We have all heard law firms’ late night TV and radio commercials and seen the billboards, “You pay nothing unless you win!” But what does that really mean when you need to hire a lawyer after getting seriously injured in an accident?

Below are some tips to understanding contingency fees and some things you should take into consideration when signing an agreement with any law firm.

Contingency fees don’t always mean you pay nothing

Reputable personal injury attorneys and law firms will handle your case on a contingency-fee basis. Contingency fee arrangments are most common in personal injury cases only when money compensation is claimed. Under the arrangement, the client pays the attorneys’ fees out of the final settlement or jury verdict, if the case settles or wins in trial.

Typically, the law firm will agree to a contingency fee of one-third (1/3) of the final settlement amount.  However, this amount can vary depending on the firm and the type of case.  If the client decides not to accept a negotiated settlement and presses the case to trial, the law firm’s expenses increase, and typically so will the contingency percentage. Any money you ‘win’ in a settlement or jury award will be automatically deducted to be paid to the law firm.

With this type of arrangement there are risks on both sides. As you can see, the law firm takes on cost risks when it agrees to handle a case on a contingency-fee basis. It provides the staff and financial resources to investigate the case, to prepare the evidence and to negotiate with the insurance company representatives.  Going to trial increases the cost of resources considerably. This is why many law firm websites and media ads make it a point to say, “…if we accept your case, you will pay nothing…”

However, it is not without some risks for the client, as well. As the American Bar Association reminds us, “…win or lose, you probably will have to pay court filing fees, the costs related to deposing witnesses, and similar charges.”  This also depends on the law firm you hire and their policy on costs, “win or lose.” In fact, some personal injury litigation firms may require a retainer to be placed in escrow at the beginning of the case. The money will be applied toward court and case development costs, in the event of losing. If there is any money remaining in the escrow account when all the costs are covered, it must be returned to the client at the end of the case. Smith, Feddeler, and Smith does not require a retainer.