What does "no fee unless you win" actually mean and how do most personal injury lawyers get paid?
Answer: Taken literally and with knowledge of what goes into every account "no win, no fee" is a legitimate statement. That means: Yes, the lawyer will not get a fee if you don't receive compensation. However, in addition to fees, there are also costs and disbursements.
Costs represent the defendant's legal costs that are due if you get an adverse judgment. These fall on your shoulders and not your lawyers. Costs insurance can be available in some cases and should be explored in your initial meetings (the earlier you get it, the cheaper it is).
Disbursements are the funds paid upfront by your lawyer to carry your file. They include things like photocopying, mail/postage, travel costs, filing costs and medical-legal assessments. A lawyer can run up disbursements in the thousands and if successful, the defendant will pay the value of your claim plus these disbursements. However, if you're unsuccessful, these disbursements are typically due and owed by you. Meaning, if you don't "win" you owe the lawyer what was spent to carry your file. Unpaid disbursements may also be covered through your costs’ insurance.
Most personal injury lawyers work off contingency, meaning that they are compensated based on the result. They take a percentage of your settlement. That percentage is typically 30-35% depending on the lawyer.
The fee isn't as simple as just taking a percentage of the overall settlement. It must be broken down in accordance with what a lawyer is legally able to take. For instance, they cannot take more than the client receives. They cannot take "costs" which amount to about 15% of the value of your claim and are used to counterbalance your contingency fee.
Here's how it might play out:
Let's say the value of your claim is $100,000. In addition to the value of your claim, the defendant will have to cover disbursements (what was paid to run your file) and costs. A typical settlement could be broken down as follows:
- value of claim $100,000
- disbursements $15,000 (including HST)
- costs $12,319.37
- DEFENDANT'S PAYMENT: $127,319.37
The lawyer's fee is taken out of the value of the claim and not the defendant's entire payment. So if the contingency is set at 30%, the lawyer's fee in the above example would be $30,000 + H.S.T.. The lawyer will take the disbursements as well to cover the funds he or she spent on the file. You're left with the remainder. Here's how it works using the above example:
- defendant's payment $127,319.37
- disbursements (-) $15,000 (including HST)
- legal fee (-) $30,000
- HST on legal fee (-) $3,900
- IN YOUR POCKET: $78,416.37
The exact calculation used could change depending on the facts of each case. As a note, claims are typically subject to pre and post-judgment interest at a variable rate. This will be added to the defendant’s payment.
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