Percentage fee v. hourly fee for personal injury claims in British Columbia
Contingency fee agreements (also called percentage fee agreements) are very common for personal injury claims in British Columbia. Under this type of fee agreement the fee paid to the lawyer depends on (i.e. is contingent on) the recovery obtained and the lawyer takes a percentage of the compensation awarded to the plaintiff.
A possible alternative to a contingency fee agreement is for the plaintiff to pay the lawyer by the hour; either as the claim proceeds or upon resolution of the claim. (See discussion above for more information regarding alternative types of fee agreements).
Although percentage fee agreements are far more common than hourly fee agreements for personal injury claims in British Columba, it is nevertheless worthwhile to consider the circumstances in which hourly fee agreements may be appropriate.
Two key factors that determine what fee arrangement is fair to the plaintiff, and, if a percentage fee is to be used, what percentage fee is appropriate, are:
- Whether liability for causing the accident is in dispute: If it will be difficult to prove that the plaintiff was injured due to the fault of a person who has money (or insurance) to pay the plaintiff damages, then the lawyer risks not being paid any fee at all and a higher percentage fee may be appropriate. In some cases the risk on liability may be so large that the lawyer will not be willing take the case on a percentage fee basis and will insist on an hourly rate fee agreement.
- The seriousness of the injuries to the plaintiff: If the injuries to the plaintiff are minor it will not likely be economical for the plaintiff to pay the lawyer by the hour. For example a claim involving minor injuries may take 10 hours of work to bring to resolution, equating to $2,000.00 in fees (if the lawyer charged $200 / hour) which would be excessive on a small file that settled for $4,000.00. In such a case a percentage fee may be preferable for the plaintiff (although some lawyers would not be interested in taking on such minor claims). On the other hand, if the injuries are very serious (e.g. multi-million dollar claim) and liability is not in dispute, it may not be fair to the plaintiff for the lawyer to take a “normal” percentage fee (e.g. 25%) if that will result in a fee of hundreds of thousands of dollars for relatively little work.
Contingency fee compensation schemes are typical for minor or moderate injuries, but in cases involving the most serious types of injuries an hourly fee may be appropriate, especially if liability for causing the accident is not in dispute.
The degree of risk on liability (low to high) and the seriousness of the plaintiff’s injuries (low to high) interact as indicated on the chart below to determine what compensation scheme would be fair to the plaintiff:
If liability is not in dispute (e.g. rear end motor vehicle accident, motor vehicle passenger claim, etc.) and/or the damages will be large (e.g. catastrophic injury such as paraplegia, quadriplegia, brain injury, etc.), then the case would be in the white block and a low percentage fee would be appropriate, or the plaintiff may prefer to pay on an hourly rate basis.
If there is high risk on liability (e.g. real risk that the plaintiff will be found entirely at fault for causing the accident) and/or the damages will likely be low (e.g. minor soft tissue injuries) then the case would be in the black block and the plaintiff would likely have to agree to a high percentage fee, or the lawyer may insist on being paid an hourly rate.
Between the extremes indicated by the white block and the black block the plaintiff and the lawyer may have to negotiate a fair percentage fee and will likely consider the following:
- the risk of the plaintiff being found wholly or partially at fault for the accident;
- the amount of legal work required to prosecute the claim; and
- the amount of expected compensation.
The foregoing confirms that although percentage fee agreements are commonly used for personal injury claims in British Columbia, they may not be appropriate in all cases, especially where liability is not in dispute, the injuries are very serious, and relatively little legal work will be required to bring the claim to resolution. In such cases plaintiff’s may consider an hourly rate fee agreement, with payment possibly being made on a deferred basis.
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