How Much Does a Lawyer Get From a Car Accident Settlement in California?
If you’ve been in a car accident in California and are considering filing a personal injury claim or lawsuit, you may be wondering how much a lawyer typically gets in fees from the settlement. This is an important question to consider when deciding to hire a personal injury attorney to handle your car accident case. It is a question we receive at the firm daily and we hope that this guide will answer some of the concerns raised by our potential clients.
Contingency Fees: How Lawyers Get Paid in Personal Injury Cases in California
The vast majority of personal injury lawyers in California, including car accident attorneys, work on a contingency fee basis. This means the lawyer only gets paid if they are able to recover compensation for you through a settlement or jury award. Hence the phrase “No Fee If No Win”. The lawyer’s fee comes out of the settlement. Contingency fees in injury cases in California generally range from 33% to 45% of the settlement.
It is customary for the contingency fee percentage to increase as a case progresses. For example, a typical retainer may set forth the following fee structure: Attorney’s fees shall be 33% before filing a lawsuit, 40% after filing a lawsuit, and 45% if the case goes to trial.
Here is an example of how this would work: Let’s assume that your attorney settled your car accident injury case for $10,000. If the settlement occurred prior to filing a lawsuit, also referred to as the pre-litigation stage, then the attorney will receive $3,300 in fees. However, if the settlement was reached after filing a lawsuit—anytime between a week after filing and a day before trial—then the fees would be $4,000. Lastly, if the case settled during the trial or the attorney was able to obtain a jury verdict, then the fee would be $4,500.
The reason that attorney’s fees typically increase as the case progresses is due to the complexity of the case at later stages. For example, in pre-litigation, there is no discovery, and everything is handled on a more informal basis between attorneys and the insurance adjusters or in-house attorneys. However, once a lawsuit is filed, strict procedures and timelines must be followed to move the case forward. There is also a lot of law and motion work that is involved in litigation – something that is very time consuming and expensive. The most challenging part of any case is the trial, and that is why most attorneys charge a much higher fee than pre-litigation settlements.
What Are Acceptable Contingency Fees in California
As mentioned, contingency fees are typically a percentage of the total settlement amount. It is important to remember that the law in California does not set a specific contingency rate for personal injury cases, except for cases involving medical malpractice, minors and incompetent clients. This provides flexibility for attorneys and clients to negotiate fee agreements suited to the unique circumstances of the case.
However, there are strict guidelines which attorneys must follow when setting their contingency rates. In particular, California Rule of Professional Conduct Section 1.5(a) states: “A lawyer shall not make an agreement for, charge, or collect an unconscionable or illegal fee.” Hence, an attorney may charge a contingency fee as long as it is not “unconscionable”.
The statute under subsection 1.5(b) then goes on to discuss the factors that are usually considered in determining whether a contingency fee is considered “unconscionable.” Some of the factors include:
- whether the lawyer engaged in fraud or overreaching in negotiating or setting the fee;
- the amount of the fee in proportion to the value of the services performed;
- the relative sophistication of the lawyer and the client;
- the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
- the amount involved and the results obtained;
- the experience, reputation, and ability of the lawyer or lawyers performing
- the services;
- the time and labor required; and
- whether the client gave informed consent to the fee.
The overall theme of the statute in determining whether a contingency fee is unconscionable or illegal is whether the fee is commensurate with the amount and complexity of legal work involved and whether the client gave informed consent. In the above example, a 40% pre-litigation fee or 60% trial fee may be found unconscionable, as those percentages are outside the norm. Even if the contingency percentages charged are within the range typically charged by other attorneys, a court may still find them unlawful if the client was unaware of or misled about the terms in the retainer agreement. The key factors are whether the fee fairly reflects the work involved and whether the client gave knowing, voluntary consent after being fully informed.
Contingency Fees Are Negotiable in California For Personal Injury Cases
When hiring a personal injury lawyer in California, many clients assume two things: 1) all attorneys charge the same fixed percentage for contingency fee agreements, and, 2) the attorney’s fees are fixed by law. However, this assumption is wrong and the answer to both of these questions is a no.
Under California’s Business and Professions Code Section 6144(4) clients have the right to negotiate the contingency fee rates with their attorneys. This statute specifically states that an attorney must have “a statement that the fee is not set by law but is negotiable between attorney and client” in their retainer agreement. As such, attorneys and clients have flexibility to negotiate fee agreements on a case-by-case basis.
This negotiable fee structure makes sense when you consider that no two cases are exactly alike. The work required for a complex medical malpractice lawsuit ending in a trial is very different from a simple rear-end car accident which settles quickly. Charging the same contingency fee percentage for such different cases would be unfair and impractical.
So when you’re hiring any type of personal injury lawyer in California, don’t be afraid to ask questions, voice concerns, and negotiate the contingency rate. Remember, the attorney’s fee percentage is not set in stone. Knowing that contingency fees are negotiable will empower you to have a productive discussion with your attorney.
Why Do Lawyers Take a Percentage of the Settlement in Personal Injury Cases in California?
Contingency fee arrangements are attractive for both personal injury accident victims and attorneys in California. From the injured person’s perspective, contingency fees are ideal because they don’t require upfront or out-of-pocket payment of legal fees or costs. Instead, the attorney’s fees and costs are deducted from any settlement or award at the end of the case.
