One of the first things we always explain to our potential new clients is that fees and costs are different. Most medical malpractice claims are handles on a contingent basis. This means that the client does not pay the lawyer’s fee unless or until a recovery is obtained for the client, and then the fee is paid from that recovery. As a practical matter, this type of arrangement allows clients to pursue litigation that they otherwise could not afford.
The contingent fee is just that– a fee. A fee is what you pay the attorney for their time and expertise. If your payment arrangement is hourly, instead of contingent, the fee is what the attorney charges per hour for their time. An hourly fee is some number of dollars per hour. A contingent fee is not a set dollar amount, but rather, a percentage of the total recovery. In medical malpractice claims, the typical contingent fee is 40-45% of the client’s total recovery.
Costs are different from fees. Costs are the expenses that are advanced by the attorney to investigate and prepare the case for trial. Medical malpractice cases are expensive to pursue. One of the first expenses your attorney will have to pay is associated with obtaining your medical records. Healthcare providers are allow by law to charge a reasonable fee for copying your records, and these charges do add up. Other expenses typically associated with medical malpractice claims include fees paid to experts who consult on your case, fees paid to court reporters who transcribe depositions, court costs associated with filing documents in your case, and the like. The costs associated with properly preparing a medical malpractice case for trial can range from $25,000 up to or even exceeding $250,000. Depending on the complexity of the case, costs may exceed $250,000 and can even approach $400-600 thousand dollars in some very complex cases.
Costs are paid back to the law firm when your case resolves, and must be paid from the client’s share of the proceeds–in addition to the fee. This means that, if the client receives a settlement of 1 million dollars, and the contingent fee agreement is for a 40% fee, the client pays the lawyers $400.000 for their fee, and then, from the client’s $600,000 share of the proceeds, reimburses the lawyers for the costs accrued to prepare the case. If costs were $100,000, the the net recovery to the client is $500,000. The fact that costs are reimbursed from the client’s share of the proceeds is not arbitrary. To the contrary, it is actually required by law in most (if not all) states. Some lawyers charge interest on costs, because the money is essentially ‘borrowed’ from them for the duration of the litigation. Burg Simpson does not charge interest on the costs we advance for our clients. Fees and costs are also different from subrogation liens, which must also come from the client’s share of the proceeds. It is not difficult to understand how, with the various sums that must be paid out from a potential settlement or award, cases might sometimes cost more to pursue than they can be worth. This is one of the most common reasons why medical malpractice lawyers may have to turn down an otherwise legitimate claim.
Some law firms require clients to provide some type of guarantee that costs will be repaid, even if the client does not obtain a recovery. This means that, if you have hired a lawyer on a contingent-fee basis and you lose your case at trial or are unable to obtain a settlement, you could be liable to your lawyers for costs even though you would not have to pay a fee. Because costs can be substantial in medical negligence cases, it is extremely important that you understand exactly what your responsibility is for repaying costs. The terms of your fee agreement with the law firm will usually include information about your responsibility for repayment of costs.
If you are hiring a lawyer, be sure to ask questions about fees, costs, and any other amounts that may have to be paid from any potential settlement or award.