How Are Personal Injury Attorney Fees Calculated: Treatment of Expenses & Case Costs Matters
Understanding how personal injury attorney fees are calculated can significantly impact your final recovery. This post explains the importance of cost treatment in contingency fee agreements.
A single line in your Contingency Fee Agreement can cost you thousands!
Let me explain.
Think of two people. "Alice" and "Benito". They are both injured exactly the same way, with exactly the same treatment and exactly the same medical outcome. In fact, imagine that except for one important detail everything that impacts their case and how much they recover is identical.
What is the critical detail that was different? The difference is how the costs advanced by the Personal Injury Attorney each hired are treated.
Every case has costs. These costs include filing fees, deposition transcription, etc. The usual practice is that the Personal Injury Attorney will pay these costs as they occur and be reimbursed from the settlement or jury award.
The Contingency Fee Agreement "Alice" signed required that the attorney's fee be calculated on the total recovery before deducting the case costs.
The Contingency Fee Agreement "Benito" signed directed that the attorney's fee be calculated after the total recovery is reduced on account of the case costs.
Here's an illustration: Alice and Benito both settled for $1,000,000 and in both cases their Personal Injury Attorneys advanced $100,000 in costs.
Alice's recovery after paying the Personal Injury Attorney and case costs: $570,000.
Benito's recovery after the Personal Injury Attorney and case costs: $603,000.
Here's how it works.
Alice: $1,000,000 total recovery minus the $330,000 fee (1,000,000 x .33 = $330,000) minus $100,00 case costs = $570,000
Benito: $1,000,000 total recovery minus $100,000 case costs minus a $297,000 fee ($900,000 x.33 = $297,000) = $603,000.
Be like Benito !!!
Frequently asked questions
How are personal injury attorney fees calculated?
As a contingency percentage of the recovery. Crucially, whether the fee is calculated before or after deducting case costs can significantly change your net recovery.
What are case costs in a personal injury claim?
Expenses like filing fees and deposition transcripts that the attorney advances and is later reimbursed for out of the settlement or award.
Why does the treatment of costs matter?
Calculating the fee on the total recovery before deducting costs leaves you with less than calculating it after costs. The wording of your fee agreement matters.