How Personal Injury Lawyers Get Paid: Contingency Fees Explained

A personal injury lawyer's contingency fee comes out of the settlement before you see it: a percentage set in a signed agreement, then costs the firm advanced, then medical liens. In our worked example ($100,000, a one-third fee, $6,000 in costs, a $12,000 Medicare claim), you'd keep about $53,400 if the fee is taken before costs, about $55,100 if after.

This article is general legal information, not legal advice. Laws vary by state and situation, and reading it does not create an attorney-client relationship. For advice about your case, talk to a licensed attorney.

Key takeaways

• American Bar Association (ABA) Model Rule 1.5(c) calls for a contingency agreement in a writing you sign, stating the percentage and whether costs come out before or after the fee. States adopt their own versions; Michigan's asks only for a writing that states how the fee is determined.
• Michigan caps injury fees at one-third of the net recovery; New Jersey and Connecticut use sliding scales that start at 33 1/3%.
• Most states set no percentage and rely on the rule that a lawyer's fee must be reasonable.
• With $6,000 in costs, a one-third fee taken after costs is $2,000 lower than the same fee taken before them.
• Medicare reduces its own claim by the share of the settlement that went to your fees and costs (42 CFR 411.37).

A $100,000 settlement, line by line

On a $100,000 personal injury settlement with a one-third fee, $6,000 in costs the firm advanced and a $12,000 Medicare claim, you'd net $53,386.67 if the fee is figured before costs and $55,146.67 if after. That is arithmetic on stated assumptions, not a typical case. The $12,000 is what Medicare paid to treat the injury.

The money is divided on a closing statement before any of it reaches you. The two columns differ in one term of the fee agreement: whether the percentage is applied before the costs come out or after.

Line	Fee before costs	Fee after costs
Settlement	$100,000.00	$100,000.00
Lawyer's fee, one-third	$33,333.33	$31,333.33
Costs repaid to the firm	$6,000.00	$6,000.00
Fee plus costs, and their share of the settlement	$39,333.33 (39.33%)	$37,333.33 (37.33%)
Medicare's reduction for fees and costs (that share of $12,000, before rounding)	$4,720.00	$4,480.00
Paid to Medicare ($12,000 minus the reduction)	$7,280.00	$7,520.00
Net to you	$53,386.67	$55,146.67

Taking the fee after costs is the method Michigan and New Jersey require: the fee is computed on the net sum left after disbursements. The rule of New York's Third Department lets the client choose between a percentage of the net and, if the lawyer agrees to pay the costs, a percentage of the gross. The choice moves the fee by one-third of the costs, $2,000 here, and your net by $1,760, because Medicare's discount shrinks along with the fee.

The lien doesn't lower the fee in either column, which follows rules like New Jersey's: no deduction need be made for the claims of hospitals, doctors and nurses when the fee is computed. Our guide to how personal injury settlements work, from demand to payment covers the steps before this one.

What percentage can a personal injury lawyer take as a contingency fee?

Most states put no percentage in a statute or court rule for an ordinary personal injury contingency fee. They rely on their versions of ABA Model Rule 1.5(a), which bars unreasonable fees. New Jersey, Michigan, Florida, Connecticut, Oklahoma, Wyoming and New York's Third Department go further, with a cap, a sliding scale or a presumption. Those seven rules are the ones we confirmed, and there may be others.

The percentage itself comes from your agreement. Florida's required Statement of Client's Rights says: "There is no legal requirement that a lawyer charge a client a set fee or a percentage of money recovered in a case." Model Rule 1.5(c), which each state adopts in its own version, calls for a writing signed by the client. It states the percentage the lawyer gets on settlement, trial or appeal, the expenses to be deducted, and whether they come out before or after the fee is calculated.

