How does a contingency fee work?

What is a contingency fee? How does it work? How does the attorney get paid and how will I get paid?

These are great questions and we usually answer them at our initial meeting with our clients. We go over the attorney-client contract in detail and answer any questions they have. People usually have the same questions: How is the attorney fee calculated? How do they get paid once you consider attorney fees and case costs?

I will answer those questions here. A “contingency fee” agreement simply means the lawyer gets paid if, and only if, there is a settlement or trial verdict in the case. The contingency fee will usually be a percentage of the gross recovery, in the range of 33 1/3% to 45% or more.

Just like a realtor’s commission, the lawyer’s percentage is paid off the top or gross amount. Next, all case costs are subtracted from the remainder, which would include court costs, expert witness costs, deposition costs and medical costs.

Whatever is left over is what the client gets. Here is an example of a low value insurance policy typical car accident case:

Settlement: $15,000


1/3 Attorney fee: $5,000

Medical bills: $5,000

Net to client: $5,000


These small car wreck cases are what I call, “everybody gets $5,000” because that’s about how they usually end up.

Sometimes a client is unhappy with the fact that the case costs come from their portion of the recovery. “Why don’t you take your attorney fees after case costs?” they ask. Because the attorney would never get paid — often it takes an incredible sum of money to bring a case to settlement or trial because the lawyer is going on the hook for all of these costs needed to prosecute the case.

And if the lawyer loses the case? The client pays and owes nothing. The loss is entirely borne by the lawyer. There is a huge financial risk in taking on a contingency fee case and we sometimes have to explain that to clients so that they understand the magnitude of the undertaking.