The use of contingency fees by personal injury law firms across Ontario has been a hot topic in the media recently.
Some have been arguing that contingency fees deplete too much of a plaintiff’s personal injury settlement or award, and deny victims the level of financial freedom necessary to manage their medical and lifestyle needs in the months and years after suffering a catastrophic injury. Today, I would like to clear up this misconception, and explain why contingent fees are not only good for accident victims, but absolutely necessary.
While contingency fees have been called unfair or even inflated by some—they typically range between 30 to 35 per cent of a plaintiff’s settlement or litigated award—these structures enable greater access to justice for clients who would otherwise find it unaffordable to take their cases to trial.
That’s because, on average, most personal injury cases take about four to five years to reach trial. After sustaining a catastrophic injury, accident victims are generally unable to continue working, or earn an income. A claim for loss of income is often the largest aspect of a personal injury claim. Virtually no one who is disabled from work can afford to pay a lawyer an hourly rate to handle their case for four to five years.
Hourly rated lawyers, in other areas of law, typically charge hundreds of dollars an hour to handle litigation. Even if lawyers charged only a fraction of those rates—let’s say $50 per hour—unemployed accident victims would still find it virtually impossible to pay a lawyer for their work. More so, when you consider that firms can spend 1,000 hours or more on a case that could take half a decade to litigate.
Insurance companies also know this, and have a duty to their shareholders to make the most money possible (which means paying as little in compensation to accident victims as possible). If they knew that personal injury lawyers were charging on an hourly-rate basis, they could simply outwait plaintiffs until they were pressured to take minimal settlements.
The only leverage a plaintiff has in a case is to be able to take it to trial. Doing so is the only way to compel an insurance company to pay. If insurers can be convinced to reach a fair out-of-court settlement, it’s because they know they would lose and pay even more if the case were to proceed to trial.
The general rule of thumb with trials is to expect them to cost about $10,000 per day in legal fees (including both fees for the time at trial and preparation time). Without contingent fees, insurance companies would steamroll injured plaintiffs using their considerable financial resources (obtained, ironically, through the very premiums those same people paid for insurance coverage prior to their accident). This is where the notion of access to justice comes into play. Without a means to delay paying lawyers’ fees—which are paid to a firm only if it wins—plaintiffs would never be able to challenge an insurer in court and win an award that addresses their, typically substantial, post-accident medical and assistance requirements.
Perhaps most importantly, contingent fees automatically align a plaintiff and lawyer’s interests. Why? Hourly-rated lawyers earn more if a case becomes more litigious (because it takes more time, and they charge by the hour). With contingency fees, however, a lawyer makes more money if their client makes more money, and loses money if their client loses the case.
In order to ensure that lawyers can offer contingent fees, those fees have to be high enough to compensate lawyers for the cases they take on where they lose money. Files are often taken on within days of an accident, to ensure that the client is taken care of and protected right away. If that client fully recovers within six months, however, there is no case and the lawyer doesn’t get paid.
In other words, lawyers incur great risk with contingency fee arrangements. It’s in their best interest to ensure their clients’ best interest is served, as well. These fee structures may face constant scrutiny and criticism, but they exist to better serve accident victims and their families.
– Strype Injury Law
Get more information about the process of personal injury trials or settlements – contact Strype Injury Law today.