlement or a court award. It is the standard arrangement in US personal injury cases, and common in medical malpractice, some employment cases and other claims for money.

Typical percentages

Many personal injury lawyers charge around 33⅓% of the recovery, rising to around 40% if a lawsuit has to be filed or the case goes to trial. Some states cap contingency fees for certain claims, such as medical malpractice and workers' compensation, and fees in Social Security disability cases are capped by federal law. Percentages are often negotiable, especially in high-value cases.

Fees vs. costs

Case costs are different from the lawyer's fee. They include filing fees, medical records, expert witnesses, depositions and investigators. Ask:

• Will the firm advance costs, and do I repay them if we lose?
• Is the percentage calculated on the gross recovery (before costs) or the net recovery (after costs)? Calculating on the net amount leaves more money for you.
• How will medical liens and unpaid medical bills be handled from the settlement?

A worked example

Suppose your case settles for $90,000, with a 33⅓% fee and $6,000 of costs. Calculated on the gross amount, the fee is $30,000, and you receive $54,000 after costs. Calculated on the net amount, the fee is one third of $84,000, which is $28,000, and you receive $56,000. Your own medical bills or liens may then be paid from your share.

What the agreement must include

Contingency agreements must be in writing and signed by you. They should state the percentage at each stage, how costs are handled and whether you owe anything if you lose. At the end of the case, you should receive a written statement showing how the money was divided.

When contingency fees aren't allowed

Professional rules prohibit contingency fees for defending criminal cases, and in divorce cases where the fee depends on securing a divorce or the amount of alimony or a property settlement.