State and rule	Limit or schedule	Figured on
New Jersey (N.J. Court Rule 1:21-7(c), (d))	33 1/3% of the first $750,000, then 30%, 25% and 20% of each further $750,000; above $3 million, a judge sets a reasonable fee	Net after disbursements
Michigan (Mich. Court Rule 8.121)	One-third, for injury, wrongful death and no-fault benefit claims	Net after disbursements
Florida (R. Regulating Fla. Bar 4-1.5(f)(4)(B))	Presumed clearly excessive unless court-approved: over 33 1/3% of the first $1 million if the case ends before the defendant answers the suit, 40% after that when liability is contested; 30% of the second million; 20% beyond	Gross or net, as the contract states
New York, Third Department (22 NYCRR 806.27)	A sliding scale (50% of the first $1,000, 40% of the next $2,000, 35% of the next $22,000, 25% above $25,000) or, if the retainer says so, up to 33 1/3%	Net after expenses, or gross if the lawyer agrees to pay the costs
Connecticut (Conn. Gen. Stat. 52-251c)	33 1/3% of the first $300,000, then 25%, 20% and 15% of each further $300,000; 10% above $1.2 million	Damages or settlement you receive
Oklahoma (Okla. Stat. tit. 5, section 7)	50%	"Net amount" of the judgment or settlement
Wyoming (Wyo. Rules Governing Contingent Fees, Rules 5 and 6)	Presumed reasonable up to 33 1/3% if the claim settles within 60 days after suit is filed, 40% after that; 30% of the part above $1 million. Other percentages can be agreed	Gross or net, as the agreement states

New Jersey's and Michigan's rules say a lawyer may agree to less. In Florida a judge can approve a contract above the standard if the client petitions, and the standard adds 5% for an appeal. If every defendant admits liability when answering and asks for a trial on damages only, it stays at 33 1/3% (then 20% and 15%). Connecticut's schedule can be waived only in a complex case, in a notarized agreement that prints the schedule, and the total fee still can't pass 33 1/3%. New York's other three departments have their own versions (22 NYCRR 603.25(e), 691.20(e) and 1015.15).

On a claim against the federal government, the fee can't exceed 20% of a settlement reached with the agency or 25% once a lawsuit is filed (28 U.S.C. 2678). In medical malpractice, California allows 25% if the case settles before a complaint or arbitration demand is filed and 33% after (Bus. & Prof. Code 6146). New York's malpractice scale runs from 30% of the first $250,000 down to 10% of anything over $1.25 million (Judiciary Law 474-a). Our legal costs page lists the limits in other kinds of cases.

## Do you pay case costs if you lose?

Whether you owe case costs after a loss depends on your state and your contract. Costs are the money spent to bring the claim, repaid on top of the fee. New Jersey's rule lists investigation expenses, expert testimony, and briefs and transcripts on appeal.

Florida's Rule 4-1.8(e) lets a lawyer advance court costs and litigation expenses and make repayment "contingent on the outcome of the matter," so a Florida agreement can say you owe nothing without a recovery. Michigan's version of the rule says repayment "shall ultimately be the responsibility of the client," with an exception for indigent clients. In Connecticut, a client who waives the fee schedule can't be required to repay costs when nothing is recovered (section 52-251c(f)). Model Rule 1.5(c) has the agreement tell you clearly which expenses you'd owe whether or not you win, so look for that clause first.

Florida's client-rights statement gives you some say over the spending: your lawyer should give a reasonable estimate of future costs, and you may decide, after consulting your lawyer, how much is spent preparing the case. Ask for that estimate early when there are several possible defendants, as in a truck crash claim.

Medical liens and Medicare's discount

Whoever paid for your treatment may have a claim on your injury settlement. When that's Medicare, 42 CFR 411.37(c) sets the arithmetic. Medicare takes the ratio of your procurement costs (the attorney fees and other expenses you paid to get the settlement) to the settlement amount, applies that ratio to what it paid, and subtracts the result from its claim.

With the fee taken before costs, fees and costs of $39,333.33 are about 39.33% of the $100,000 settlement. That share of $12,000, figured on the unrounded ratio, is $4,720, so Medicare is owed $7,280. The reduction applies when the claim was disputed and you bore the costs (411.37(a)).

Once the case resolves, you or your lawyer should report the settlement date, the amount and your fees and costs to Medicare's recovery contractor, whose demand letter states what's due. If a Conditional Payment Notice goes unanswered for 30 calendar days, the demand is issued with no reduction for fees or costs.

