Accident insurance vs. contingency fee lawyers

Everything is clear and understandable with accident insurance: if you get injured in an accident, insurance company pay you money according to your contract. Period. No questions asked. However, some people think that there is no need to have accident insurance because if an accident happens, it’s easy to find a personal injury lawyer who works on contingency fee and you only pay if they win. Let’s see how a contingency fee legal contract works.

What is a contingency fee legal contract?

A contingency fee legal contract is an agreement between a plaintiff and a lawyer, stating that the lawyer will represent the plaintiff without money to pay up front. In these situations, the plaintiff pays the lawyer only if the lawyer wins the case. In the event of a settlement agreement for the plaintiff, the lawyer keeps the percentage of the award agreed upon beforehand.

A plaintiff can request many types of damages from the defendant, including:

• Economic damages – lost wages and medical bills.
• Non-economic damages – non-monetary losses, such as pain and suffering.
• Compensatory damages – a combination of economic and non-economic damages.
• Punitive damages – served to punish the defendant for a lack of care of others.

At first glance, contingency agreements seem like a win-win for the plaintiff: The plaintiff pays nothing out of pocket, and the lawyer works hard to win the case in order to receive a paycheck. Is it that straightforward?

“You pay only if we win”

There are two advantages to having a contingency fee agreement. First, you don’t pay fees for legal services up front. Second, if you lose your case, you will not have to pay legal fees to your own lawyer.

There are also possible disadvantages. If you settle or win your case early in the process, the percentage of the award your lawyer charges you for legal fees may be higher than if you had been paying hourly or fixed fees.

Ontario’s standard contingency fee

In Ontario, a standard contingency fee is 30% of the final award. Whether your lawyer works for one week or one year, he or she will get 30%. If you have a “risky” case, a lawyer may negotiate a higher fee. Lawyers who use contingency fees can be very selective about the cases they take and avoid cases that appear to have low odds of winning.

What are the other legal expenses?

The fees you pay to a lawyer at an hourly rate usually only cover the time they spend working on your case. However, there are two other types of legal expenses: disbursements and costs.

1

Disbursements

These are expenses that your lawyer pays on your behalf to third parties for items and services needed to support your case:

• court filing fees
• hiring court reporters
• medical records
• costs of transcripts
• paying for expert witnesses, such as medical experts
• cost of copies of documents
• accounting fees

You’ll have to pay your lawyer for disbursements when your case concludes, even if you lose your case. Disbursements can be substantial sums of money.

2

Costs

In legal proceedings, “costs” are the money that a court or tribunal may order the person who loses the case to pay to the person who wins the case. If you lose your case, you may have to pay costs to the successful party. Having a contingency fee contract does not protect you from having to pay costs. You should talk with your lawyer about the risks involved in your case.

Can you end the contract after it is signed?

You have the right to end the contract at any time. But you may still have to pay your lawyer fees for work he/she has already done at an hourly rate, plus HST – this condition has to be specified in the contract. However, you have to keep in mind that there are other legal expenses besides fees for lawyers that you have to pay. It might be thousands of dollars.

If you win or settle your case

Money that has been awarded by the court or negotiated in a settlement will usually be paid to your lawyer. Before they give the money to you, they prepare an account statement showing what they will deduct for fees, disbursements and applicable taxes.

The account statement must clearly set out:

• the amount of the settlement or award
• the amount of the contingency fee and amounts for any other legal services that they will deduct, plus HST
• the amount of all outstanding disbursements they will deduct, plus any applicabletaxes
• the net amount of money that you will receive after the deductions

Your lawyer has the right to take this money from your settlement or award at the end of your case.

For more information you can visit the Law Society of Ontario website – The Contingency Fee Consumer Guide:

https://lawsocietyontario.azureedge.net/media/lso/media/about/initiatives/en_contingencyfee_consumerguide-april2021.pdf