When an individual makes a claim for damages resulting from an instance of personal injury, one should be aware of the costs associated with a lawsuit.
At most personal injury firms, including JRJ, legal counsel works under a contingency fee retainer. A contingency fee retainer means that a client only pays legal fees if the client wins their case or negotiates a settlement. The fees paid to a lawyer only cover the costs of the time they spent working on the case. Two other expenses exist: disbursements and costs.
Disbursements are expenses that a law firm pays on a client’s behalf related to necessary services that support the case. Examples of common disbursements include:
- Court filing fees;
- Court reporting services;
- Costs of transcripts;
- Expert witnesses;
- Costs of copying, scanning, faxing, and mailing;
- Obtaining medical records.
In contingency fee agreements, it is most common that the law firm will pay the file disbursements upfront and then recover the monies at the conclusion of the file. Where disbursements are substantial, a lawyer has a duty to advise their client of major expenses that may impact the settlement or award received by the client.
At the conclusion of a file, money that has been awarded or negotiated will be paid to the injured party’s lawyer in trust. An account will be prepared for the client setting out the amount of the award or settlement, the amount of the fees the lawyer will receive under the contingency fee agreement (plus H.S.T.), and the number of outstanding disbursements. As per this accounting, disbursements are subtracted from the award or settlement. After all fees and disbursements are deducted, the balance of the award or settlement goes to the client.
Clients should be aware that although they do not need to pay legal fees when they lose their case, they may have to pay for other legal expenses. In addition to disbursement expenses, costs are the monies that a court orders the party that loses the case to pay to the winning party. A contingency fee does not protect a client from having to pay costs. It is advisable that clients obtain Adverse Cost Insurance, which protects clients against adverse awards of costs and disbursements. Where a client purchases this protection, the adverse cost insurance pays for the costs that would otherwise be an out-of-pocket expense. It can also be used to pay for expenses, such as expert fees and other disbursements.
Premiums to obtain adverse cost insurance range from $1,500.00-$2,500.00 and provide coverage from $100,000.00-$200,000.00, with the premium only being owed after the resolution of a claim.