What are contingency fee and retainer agreements?

What Are Contingency Fee and Retainer Agreements?

The process of seeking compensation for damages and injuries that stem from medical malpractice, also known as medical litigation, is many-sided and emotionally challenging. 

A firm grasp of the critical aspects of the lawyer-client relationship while focusing on financial arrangements is crucial when navigating the legal landscape in such cases.

This article seeks to offer insight into the nuances of Contingency Fees and Retainer Agreements, as well as into their inner workings and the evolving legal framework in Ontario.

Understanding Contingency Fee Agreements

A contingency fee agreement serves as a formalized pact between a client and a lawyer, featuring a distinctive provision that relieves the client from the obligation to pay legal fees unless the case reaches a successful resolution, either through a favourable court outcome or a negotiated settlement.

This contractual arrangement explicitly states that if the defendant does not prevail in the case, neither does the lawyer, resulting in the client not incurring any charges. 

The significance of these agreements in medical malpractice litigation lies in eliminating economic barriers that could hinder victims’ access to justice. 

Elements of Contingency Fee Agreements

1. No Win, No Fee Assurance

Contingency fee agreements revolve around a “no win, no fee” principle, assuring clients that they are exempt from legal fees in case of an unsuccessful claim. It underscores the lawyers’ commitment to closely aligning their success with their clients.

It’s important to note that even though legal fees may not be applicable in the event of a loss, clients may still be responsible for additional legal expenses, such as disbursements.

2. Deconstructing Disbursements

Disbursements cover expenses incurred during legal proceedings, like court filing fees or expenses associated with procuring essential elements like medical assessments and reports.

The intricacies of disbursement responsibility in case of an unfavourable outcome differ among law firms. 

Some may stipulate that clients remain accountable for disbursements even if the case is lost, introducing an additional layer of financial consideration for those seeking legal recourse.

Recent Changes to Contingency Fee Agreements

As of July 1, 2021, the Law Society implemented standardized changes to contingency fee agreements in Ontario. The objective was to enhance consumer protection, transparency, and fairness. Clients are given a “Know Your Rights” guide and the standard form contingency fee agreement. Key changes include:

  • Inclusion of costs: Costs are included in the amount on which the contingency fee is based. It is a departure from the previous method, where costs were typically not considered when applying the contingency fee percentage.

  • Disbursement regulations: The new provisions outline what can and cannot be charged as disbursements. It clarifies this aspect of the agreement.

  • Plain language requirement: Simple language is now a requirement in contingency fee agreements, making the terms easily understandable for all parties involved.

How Contingency Fee Agreements Work

In a contingency fee agreement, the legal fee constitutes a percentage of the client’s settlement or award, encompassing any allocated cost amount. 

The computation entails combining the overall award and costs, deducting disbursements, and applying the contingency fee percentage along with the Harmonized Sales Tax (HST).

Example Calculation:

For instance, if a judge grants a $100,000 award at trial, with costs totalling $30,000 (including disbursements of $15,000), the client receives $76,015 after deducting the 30% contingency fee and HST. 

This example underscores that, even with the repayment of disbursements, the client retains a substantial portion of the awarded sum.

Factors Influencing Percentage

The contingency fee percentage typically ranges from 10% to 45%. Factors influencing this percentage include the likelihood of success, nature and complexity of the claim, time required for the case, expense and risk involved, expected recovery amount, and costs awarded.

Graduated and Fixed Contingency Fees

Some lawyers adopt a graduated contingency fee structure, wherein the percentage varies based on the case’s resolution stage. Others opt for a fixed percentage, applying the same rate regardless of case progression. 

Additionally, partial contingency fees may require clients to pay for specific legal services initially, alongside a contingency fee if successful.

Understanding Retainer Agreements

A retainer agreement is an arrangement where clients make an upfront payment to secure legal services, regardless of the case’s outcome. 

In contrast to contingency fees, where the lawyer takes on financial risk, clients in retainer agreements are responsible for associated costs, including the initial upfront payment.

The billing structure under a retainer agreement can vary. In medical litigation, lawyers may use hourly billing or charge a flat fee for specific services, with the agreement outlining the scope and nature of services. 

Retainer agreements are versatile, covering both litigation and ongoing legal needs like consultations, document reviews, or general legal advice.

Unlike contingency fee agreements tailored to address financial constraints in medical litigation, retainer agreements provide flexibility in legal service provision. Clients entering a retainer agreement understand that the upfront payment secures ongoing legal support, irrespective of the case’s outcome.

Example Calculation:

For instance, in scenarios where a lawyer opts for hourly billing, they might request that the client maintain $5,000 in the trust account as a retainer. The retainer is used as the lawyer diligently works on the case and bills hours. 

To ensure continuous coverage for the lawyer’s services, the client may need to replenish the retainer to meet the specified amount.

Elements of a Retainer Agreement

The Law Society of Ontario advises including the following essential elements in a retainer agreement:

  • Scope of services: The retainer agreement should clearly define the client’s goals, the legal services provided, critical steps in the matter, expected timeframes, and any limitations to the representation.

  • Fees and disbursements: Details about estimated fees or disbursements, billing methods (hourly rate or flat fee), payment terms, and consequences for non-payment must be explicitly outlined in the agreement.

  • Communication protocols: The manner and frequency of communication between the lawyer and client, as well as reporting intervals, are established to maintain transparency and keep all parties informed.

  • Withdrawal from representation: The retainer agreement should clarify the circumstances under which a lawyer may withdraw and the consequences of inadequate instructions or non-payment.

Choosing between a contingency fee agreement and a retainer agreement in medical litigation involves careful consideration of individual circumstances and legal needs. Contingency fees provide a no-win, no-fee structure, making legal representation accessible, while retainers offer flexibility for ongoing legal support. 

Clients navigating the landscape of medical litigation should weigh these considerations before entering into a contractual arrangement, ensuring alignment with their specific legal and financial requirements.

Consult Our Expert Medical Litigation Lawyers

Patients and families considering a medical malpractice lawsuit often grapple with overwhelming circumstances and the associated financial concerns. At Sommers Roth & Elmaleh, the initial consultation and pursuit of a medical malpractice claim won’t incur any costs.

Given our dedication to medical malpractice cases for 40-plus years, clients can be assured we can provide the professional assistance they need. We are so dedicated to medical malpractice cases that we do not charge a fee unless we solve your case.

We invest significant resources upfront in every case we accept – consulting with top medical specialists nationwide, reviewing records inside and out, spending tremendous amounts of time and effort, and employing investigators when necessary–all at our expense. 

This commitment ensures that families do not bear the financial burden of the complex legal process.

If you’ve experienced medical malpractice, contact our medical litigation lawyers at 1-844-777-7372 or online for a free consultation.

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