Lawyers are governed by the Law Society of Upper Canada, but that being said, lawyers are not regulated on how much they can charge you on a per hour basis. It is a free market based on experience, as well as supply and demand. There are some exceptions to this rule when it comes to minors and disabled individuals who are always protected by courts pertaining to legal fees.
Personal injury law is different in how lawyers charge clients for their services. It is fair to estimate that at least 95% of personal injury lawyers are paid on a contingency fee basis. This means they only get paid a percentage of what they recover on your behalf.
Contingency fee agreements in a personal injury matter must be put in writing, verbal agreements will not suffice.
Some of terms that must be spelled out in the agreement include:
• The client has been given a choice to hire the lawyer on an hourly basis rather than on a contingency fee basis
• The client is to be involved in all critical decisions of the law suit
• The cost payable by the at-fault party must be paid to the client and not the lawyer. This is the most important term
While lawyers can charge as much as they want on a percent basis, 30, 40 or even 50%, they are regulated as to what the percentage can be applied to.
You may see some Ontario personal injury lawyers charging only 20 to 25% plus costs, but it is very important that you understand the complete breakdown of the numbers and what the word “costs” actually means.
First, we need to understand there are three parts to every settlement claim:
1. The Claim portion- That is the money you receive for your damages; for example, pain and suffering and other economic losses.
2. Partial Indemnity Costs- This is often referred to as just “costs” and is the money given to you to help pay your lawyer’s fees – typically 10 to15% of your claim portion.
3. Disbursements – which are third party expenses charged for things such as medical records and filing court documents. A personal injury law firm will usually pay for these expenses on your behalf until your settlement is paid, at which time the law firm gets reimbursed.
An Example of Personal Injury Fees
In this example, taxes are omitted for simplicity.
Let us say your claim portion of a settlement was $100,000 and your partial indemnity costs were assessed at 12%. So in this example, an insurance company will be contributing an additional $12,000 towards its settlement to help reduce your legal fees being charged by your lawyer.
The first common scenario is a contingency fee of 33.3%. Therefore, in our example, you would receive $66,666 and the injury lawyer would be paid $33,333. You would also get that $12,000 partial indemnity cost paid back to you to help offset your legal fees. Therefore, in total, you would receive $78,666 in your pocket.
The second common scenario is a contingency fee of 25% plus costs. It sounds like a better deal, but what you may not be aware of is in this lower fee arrangement, the lawyer is being paid $25,000 from the $100,000 claim portion PLUS an additional $12,000 – remember your agreement was PLUS costs – making your total fee $37,000 – and resulting in you receiving $75,000 in your pocket.
That is almost $4,000 less than what you would have received in the 33.3% fee scenario.
It is important to note that in 2004 the Solicitors Act was amended to no longer allow lawyers to receive the cost portion of any settlement or judgment in a contingency fee arrangement. Costs must be paid to the clients. So before signing any contingency fee agreement, it would be important to make sure that your agreement stipulates that you are recovering the partial indemnity costs.
To learn more about Ontario personal injury law, we invite you to watch our video series that helps answer many of the most common questions asked to Ontario injury lawyers.