Signing a contingency fee agreement? The six clauses worth reading twice

Covers how injury claims are run and paid for in the United States, from the first adjuster call to the money that clears the bank.

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Signing a contingency fee agreement? The six clauses worth reading twice — Most injury fee agreements set a lower rate before suit is filed and a higher one after. Check whether the trigger is a verifiable filing date or a vague reference to litigation preparation.

A contingency agreement is usually two to four pages, and it is typically presented at the end of a first meeting, when the person signing it has been talking about a collision for an hour and wants the paperwork over with. That is the worst moment to read carefully, and it is also the only moment when the terms are still open. Most of the document is boilerplate. Four or five clauses decide what the claimant actually receives, and each of them can be checked in a few minutes by someone who knows where to look.

The percentage, and whether it moves

The headline number is rarely a single number. Many agreements set one rate for a claim resolved before a lawsuit is filed and a higher rate once suit is filed, with a further step if the case is appealed or reaches trial. A careful reader looks for the trigger rather than the tiers: does the rate rise on the date the complaint is filed, on the date an answer is served, or on some vaguer event like "preparation for litigation"? A filing date is a fact anyone can verify. Preparation is a judgment call made by the firm that benefits from it.

The second thing to check is whether the tier applies to the whole recovery or only to the portion recovered after the trigger. Almost always it is the whole recovery, which means a case filed for tactical reasons can cost several thousand dollars more even if it settles a month later. Ask what the firm's practice is on filing, and how often cases at this value get filed.

Gross or net, and why the order matters

The agreement will say the fee is calculated on the gross recovery or on the recovery after deduction of case costs. This is the single clause with the largest dollar effect, and it is often a single sentence buried mid-paragraph. On a gross calculation, the firm takes its percentage of the full settlement and costs come out of the claimant's remainder. On a net calculation, costs are reimbursed first and the percentage applies to what is left. The gross method produces a larger fee and a smaller check, and the gap widens with every deposition and expert report. Many state bar rules require the agreement to state which method applies and to show the calculation in a closing statement; a reader should insist on seeing a sample.

Who advances case costs, and who eats them if the case loses

Costs are separate from the fee: filing fees, service, records requests, deposition transcripts, expert witnesses, accident reconstruction, mediator fees, and postage. Nearly every firm advances them. The question is what happens if the claim recovers nothing. Some agreements make the client liable for advanced costs regardless of outcome, some waive them on a loss, and some waive them at the firm's discretion, which is not a waiver. Look also for a clause charging interest on advanced costs, or a markup on in-house copying and mileage. If the firm uses outside litigation funding, ask whether that interest passes through to the settlement. The Consumer Financial Protection Bureau oversees consumer lending practices generally, and pre-settlement advances behave like loans even when the paperwork avoids the word.

Withdrawal, discharge, and the lien that follows

Every agreement addresses what happens if the relationship ends before the case does. If the client discharges the firm, most agreements convert the contingency into a claim for the reasonable value of work performed, asserted as a lien against any later recovery. That is standard and generally enforceable. What varies is whether the lien is stated as an hourly figure, at what rate, and whether it is payable immediately or only out of a future settlement. Immediate payment terms are worth questioning. If the firm withdraws voluntarily, a well-drafted agreement says whether it also gives up its costs claim, and reasonable versions say it does.

What a firm will actually change

The base percentage moves less often than people expect, though it does move on large or liability-clear claims. The terms that move more readily are the ones that cost the firm little: switching the fee calculation from gross to net, capping the post-filing tier, waiving costs on a loss, striking interest on advances, and adding a requirement that any settlement offer be communicated in writing. Ask for the changes in the document itself, initialed, rather than as an assurance across the desk. A firm that will not put a term in writing has told you what the term is worth.

Take the agreement home. A day's delay costs nothing on a claim with a two- or three-year statute of limitations, and the reading is easier without anyone waiting.