Should Personal Injury Lawyers Reduce Their Fees?
September 30, 2010
Let’s assume that you are involved in a car accident in which you sustained an injury. You decide to hire a personal injury lawyer. You sign a typical contingency fee contract in which the attorney fees are based upon a percentage of the gross settlement. For our purposes, we will make that percentage 33 1/3% (or one-third). Let’s also assume that your medical expenses are $4,000, and the insurance company has made a final settlement offer of $6,000. If you and your lawyer mutually agree that the settlement offer should be accepted, this is how your net recovery would be initially calculated:
Gross Settlement: $6,000
Attorney Fees: $2,000
Medical Expenses: $4,000
Client’s Net Recovery: $0.00
Even if your lawyer is able to negotiate the medical expenses from $4,000 to $3,000, you would still only net $1,000, while the lawyer would take $2,000 in fees. Unfortunately, this is a commonly accepted practice with many personal injury lawyers and is probably one of the reasons why personal injury lawyers have such a bad reputation.
Even though my fee percentages are typical of other personal injury lawyers, I calculate a settlement on the belief that the client should take a greater net recovery than the attorney’s fees. This is a practice I have followed throughout my career and continue to follow today. In the example above, I would reduce my fee so that the client’s net recovery would be greater than the attorney fees. This is how my calculation might look:
Gross Settlement: $6,000
Attorney Fees: $2,000 reduced to $1,400
Medical Expenses: $4,000 reduced to $3,000
Client’s Net Recovery: $1,600
As you can see, I reduced my fee from $2,000 to $1,400. After paying the $3,000 in negotiated medical expenses, the client’s net recovery is now $1,600, which is $200 more than the attorney fees.
There are, however, rare and extenuating circumstances where I would consider taking a full fee even if it means that the client recovers less. Examples would include a client forcing me to accept a settlement offer which is unfair; a client being dishonest with me about their case; or where a client refuses to cooperate in prosecuting the case. Luckily, those situations are very rare and I may have refused to reduce my fees maybe five times in my entire 16 years of practice. However, where the client is cooperative in prosecuting their case, then I believe the client should be fairly rewarded in the net result of the settlement. Hopefully, more lawyers will come to follow this practice in the future.
