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Attorney Contingency Fee: What You Need to Know BEFORE Hiring a Lawyer

Anyone who has a personal injury claim wants the most that they can for their case, AFTER the attorney contingency fee. It has been said that the first dollar is the easiest to recover in a personal injury case, the last dollar is the hardest. What this means is that if your case is worth $90,000, then getting the insurance company to pay $1 for it is the ‘easiest’ recovery. The last dollar, the 90,000th dollar, is the ‘hardest’ to get them to pay.

But you, the personal injury victim, want to recover the full $90,000.  Settling your case for say, $30,000, or 1/3 of the value, would not seem something that you would want.

Often, in Baton Rouge, Louisiana and other places, attorneys charge 1/3 of the recovery. Some even more! That means if you accepted an offer to settle your case for $30,000, the attorney contingency fee is $10,000. you would only ‘net’ $20,000, including medical expenses and fees.

If the insurance company was to pay $90,000 to settle your case, the attorney contingency fee is $30,000. Your ‘net’ would go up. But it is not easy to get the insurance company to pay $90,000. It’s far easier to get $30,000 and walk away.

Insurance Adjusters Get Raises if You Take Less

That is because insurance companies want to pay as little as possible for personal injury cases. In fact, some insurance companies review the performance of their adjusters, and pay bonuses, on how many cases they settle for less than full value.

State Farm, for example, paid bonus checks and raises to adjusters who “reduced the payout on automobile insurance claims.” Article here. After a personal injury accident, there is a great incentive for insurance adjusters to settle claims for less than full value. The less that the insurance company pays to you, the more that they make in profits.

The Proliferation of Lawyer Ads and Abuse of Attorney Contingency Fees

The easiest way for a lawyer to handle a personal injury case is to try to get you, the client, to settle as quickly as possible for a ‘quick check.’ The hardest way for a lawyer to make money, but often the best for you, the client, is to force the insurance company to pay fair value for your case.

But getting the highest amount possible in a personal injury claim often takes experience and hard work. The work for a lawyer is getting all the medical bills and medical reports to ensure that you are fully healed before settling your personal injury case. Work such as gathering evidence to prove that you are not at fault, or minimizing fault. It may mean hiring experts and associating other attorneys. It often means showing the insurance company that you are ready to take your case to trial.

This is where you should pay close attention and what you NEED to know BEFORE hiring a lawyer.

Personal Injury Contingency Fee Often Exploited

According to Professor Nora Engstrom Engstrom, “Contingency fees also have an advantage over other legal payment schemes because, unlike a flat or hourly fee, contingency agreements align the client and attorney’s financial interests. The alignment is imperfect, however, and thus generates significant agency costs. Settlement mills exploit this misalignment and also turn a solution some have offered to remedy it on its head.” In other words, some heavily-advertising ‘Settlement Mills’ take on a whole lot of cases, and settle them quick and cheap – less than full value.

To me, Ed Kramer, this is a questionable legal tactic. The attorney should do all that is possible to recover the most for the client. The attorney should not simply take the easy money and walk away.

According to Professor Engstrom of Stanford Law School, the attorney contingency fee system has allowed so-called “settlement mill” law firms to proliferate. What is a ‘settlement mill’ you ask? According to Professor Engstrom:

  • These law firms advertise at a high rate;
  • These law firms settle most of their cases for far BELOW what a judge or jury might award.

Insurance Companies Pay Less to a “Settlement Mill”

In fact, Forbes Magazine ran a story entitled “Study Of “Settlement Mills” Shows Insurers Like Them.”  Forbes. This is because the “settlement firms” often settle the cases for less than the full value.

This is because they are after the easiest money to recover in a personal injury case – the first dollar. According to Professor Engstrom, these settlement mills differ from conventional law practices because they settle everything, and do so without the negotiator having the benefit of “(1) first-hand information about verdicts obtained in comparable cases, (2) detailed information about the intricacies of the particular claim, and (3) the proven willingness and ability to take the claim to court.”

The Forbes article notes: Settling all cases  — including the catastrophic cases —  cheaply in relation to the value the cases would have at trial, the settlement mills lack the ability to credibly move cases to a jury trial but offer insurance companies quick, cheap settlements. The settlement mill attorney, therefore, makes up for quality in quantity in collecting an attorney contingency fee.

How a Settlement Mill Can Harm You

See also: Four Ways Personal Injury Settlement Mills Harm Clients stating:

“The billboards and TV commercials promise – quick settlements, fast cash, immediate compensation. These “settlement mill” law firms function on high case volume and low case value. That’s bad for injured people who need justice. What are four ways settlement mills harm clients?

  • Settlement Mills do not go to court;
  • They do not help clients with rehabilitation;
  • Settlement Mills do not stand up to insurance company tactics.”

What Former Settlement Mill Lawyers Say

Also, people who have worked at “settlement mills” ” have told me how lawyers may be responsible for 600 cases at a time, with 100 or more in litigation.”

“They have told me how young lawyers in some of those firms are paid only for work on cases they settle before suit, so they have an extremely vested interest in taking whatever an insurance adjuster is willing to offer at that early stage, selling the client’s interest short.”

“Former settlement mill lawyers “have told me how in some firms non-attorneys employees actually negotiate with claims adjusters with no substantial attorney involvement. They have told me how those firms threaten clients that if they do not accept the insurance company’s pre-suit offer, they may be required to pay the other side’s attorney fees, long before suit is filed or the defense invokes the “offer of judgment” rule that would make that even theoretically possible.” Atlanta Injury Law Blog.

Such settlement mills prey upon uneducated and unsophisticated people” Law Firm is NOT a settlement mill. Our practice revolves around getting you – the client – the MOST for your case. Contact us today if we can help you with your personal injury case. Our attorney contingency fee covers the whole ‘team approach’ concept and will benefit you, the client by going for more!