Making the case for personal injury contingency fees

The use of contingency fees by personal injury law firms across Ontario has been a hot topic in the media, recently.

Some have been arguing that contingency fees deplete too much of a plaintiff’s personal injury settlement or award, and deny victims the level of financial freedom necessary to manage their medical and lifestyle needs in the months and years after suffering a catastrophic injury. Today, I would like to clear up this misconception, and explain why contingent fees are not only good for accident victims, but absolutely necessary.

Why Contingency Fees are Necessary

While contingency fees have been called unfair or even inflated by some—they typically range between 30 to 35 per cent of a plaintiff’s settlement or litigated award—these structures enable greater access to justice for clients who would otherwise find it unaffordable to take their cases to trial.

That’s because, on average, most personal injury cases take about four to five years to reach trial. After sustaining a catastrophic injury, accident victims are generally unable to continue working, or earn an income. A claim for loss of income is often the largest aspect of a personal injury claim. Virtually no one who is disabled from work can afford to pay a lawyer an hourly rate to handle their case for four to five years.

Hourly rated lawyers, in other areas of law, typically charge hundreds of dollars an hour to handle litigation. Even if lawyers charged only a fraction of those rates—let’s say $50 per hour—unemployed accident victims would still find it virtually impossible to pay a lawyer for their work. More so, when you consider that firms can spend 1,000 hours or more on a case that could take half a decade to litigate.

How Contingency Fees Improve Access to Fair Compensation

Insurance companies also know this, and have a duty to their shareholders to make the most money possible (which means paying as little in compensation to accident victims as possible). If they knew that personal injury lawyers were charging on an hourly-rate basis, they could simply outwait plaintiffs until they were pressured to take minimal settlements.

Of course, the only leverage a plaintiff has in a case is to be able to take it to trial. Doing so is the only way to compel an insurance company to pay. If insurers can be convinced to reach a fair out-of-court settlement, it’s because they know they would lose and pay even more if the case were to proceed to trial.

The general rule of thumb with trials is to expect them to cost about $10,000 per day in legal fees (including both fees for the time at trial and preparation time). Without contingent fees, insurance companies would steamroll injured plaintiffs using their considerable financial resources (obtained, ironically, through the very premiums those same people paid for insurance coverage prior to their accident). This is where the notion of access to justice comes into play. Without a means to delay paying lawyers’ fees—which are paid to a firm only if it wins—plaintiffs would never be able to challenge an insurer in court and win an award that addresses their, typically substantial, post-accident medical and assistance requirements.

Why Contingency Fees Work Well

Perhaps most importantly, contingent fees automatically align a plaintiff and lawyer’s interests. Why? Hourly-rated lawyers earn more if a case becomes more litigious (because it takes more time, and they charge by the hour). With contingency fees, however, a lawyer makes more money if their client makes more money, and loses money if their client loses the case.

In order to ensure that lawyers can offer contingent fees, those fees have to be high enough to compensate lawyers for the cases they take on where they lose money. Files are often taken on within days of an accident, to ensure that the client is taken care of and protected right away. If that client fully recovers within six months, however, there is no case and the lawyer doesn’t get paid.

In other words, lawyers incur great risk with contingency fee arrangements. It’s in their best interest to ensure their clients’ best interest is served, as well. These fee structures may face constant scrutiny and criticism, but they exist to better serve accident victims and their families.

– Strype Injury Law

Get more information about the process of personal injury trials or settlementscontact Strype Injury Law today.

 

 

 

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Strype Injury Lawyers: Access to Justice

Court delays deny access to justice for personal injury victims

Virtually every week, media headlines shine a spotlight on the trial delays plaguing our courts. But this coverage tells only half the story of the hurdles faced by personal injury victims in Ontario when it comes to gaining fair access to justice.

As we’ve seen in several high-profile cases such as the Supreme Court’s decision in R v Jordan—in which the Court decided that criminal cases in provincial courts should take no longer than 18 months from the charge to the end of trial—criminal charges, even grievous ones, are sometimes ‘stayed’ or dismissed because they were not dealt with expeditiously.

Those charged with a crime in Canada are entitled to trial within a reasonable time under s. 11(b) of the Charter of Rights and Freedoms.

There is, however, another unintended consequence of that Supreme Court ruling. Because criminal trials take precedence over civil actions and because we have a serious shortage of judges, civil proceedings are often unreasonably delayed, sometimes for years on end. A civil suit in Ontario may require six to eight years from the date that the Statement of Claim is issued until resolution.

The impact on personal injury victims

Victims who are injured in a motor vehicle accident or another catastrophic event are often unable to work, and as a result, must survive financially on accident benefits in the interim—amounts that tend to be a mere fraction of their regular income. This hardship often results in significant stress, mental health issues, divorce and family breakdown.

Furthermore, because of the way that accident benefits are structured, insurers can arbitrarily cut off those benefits, which they do routinely.

The unfair settlement loophole

Insurance companies exploit these facts and delays to their advantage. They fully understand that their own clients are often desperate to settle for much less than they deserve, because they are facing bankruptcy. To compound the pressure, they routinely seek multiple court delays of six months to a year for various reasons, and consistently refuse to make reasonable—or any—offers of settlement. They know that a trial will be set so far in the future that their client will be forced to accept minimal compensation just to survive.