From the lawyer’s perspective, they only get paid if they win, so they have an incentive to maximize the client’s recovery. It compensates them for investing time and resources in investigating, building, and litigating the case. However, contingency fees are not risk-free for attorneys, as they front all the litigation costs without guarantee of payment. This aligned incentive encourages attorneys to work hard on contingency fee cases. Overall, when used appropriately, contingency fees provide mutually beneficial access to legal services for injured personal injury victims and attorneys taking on their claims in California.
Additional Expenses Beyond the Lawyer's Fee in Personal Injury Cases in California
It’s important to note that the contingency fee percentage taken by your attorney is separate from any case-related expenses. Attorneys typically front the costs for many fees throughout the life of a case, and then are reimbursed for these expenses at the conclusion of the case. Some common examples of such costs include:
- Filing fees for lawsuits or motions
- Process server charges
- Costs related to obtaining medical records or accident reports
- Fees for expert witnesses, like accident reconstructionists
- Deposition costs
- Travel expenses
- Costs associated with taking a case to trial
These costs are not part of the attorney’s contingency fee percentage. Instead, they are paid back to the attorney out of the total settlement or award. The contingency fee percentage only applies to the actual compensation or damages recovered for the client.
For example, assume that a case settles in pre-litigation for $100,000 and the lawyer’s fee is 33%. In this instance, the attorney will take $33,000 in fees, deduct $5,000 for case related expenses, and disburse the remaining $62,000 to the client. In this example, the attorney’s fees were deducted from the settlement before the expenses were.
Make sure you understand how costs and expenses will be handled when signing a fee agreement with a personal injury attorney. Ask if the contingency fee is deducted before or after deduction for expenses.
Limits on Contingency Fees in Medical Malpractice and Minor Cases in California
To protect certain vulnerable classes, California law places limits on contingency fees an attorney may charge in personal injury cases for minors or medical malpractice cases.
When it comes to medical malpractice cases, effective January 1, 2023, California Business & Professions Code section 6146 sets forth the following contingency fee sliding scale:
- 25% of the total settlement amount if a settlement is reached before filing a lawsuit;
- 33% of the total settlement amount if a settlement is reached after filing the lawsuit.
In personal injury cases involving minors, there are two specific statutes that govern settlements. First, under California Family Code section 6602 a contingency fee agreement for attorney’s fees involving a minor (or a incompetent person) must be approved by a court to be valid. This is usually referred to as a Minor’s Compromise and it requires the appointment of a Guardian ad Litem. Second, California courts have considered a 25% contingency fee for minors as reasonable, and have readily approved it. (See 2023 California Rules of Court Rule 7.955: Attorney’s fees for services to a minor or a person with a disability).
Requirements for Contingency Fee Retainer Agreements Under California Law
California Business & Professions Code Section 6147 lays out the basic framework of what provisions must be included in every contingency fee contract in personal injury cases in California. The statute is designed to promote transparent and fair contingency fee retainer agreements that protect client interests.
First and foremost, the agreement must always be in writing. Second, it must contain at least the following terms:
- The agreed upon contingency fee rate;
- An explanation of how case related costs advanced by the attorney will affect the contingency fee and the client’s ultimate recovery;
- How is the attorney to be compensated if the attorney is representing the client in other non-contingency matters,
- The statement that the contingency fee rate is negotiable between lawyer and client,
- For medical malpractice cases, the agreement must state what the contingency fee limits are and that the parties may negotiate a lower rate.
If the lawyer fails to comply with these requirements, the client can void the agreement, in which case the lawyer can only receive a reasonable fee for work done, also referred to as quantum meruit.
Once the contingency agreement is signed, the attorney must provide the client (or the client’s legal guardian or representative) with a duplicate copy of the fully executed contract. This ensures the client has their own record of the terms.
Questions to Ask a Lawyer About Contingency Fees in Personal Injury Cases in California
When researching lawyers in California for your personal injury claim, don’t hesitate to ask about how they calculate contingency fees and handle expenses. Here are some key questions to consider:
- What is the contingency rate if a case is settled pre-litigation, after a lawsuit is filed, and during litigation?
- What percentage of cases are taken to trial?
- How are case-related expenses or costs handled?
- Who is responsible for negotiating and paying for the medical liens?
- If we do not prevail, am I still responsible for any expenses or costs?
- Is the contingency fee calculated before or after case-related expenses are deducted?
- Are there any other fees or expenses to be aware of?
An attorney who readily answers these questions can give you greater confidence and peace of mind in how they handle fees. Beware of any lawyer who is evasive or refuses to explain fee arrangements clearly. And remember, under California law, all contingency fee agreements must be in writing.
Consulting a Personal Injury Lawyer in Los Angeles, California, for a Free Case Evaluation
If you were injured in a car accident caused by another driver’s negligence, consult with a qualified personal injury attorney. Most provide free, no-obligation case evaluations and can give you a better idea of potential compensation. They’ll also discuss representation options including contingency fees.
Knowing how lawyers get paid from car accident settlements in California can help you make an informed choice. Partnering with the right attorney gives you the best chance at maximizing your recovery so you can move on after your accident.
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