Contingency fees are hard to swallow especially when the numbers become significant. On many occasions, I’ve had clients ask me to explain my fee or to reduce it because it just doesn’t seem fair. And, in some cases, I will reduce my fee if I feel like the result is unfair to the client.
But as a general rule, contingency fees are incredibly fair to the client and the lawyer and I can explain why.
1. Everybody has equal access to the judicial system
In a personal injury case, it does not matter how much money you have in the bank when you determine that you need a lawyer. All that matters is that you were injured through no fault of your own and you are entitled to a financial recovery for the losses that you suffered.
No personal injury lawyer will ask you to write a large retainer check before accepting your case. In fact, quite the opposite is true. The lawyer oftentimes uses his own money to advance the cost of your case so that it will get to a place where the insurance company will offer a fair settlement or he can ask a jury for a full and fair verdict.
The fact that every person has equal access to a lawyer to pursue his or her case makes contingency fees a good idea.
2. Motivates your attorney to win your case
Hourly fee arrangements are the norm when it comes to civil litigation, except in personal injury and medical malpractice cases. In those cases, your attorney does not get any fee unless he wins your case. Hourly fee arrangements motivate lawyers to spend time on your case, but that does not guarantee that the time spent will be quality time. One must never mistake movement for progress. Hourly fee arrangements promote movement, but not necessarily progress.
This is not to say that lawyers who charge by the hour are somehow unethical, I do not think they are. But if you are structuring the fee arrangement to position your attorney 100% in your corner, this is a surefire way to do it.
3. With great risk comes great reward
Lawyers take great risks when they take on personal injury cases. Because these cases can take a long time to resolve, the lawyer does not get paid sometimes for years and he may have to use his own resources to fund your case. The lawyer will ultimately get those costs back when the case settles or the defendant pays a verdict, but he has to float that cost for several years. Also, if he invests his own time and money into your case, but the jury returns a defense verdict, then he will not get paid at all.
As a result of this great risk, the lawyer earns a great reward.
4. Reduces the risk of frivolous cases
If the case is frivolous, the lawyer gets nothing. Contrary to popular belief, frivolous cases do not settle out of court. In fact, while a majority of personal injury cases settle out of court—I’ve heard as much as nationwide—the frivolous cases are usually tried by a jury. The insurance company’s payout based on risk. If they perceive no risk, they would rather litigate and win than pay a frivolous claim. There are some occasions where it would be cheaper to give the frivolous claimant a few hundred bucks instead of paying an insurance defense attorney, but those are few and far in between. Either way, the lawyer barely gets anything if the settlement is simply a cost of defense settlement.
In my view, it is not worth it to take a frivolous case because the chances are that the lawyer will spend an inordinate amount of time for the few dollars it may make him.
So these are just a few reasons why contingency fee arrangements are beneficial to both the client and the lawyer. While it may seem like the lawyer is simply hitting the jackpot, that is not nearly the case. I recently posted an article from Lawyerist discussing why lawyers are so expensive.
What is your experience with contingency fee arrangements? I’d like to hear from you in the comment section below.