HOW DOES AN ATTORNEY GET PAID FOR A PERSONAL INJURY CASE?
A personal injury attorney is different from other type of attorneys, such as tax, criminal, maritime and estates and trusts attorneys, who get paid either a flat fee or on an hourly basis, because we are compensated on a contingency fee basis, which means that the attorney takes the risk that there may be no money at the end of the case, no pot of gold at the end of the rainbow.
When the person finishes treating and going forward, there may be questions of liability or questions of insurance coverage and money available to cover the client’s damages and injuries; there is a risk in accepting a personal injury case because a small minority of cases won’t pan out for one reason or another. Perhaps there is no actual insurance coverage available or there are issues of liability because, in Virginia, if a client is even one percent at fault and the other party is 99 percent at fault, it’s called contributory negligence and your client cannot recover anything. Issues of liability are not always clear in the beginning.
A personal injury attorney doesn’t have a contract for hourly billing or a flat fee; they get nothing upfront; they typically get paid one-third of the final lump-sum settlement amount. Since they are paid on a contingency fee basis, they take a risk that there is a small chance they will get nothing, which does very occasionally happen. Therefore, they are allowed to charge something like one-third (or 40 percent if the case goes to trial) of the total amount of the amount a client receives, either through settlement negotiations or through a judge or jury after a trial.
The attorney gets one-third of that total lump sum, which is made up of three things; the total lost wages, loss of future earning capacity and all of the medical bills and other costs incurred, as well as money for pain and suffering and continuous discomfort and scarring disfigurement, if appropriate. The lawyer takes one-third off the top of that before any or all bills are paid and before any liens are settled; the attorney has a priority lien of that one-third against settlement.
For example, if the lump sum settlement is $90,000, the attorney gets $30,000 and the client gets $60,000 tax free. It’s tax free for the client, not the attorney. In return, they work for days, weeks, months or years with absolutely no money or fees upfront. The clients always remain responsible for the expenses incurred in a personal injury matter, such as the lawyer paying in advance to get copies of medical records and bills, police crash reports; items like that, although those costs are usually nominal.