The term "contingency" refers to the fact that the payment is dependent on the successful completion of the agreed-upon task, such as a court case or a business deal. The client and the service provider agree on a percentage of the total reward or settlement as the fee, which is paid only if the outcome is achieved.
In the legal industry, a contingency refers to a fee arrangement between an attorney and a client, where the attorney agrees to work on the client's case in exchange for a percentage of the monetary reward that the client receives if the case is successful. This type of fee arrangement is sometimes referred to as a contingency fee agreement or a "no win, no fee" agreement, where the client pays on a contingency basis.
What Is A Contingency Basis?
Similarly, in the legal industry, contingency fee arrangements are common in personal injury cases, where a client may not have the financial resources to pay upfront for legal representation. Under this arrangement, the attorney assumes the risk of not being paid if they are unable to obtain a favorable outcome for the client.
How Does A Contingency Basis Work?
The first step in a contingency fee arrangement is for the client to meet with the attorney to discuss the details of their case. During this initial consultation, the attorney will evaluate the case's strengths and weaknesses, determine if it is suitable for a contingency fee arrangement, and discuss the percentage of the reward that they will receive if the case is successful.
If the attorney agrees to take on the case, the client and the attorney will sign a written agreement outlining the terms of the contingency fee arrangement. This agreement will typically include the percentage of the reward that the attorney will receive, the amount that will be deducted from the reward (such as court fees and expert witness fees), and any other relevant details.
Once the agreement is signed, the attorney will begin working on the case. They will typically conduct an investigation, gather evidence, and prepare legal arguments in support of the client's case.
If the case is successful, and the client is rewarded, the attorney will receive a percentage of the reward as agreed upon in the contingency fee agreement.
You see, the percentage of the settlement that the attorney receives varies depending on the case and the attorney’s experience and reputation. Typically, the percentage ranges from 25% to 40%, although in some cases it may be higher or lower.
These costs are usually paid upfront by the attorney but will be deducted from the client’s share of the settlement or judgment.
Benefits Of A Contingency Basis
Hiring an attorney can be a significant expense, especially if you are already facing financial difficulties due to a personal injury or another legal issue. However, hiring an attorney on a contingency basis can offer several benefits that may make pursuing your legal rights more accessible.
One of the primary benefits of a contingency fee arrangement is that it allows clients to pursue legal action without incurring upfront costs.
Many clients who are injured in accidents or face other legal issues may be struggling to pay medical bills or other expenses related to their case. By hiring an attorney on a contingency basis, they can focus on their recovery and other aspects of their life while their attorney works to secure a settlement or judgment on their behalf.
Another benefit of a contingency fee arrangement is that it aligns the interests of the attorney and the client. What this means is that because the attorney's fee is based on the outcome of the case, they are motivated to work hard and achieve the best possible result for their client. In other words, they're more likely to dedicate the time and resources necessary to build a strong case.
In addition, contingency fee arrangements can give clients access to high-quality legal representation that they might not otherwise be able to afford. Many attorneys who work on a contingency basis have years of experience handling complex legal issues and are well-equipped to handle even the most challenging cases. This can give clients peace of mind knowing that they have a skilled and knowledgeable attorney on their side.
Contingency fee arrangements can also be beneficial in cases where the client is seeking a large settlement or judgment. Because the attorney's fee is based on a percentage of the amount awarded, they have a strong incentive to pursue the highest possible amount. This can be particularly advantageous for clients who have suffered significant financial losses as a result of their legal issues.
Finally, a contingency fee arrangement can offer clients a greater sense of control over the outcome of their case. Because they are not required to pay upfront costs, they may feel more empowered to pursue their legal rights and fight for the benefit they deserve.
Examples of Contingency Arrangements In Insurance
Insurance is a vital part of risk management for both individuals and businesses. However, when a policyholder suffers a loss, navigating the claim process can be challenging, and disputes with the insurance company can arise. This is where contingency fee arrangements come into play.
Some examples of contingency arrangements in insurance include:
Public adjusters are hired by policyholders to help them negotiate with their insurance company on a property damage claim. They work on a contingency basis and are paid a percentage of the settlement or reward that they obtain for the policyholder.
Catastrophic Event Response
In the event of a major natural disaster or other catastrophic event, insurance companies may hire response teams on a contingency basis to assist with claims processing and other services.
Insurance companies may hire third-party administrators to handle claims processing, policy administration, and other tasks. These administrators may be paid on a contingency basis, receiving a percentage of the premiums collected or the claims processed.
Insurance Fraud Investigations
Insurance companies may hire private investigators or law firms to investigate suspected cases of insurance fraud. These investigators may be paid on a contingency basis, receiving a percentage of the funds recovered if fraud is proven.
Learn How to Get Full Payment for Your Claim
If your insurance provider refuses to honor your claim, the Voss Law Firm can help you get paid for your losses—and potentially more. Call us at (888) 614-7730 or complete our contact form today to get answers to your questions, or start reading your copy of our free book, Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse, and Refuse.