Contingent Fees are Common in Personal Injury Cases

Wednesday, June 3rd, 2009

When the attorneys earn a fee or a percentage of the client’s claim, it’s called “contingent fees.” These are typical fees given in personal injury cases throughout the United States. There are various advantages in giving this incentive to the lawyers to encourage them to claim the best outcome for you.

In fact, a study (Behavioral Analysis of Contingent Fees) at University of Jerusalem done by professors reached a conclusion contrary to common economic wisdom:

• *Counter-intuitively, people judge contingent fees yielding low effective hourly rate for the lawyer as unfair compared to contingent fees yielding high effective hourly rate.
• *Lack of alternatives and information problems are not such big factors to be considered in the fee arrangement chosen by clients.
• *Loss aversion (instead of risk aversion or giving incentives to win the case) may play a major role in the preference of clients for contingent fees.
• *Facing a choice between one mixed gamble and one pure positive one, the plaintiffs would prefer contingent fees even if that yields an expected fee several times higher compared to a non-contingent one.
• *Defendants facing a choice between two negative gambles typically risk preferring and seeking fixed fees.
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Tags: attorneys, Behavioral Analysis of Contingent Fees, contingent fees, Injury, lawyer, lawyers, personal injury, University of Jerusalem
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