If Medicare paid as much as the settlement or more, it takes the whole settlement minus your fees and costs (411.37(d)). By that formula nothing is left for you unless Medicare gives up part of its claim. The Centers for Medicare & Medicaid Services may waive recovery in whole or in part (42 CFR 411.28), and the demand letter comes with information on waiver and appeal rights.

The formula covers Medicare only. Hospitals, doctors and insurance carriers can hold liens too (New York's Third Department rule names all three), and what each must accept depends on state law or the plan's terms. Get every payoff figure in writing and check it against the closing statement.

## What the agreement and the closing statement must say

Michigan and Florida add steps to a contingency agreement. In Michigan the lawyer must tell you, before you sign, that lawyers can also be hired on other terms, such as by the hour, and must give you a copy (Mich. Court Rule 8.121(E), (F)). Florida requires an injury client to receive and sign the Statement of Client's Rights and allows 3 business days to cancel in writing with no fee owed. The lawyer can still be reimbursed for amounts reasonably advanced.

At the end, Model Rule 1.5(c) calls for a written statement showing the outcome and, if there's a recovery, what is sent to you and how it was determined. New Jersey requires a signed closing statement whenever its fee limits apply. Florida's must itemize all costs and each lawyer's fee and carry your signature. Until you approve it, the lawyer can't pay money to anyone, including you, without a court order.

Florida's rules show what changing lawyers mid-case can cost. The comment to Rule 4-1.16 says a client may discharge a lawyer at any time, with or without cause, "subject to liability for payment for the lawyer's services." The client-rights statement warns that if you discharge your lawyer without good cause after the 3-day period, you may have to pay a fee for work already done. Neither passage says how that fee is measured. Before you switch, ask the first lawyer what they will claim, and ask the new lawyer to put in writing whether that claim comes out of the new firm's percentage or out of your share.

A minor's case can bring a judge's review or a lower ceiling. In California, unless the court approved the fee agreement in advance, it must use a reasonable-fee standard when it approves fees paid from a minor's money (Cal. Rules of Court, rule 7.955). New Jersey lowers its ceiling to 25% when a minor's claim settles before a jury is empaneled (R. 1:21-7(c)(6)).

Five fee questions to ask an injury lawyer

Ask two or three firms the same questions, and look for the answers in the contract:

• What is the percentage if the claim settles before a lawsuit, after one is filed, and after an appeal?
• Is it applied to the gross settlement or to what's left after costs?
• Which costs would I owe if we lose, and what do you expect them to total?
• Who deals with Medicare and other lienholders, and does any reduction come back to me?
• What do you expect to add to the offer I already have, and how does that compare with your fee and costs?

Our Personal Injury Settlement Estimator gives a rough gross range, and the guide to what a personal injury case is worth explains what moves it. Once you find a personal injury lawyer near you, put that range through the line-by-line table at the percentage you're quoted.

Frequently asked questions

Do you pay a personal injury lawyer anything upfront?

Usually not a fee, since a contingent fee depends on the outcome. Costs are separate: rules such as Florida's 4-1.8(e) let the firm advance court costs and litigation expenses, but an agreement can ask for a cost deposit. If you pay one in Florida, you may ask how it has been spent and how much remains.

Can you negotiate a contingency fee?

Yes. Florida's Statement of Client's Rights says you may bargain about the rate or percentage as in any other contract, and talk with other lawyers if you can't agree. Raise it before you sign, because the written agreement sets the percentage.

Does the percentage go up if the case goes to trial or appeal?

It can, if the agreement says so. ABA Model Rule 1.5(c) has the agreement state the percentage for settlement, for trial and for appeal. Florida's standard rises from 33 1/3% to 40% once the defendant answers the lawsuit and contests liability, with 5% more for an appeal. In New Jersey the capped fee already includes work on any appeal or retrial.

What can you do if the fee on the closing statement looks wrong?

Compare it with your signed agreement: the percentage, the stage the case reached and whether costs came out first. In Florida the lawyer can't disburse anything until you approve the closing statement or a court orders it, and you can report an excessive fee to The Florida Bar. Michigan lets a client file a verified written complaint in circuit court (Mich. Court Rule 8.122).