The myth of double-dipping—How litigation cost-recovery benefits personal injury victims

The myth of double-dipping—How litigation cost-recovery benefits personal injury victims

Personal injury lawyers are unique in the way they collect fees and recoup costs.

In Ontario, for example, the personal injury law bar is one of the only where lawyers bill through contingency fee arrangements—you only pay if we win. This structure allows plaintiffs to take their case to court and obtain a personal injury settlement or award that affords them a level of financial freedom necessary to manage their medical and lifestyle needs in the months and years after suffering a catastrophic injury.

Perhaps most importantly, contingency fees allow accident victims to take their cases to court without paying out of pocket, which is crucial when you consider that, in catastrophic injury situations, these individuals are often unable to work. In many cases, even their family members are forced to take time off work to manage their care. In short, contingency fee structures provide greater access to justice for accident victims and their families.

Inaccurate media reports

But when it comes to cost recovery, recent media coverage has misstated the law as it pertains to Ontario’s Solicitor’s Act, the legislation that sets the rules for lawyers across the province. Various articles have inaccurately asserted that it is illegal for personal injury lawyers operating under contingency fee arrangements to recover case-related costs.

This is simply incorrect.

Solicitor’s Act s. 28.1(8) says:

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances; and

(b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them. 2002, c. 24, Sched. A, s. 4.

In other words, lawyers can recover costs associated with a case if such an arrangement is agreed upon by the client and a judge approves. This is a common and even essential practice across the personal injury bar in Ontario. Why?

The problem with fixed-percentage arrangements

Because a fixed percentage arrangement—where a lawyer collects, say, 33% of damages recovered, regardless of the stage of litigation—encourages lawyers to settle files early, even if the overall recovery is less than ideal for the client. That’s because the costs of managing a file increase over time, and drastically so if a case goes to trial. Typical costs include the lawyer’s time and services, the fixed costs of managing an office and support staff wages, as well as additional overhead charges that law firms must cover in their day-to-day operations.

At the trial stage, fees tend to increase dramatically because in-court litigation services are far more expensive than any other stage of litigation. The typical rule of thumb is that it costs about $10,000 per day during a trial to cover a lawyer’s time alone. Almost no accident victims or their families would be able to pay for these costs if they were forced to pay out of pocket. As such, the ‘costs’ award after a trial is far higher than it would ever be on settlement.

If the client always gets the whole amount of the costs award, then proceeding to trial will inevitably mean that the lawyer’s profit on a file decreases significantly, because his/her costs skyrocket with no increase in the fee.

A win-win situation for personal injury clients and lawyers

One of the advantages of contingent fee arrangements is that the lawyer and client are essentially partners in the management of a personal injury file and the outcome of any protracted litigation.

Clients understand they can trust their lawyer’s advice because both parties’ interests are aligned (unlike hourly-rated litigation, where lawyers make money regardless of the file’s outcome). Having the client retain all cost awards associated with the file severs this important alignment of interests, and incentivizes the lawyer to encourage a client to settle before trial—even if the client’s best interest is better served by proceeding with litigation.

It’s no surprise, then, that both clients and judges regularly agree to allow lawyers to recover costs as a part of the litigation process.

This system is fair, just and delivers access to justice for personal injury victims and their families. Cost awards should continue to be shared between plaintiffs and their lawyers.

– Strype Injury Law

Get more information about the process of personal injury trials or settlements – contact Strype Injury Law today.