What Is a Contingency Fee?

January 25, 2024 | Article by Chain | Cohn | Clark staff

A contingency fee is a way of compensating an attorney for legal services that doesn’t require the plaintiff (the party making a claim) to pay anything upfront.

A contingency is something that depends on a certain outcome. In legal cases, that outcome is a successful settlement or a jury decision that awards the plaintiff money.

In a contingency fee agreement, a lawyer agrees to represent a client for a pre-agreed-upon percentage of the settlement or jury award.

The lawyer only receives payment if the client’s claim is successful. The client doesn’t pay attorney fees until the case is settled or they win their lawsuit.

Are Contingency Fees Common?

Contingency fees are very common in personal injury law.

As the saying goes, “Accidents happen.” But if you were injured or had property damaged in an accident caused by the negligence of an individual, business, or government entity, you are legally entitled to pursue a personal injury claim. Through your claim, you may be able to receive money to:

  • Repair or replace your damaged property.
  • Pay for your medical bills.
  • Make up for lost wages due to your injuries.
  • Compensate you for your pain and suffering.

However, insurance companies, businesses, and government entities don’t just hand over money—you need to gather evidence to prove their negligence and either negotiate a settlement or present your case in litigation.

Most people need the help of a personal injury attorney to do this—but it’s difficult for many people to pay for a personal injury lawyer out of pocket. That’s where contingency fees come in—they enable accident victims to afford legal services as they seek the compensation they deserve.

Contingency fees are common in the following personal injury practice areas:

  • Car accidents
  • Premises liability
  • Construction accidents
  • Medical malpractice
  • Wrongful death

Contingency fees are also common in workers’ compensation and probate cases (cases involving estates, wills, and inheritance).

Benefits of Contingency Fees

The benefits of contingency fees include:

  • Contingency fees help those who otherwise can’t afford legal help seek justice.
  • There are no up-front costs to you when you hire a personal injury lawyer on contingency.
  • Under a contingency agreement, lawyers earn a percentage of the compensation you receive. The more you receive, the more they receive. So, a contingency agreement motivates your attorney to seek the highest possible compensation for you.

If you have legal representation for your personal injury case, there are a couple of side benefits:

  • Less pressure and stress on you during your case.
  • A strong likelihood of receiving more from the case than if you negotiated with an insurance company or tried to litigate on your own.

What’s the Law on Contingency Fees in California?

California’s Business and Professions Code, Section 6146, spells out the requirements for a contingency fee agreement. The agreement must be a written contract signed by both attorney and client and must include:

  • The contingency fee rate (as a fraction or percentage).
  • A statement that explains what costs the client must pay in addition to the contingency fee (e.g., court filing, deposition, and expert witness fees).
  • A statement that explains whether the client must pay the fee before or after attorney fees are deducted from the settlement or jury award.
  • A statement indicating that the fee rate is negotiable (unless it’s a medical malpractice or healthcare-related case—then different rules apply).

For most areas of personal injury law, there is no explicit limit on contingency fee rates. However, both the American Bar Association (ABA) and the State Bar of California’s rules of professional conduct say that personal injury lawyers shouldn’t charge “unreasonable” or “unconscionable” fees.

Typical Contingency Fees

A typical fee for personal injury cases in California is 33% of the final settlement. Some lawyers may charge more or less depending on the following factors:

  • The complexity of the case.
  • How long the case is expected to take.
  • How likely it is that the case will result in a lawsuit and trial.

For a case that is straightforward and expected to settle out of court, a law firm might request a contingency fee of 25%. For a complicated case that’s disputed and likely to go to trial, the same law firm might ask for a contingency fee of 40%.

Contingency fees are usually lower in workers’ compensation cases—typically between 10% and 20%.

Variations in Contingency Fee Arrangements

Some contingency fee agreements use a variable rate that depends on how a case is resolved. For example:

  • 25% if the case settles out of court before a lawsuit is filed
  • 33% if the case settles out of court after a lawsuit is filed
  • 40% if the case goes to trial

Another important variation is when costs are deducted—before or after the contingency fee is deducted. This stipulation in a contingency fee agreement affects how much money you ultimately receive.

Suppose your case ends in a $20,000 settlement with a 33% contingency fee and $1,500 in costs:

  • If costs are deducted before the contingency fee, the fee is taken out of $18,500 ($20,000 − $1,500). Then, the contingency fee is $6,105 ($18,500 × 0.33), and you receive $12,395.
  • If costs are deducted after the contingency fee, the fee is $6,600 ($20,000 × 0.33), which leaves you $13,400 minus $1,500 in costs—a total of $11,900.

Limitations on Contingency Fees

Both the ABA and the State Bar of California place limitations on the use of contingency fees in family law cases—they’re prohibited in divorce and child custody cases. Contingency fees are also disallowed in criminal cases.

California Business and Professions Code, Section 6146, limits contingency fees in medical malpractice and healthcare-related cases to 25% or 33%, depending on certain conditions. If a malpractice case goes to trial and the plaintiff’s lawyer wants to charge a higher rate, the court must approve the rate.

Bakersfield Personal Injury Lawyers

If someone else’s carelessness or recklessness resulted in your property damage, injuries, or the wrongful death of a loved one, the experienced personal injury lawyers at Chain | Cohn | Clark can help you receive the compensation you deserve.

For a free consultation—with no obligation to you—contact us today.