Even if a trial date is determined, that only indicates its opening day. Because of the problems in the court system, civil trials are routinely interrupted, or canceled at the last minute and rescheduled many months into the future. This is not only unfair to the plaintiffs, it also forces their lawyers to spend inordinate amounts of time preparing for a trial, then more time at a much later date as they work to review the case once again.

Insurance companies benefit with every delay in the resolution of a case, all at accident victims’ expense.

Jury trials for injury cases

The worst-case scenario for an accident victim is a trial by jury. Those trials take 50 per cent longer than trials by judge alone, largely for procedural reasons.

The situation is so dire that in Brampton, for example, jurors are being bused back and forth every day to other locations such as Milton or Orangeville, because of the shortage of judges and trial space. Juries, on the other hand, are subconsciously aware that substantial awards will affect their own car insurance rates, and often award sums that fall far short in addressing accident victims’ medical and ongoing support needs.

The case for timely justice in civil law

The Supreme Court ruled unanimously that an accused in a criminal case has the right to be tried “within a reasonable time frame”, and that the court “has a role to play in changing courtroom culture and facilitating a more efficient justice system.”

This ‘access to justice’ standard should apply to civil cases as well.

– Strype Injury Law

Get more information about the process of personal injury trials or settlementscontact Strype Injury Law today.

 

The myth of double-dipping—How litigation cost-recovery benefits personal injury victims

The myth of double-dipping—How litigation cost-recovery benefits personal injury victims

Personal injury lawyers are unique in the way they collect fees and recoup costs.

In Ontario, for example, the personal injury law bar is one of the only where lawyers bill through contingency fee arrangements—you only pay if we win. This structure allows plaintiffs to take their case to court and obtain a personal injury settlement or award that affords them a level of financial freedom necessary to manage their medical and lifestyle needs in the months and years after suffering a catastrophic injury.

Perhaps most importantly, contingency fees allow accident victims to take their cases to court without paying out of pocket, which is crucial when you consider that, in catastrophic injury situations, these individuals are often unable to work. In many cases, even their family members are forced to take time off work to manage their care. In short, contingency fee structures provide greater access to justice for accident victims and their families.

Inaccurate media reports

But when it comes to cost recovery, recent media coverage has misstated the law as it pertains to Ontario’s Solicitor’s Act, the legislation that sets the rules for lawyers across the province. Various articles have inaccurately asserted that it is illegal for personal injury lawyers operating under contingency fee arrangements to recover case-related costs.

This is simply incorrect.

Solicitor’s Act s. 28.1(8) says:

(8) A contingency fee agreement shall not include in the fee payable to the solicitor, in addition to the fee payable under the agreement, any amount arising as a result of an award of costs or costs obtained as part of a settlement, unless,

(a) the solicitor and client jointly apply to a judge of the Superior Court of Justice for approval to include the costs or a proportion of the costs in the contingency fee agreement because of exceptional circumstances; and

(b) the judge is satisfied that exceptional circumstances apply and approves the inclusion of the costs or a proportion of them. 2002, c. 24, Sched. A, s. 4.

In other words, lawyers can recover costs associated with a case if such an arrangement is agreed upon by the client and a judge approves. This is a common and even essential practice across the personal injury bar in Ontario. Why?

The problem with fixed-percentage arrangements

Because a fixed percentage arrangement—where a lawyer collects, say, 33% of damages recovered, regardless of the stage of litigation—encourages lawyers to settle files early, even if the overall recovery is less than ideal for the client. That’s because the costs of managing a file increase over time, and drastically so if a case goes to trial. Typical costs include the lawyer’s time and services, the fixed costs of managing an office and support staff wages, as well as additional overhead charges that law firms must cover in their day-to-day operations.

At the trial stage, fees tend to increase dramatically because in-court litigation services are far more expensive than any other stage of litigation. The typical rule of thumb is that it costs about $10,000 per day during a trial to cover a lawyer’s time alone. Almost no accident victims or their families would be able to pay for these costs if they were forced to pay out of pocket. As such, the ‘costs’ award after a trial is far higher than it would ever be on settlement.

If the client always gets the whole amount of the costs award, then proceeding to trial will inevitably mean that the lawyer’s profit on a file decreases significantly, because his/her costs skyrocket with no increase in the fee.

A win-win situation for personal injury clients and lawyers

One of the advantages of contingent fee arrangements is that the lawyer and client are essentially partners in the management of a personal injury file and the outcome of any protracted litigation.

Clients understand they can trust their lawyer’s advice because both parties’ interests are aligned (unlike hourly-rated litigation, where lawyers make money regardless of the file’s outcome). Having the client retain all cost awards associated with the file severs this important alignment of interests, and incentivizes the lawyer to encourage a client to settle before trial—even if the client’s best interest is better served by proceeding with litigation.

It’s no surprise, then, that both clients and judges regularly agree to allow lawyers to recover costs as a part of the litigation process.

This system is fair, just and delivers access to justice for personal injury victims and their families. Cost awards should continue to be shared between plaintiffs and their lawyers.

– Strype Injury Law

Get more information about the process of personal injury trials or settlementscontact Strype Injury Law today.