Lawyers are generally retained on a Contingency Fee Arrangement, which means that the lawyer receives a percentage of your overall recovery at the end of the case
The advantage of the Contingency Fee Agreement is that you only pay the lawyer at the end of the case once you receive your settlement/judgment from ICBC. If you pay based on an hourly rate, you would have no control over the cost of the lawyers’ fees relative to the size of your claim. Also, you would have to pay the lawyer their legal fees as the case progresses. This would require you to have the necessary cash on hand to fund the litigation.
What should you look for to ensure you are not over-charged for the work performed by your lawyer?
The current law allows a Contingency Fee Agreement of a maximum of 33.3% of your recovery excluding legal costs and disbursements paid by ICBC. Therefore, the maximum that can be charged is 33.3% on all heads of damages such as pain and suffering, past and future wage loss/loss of capacity, out of pocket expenses, future care, etc. but not legal costs and disbursements.
There are many law firms that charge a standard rate of 30-33.3% on all cases. The Contingency Fee Agreement is on a pre-printed form giving you the impression that the fee is standard and not negotiable. You should be very cautious about hiring a lawyer who is charging those rates regardless of the amount of work that is performed on the file. The exception is where there is a liability issue, or the claim is likely to be categorized as a “minor injury”. These sorts of cases are high risk and deserve the maximum fee charge.
Assuming you have a case without a lot of risk of limited recovery, the preferable system is to sign a Contingency Fee Arrangement where the lawyer’s percentage of recovery increases depending on how far along your case is when it settles. This is called a sliding scale Contingency Fee Agreement.
Where you have suffered serious objective injury with significant disability, you should not hire a lawyer for a Contingency Fee Agreement at or near the 33.3% maximum fee charge unless there is a major liability problem. Shop around for a better percentage rate with a good lawyer because the industry is very competitive and if a lawyer is not willing to charge a lower percentage fee for a large claim then you may end up overpaying the lawyer for his/her services.
The only time you should accept the maximum fee charge of 33.3% is where:
- Liability is a serious issue and there is risk of no or little recovery;
- You suffered a “minor injury” which has a real chance of being capped under the ICBC no-fault scheme;
- ICBC is denying the claim meaning the file will be defended vigorously by ICBC; OR
- The lawyer is offering you a sliding scale Contingency Fee Agreement and the 30-33.3% rate applies if the matter is going to a full trial.
Overall, you should be looking at a fee in the range of 25-30% for moderate injury claims and 15-20% for severe injury claims.
Other than the percentage fee being charged, a Contingency Fee Agreement will also have numerous other clauses that could impact your net recovery. One of the clauses you should be cautious about is the treatment of disbursements. If your lawyer is not prepared to pay disbursements as incurred on the file and expects you to pay them upfront, before settlement, then you should be looking to another law firm because that may tell you this lawyer cannot financially support your ICBC claim.
In that regard, your lawyer should have a large credit facility available to enable the lawyer to spend enough money on your case to ensure that it is fully developed so that you can maximize your recovery.
Some firms have tried to creatively increase the legal fees owing by charging a lower percentage of the settlement but keeping the legal fees awarded to you by ICBC. That could turn out to be a bad deal if ICBC pays back a lot of fees so be cautious signing that type of agreement.
Most law firms charge interest on the disbursements they incur before the case is settled as they must borrow money to carry your disbursements. In some instances, the percentage charged by the law firm makes the credit card interest charges look reasonable. You should be careful not to agree to pay a large interest percentage on the disbursement expenses.
The amount spent on disbursements will vary. On smaller cases, the disbursements are $1,000-$5,000. On larger cases, it is not unusual to have disbursements at $50,000-$100,000 or more. Therefore, if you are paying over 10% interest on disbursements over the 2-3 years your claim is open, you will owe the lawyer a very large amount for interest at the end of the case. This impacts your take home amount as the interest charge is not recoverable from ICBC.