Contingency Fee Agreements: How to Avoid Potential Issues

Finding something everyone can agree on is rarely easy—however, it’s difficult to find someone who doesn’t agree to hire an attorney is expensive. After being involved in an accident, you’re probably going to need assistance from a personal injury attorney to successfully settle your claim. 

The primary issue is figuring out how you’re going to pay the legal fees. This is when a contingency fee agreement comes in handy. 

But what are the contingency fee agreement rules and how do you handle any potential issues? Knowing the answer to these and a few other questions can be the difference between taking home a settlement that covers your expenses or one that leaves you with outstanding bills.

What is a Contingency Fee Agreement

All 50 states, including Nevada, allow certain types of attorneys to enter a contingency fee agreement with their clients. 

The agreement is pretty basic that even a layman can easily understand, and it states you can hire an attorney without paying an upfront fee. Yes, you still enjoy the same rights as those who’re paying their lawyer by the hour or case.

With contingency fees, you agree to pay your attorney a predetermined percentage of your personal injury settlement. How much is the percentage? This varies depending on the attorney, but most charge anywhere from five up to 40 percent and higher of your total settlement amount. If you’re still feeling a little confused, here’s a quick example.

You have a contingency fee agreement with your attorney, and the agreement states your attorney is entitled to five percent of your settlement amount. The insurance company hands over a check and your attorney deposits it in an escrow account. 

When you meet with your lawyer, they deduct the agreed-upon amount and you receive the remainder of the settlement. So, if your insurance settlement is $100,000 and your lawyer receives five percent, you take home $95,000 and your attorney gets a contingency fee of $5,000.

For accident victims dealing with rising expenses like medical and property damage costs, a contingency fee agreement is often the best solution since there aren’t any upfront costs.

Nevada Contingency Fee Agreement Rules

There are specific rules attorneys and their clients must follow if they enter into a contingency fee agreement. The rules are basically the same whether you’re filing a personal injury claim in Nevada, Texas, or Massachusetts. This is because the American Bar Association generally sets down the guidelines following federal regulations.

So, what are the rules governing contingency fee agreements? Let’s take a closer look:

• The agreement must be in writing. The agreement can’t be oral and based on a handshake. The agreement is a legal contract between an attorney and their client. The written agreement also indicates you enjoy all of the rights and protections afforded under the law regarding attorney-client privilege.

• You must include the percentage of the settlement the attorney agrees to accept as payment. In other words, you can’t wait until your personal injury claim is settled to decide what percentage your attorney is entitled to. The agreement should also include the percentage your attorney is entitled to receive if your claim ends up going to trial. Usually, if your claim becomes a case in civil court, your attorney is entitled to receive a higher percentage of the settlement.

• Contingency fee agreement rules also allow clients to walk away at any time. The client can terminate the agreement without any legal repercussions. However, the attorney also has rights which include being paid for the work done on your injury claim. Terminating the agreement doesn’t mean you aren’t going to owe your attorney. A lawyer can request compensation based on their average hourly rate.

What happens if your attorney doesn’t win your personal injury claim? As long as you haven’t terminated the agreement, the relationship between you and your attorney ends without you owing a dime. Unfortunately, even if you don’t owe your attorney you may still be responsible for paying the other side’s legal fees. Your contingency fee agreement only covers your legal expenses and not those of the other party.

When Can You Enter Into a Contingency Fee Agreement

Not all attorneys are legally allowed to work on a contingency fee payment structure. For example, criminal defense attorneys must charge a fee either based on the case or an hourly rate. There aren’t any exceptions. 

The U.S. Constitution does give everyone the right to legal representation. When it comes to obtaining legal representation in a criminal case, the state or federal government will appoint an attorney if you can’t afford one. This eliminates the need for contingency fees since you’re guaranteed the right to counsel.

So, when can you legally enter into a contingency fee agreement? Basically, any type of civil litigation can use a contingency fee agreement. This includes personal injury and medical malpractice claims. Class action lawsuits, bankruptcy cases, and wage disputes are other examples.

Does a Contingency Fee Agreement Cover All Costs

Don’t be surprised if you’re still hit with a legal bill even after entering into a contingency fee arrangement. This can be especially true if you don’t have everything in writing. Before signing the agreement, it’s a good idea to ask your attorney a few questions. This is the best way of avoiding any surprise costs or unpleasant issues.

If your personal injury claim stays out of court, there’s a good chance you’re not going to find any hidden costs. However, if your case goes to trial, you should expect costs to increase. Your attorney may need to hire expert witnesses, pay a private investigator, and don’t forget about court filing fees—these are only a few examples of costs that can pop up. 

Getting everything in writing, including what you may owe if your case heads to civil court is the best way of avoiding any potential problems.

A Contingency Fee Agreement Can Make Legal Representation More Affordable

There are benefits to entering into a contingency fee agreement with the most obvious being you can afford to hire an attorney. Before signing the agreement, make sure you understand all of the terms and conditions. 

Don’t forget, you can also walk away from the agreement at any time. However, be prepared to receive a bill for your attorney’s hard work on your case.