Typically when you hire a personal injury attorney to represent you, he or she will require that you sign a “Retainer Agreement.” This is the contract between you and them, which lays out the terms of your agreement. Typically this contract will cover such things as the percentage of recovery that you will have to pay for attorneys fees (from the proceeds of your personal injury settlement or verdict), how expenses will be handled, and your responsibilities, such as keeping your attorney fully informed regarding any changes in your medical condition.

Potential Warning Signs When You Hire A Personal Injury Law Firm

Just a couple of months ago one of my new clients hired me after her growing frustration with what I believe is one of the high volume “mill” firms in town. She was shocked when, several months after hiring this firm, she contacted one of two insurance companies that might provide coverage for her injuries. She learned that the law firm had not even contacted one of the insurance companies. To make matters worse, in the letter that they sent to the other (second) insurance company, her prior personal injury attorney repeatedly said that she had been in a car accident, even though her injuries were sustained during a sporting event. This firm had quite obviously utilized a form letter without giving any thought to accuracy.

But that wasn’t what amazed me the most. I discovered what I considered the biggest jaw dropper when I read the contract they had required her to sign.

A Retainer Agreement Reveals Much More Than Meets The Eye

I just about fell out of my chair when I read a section of their retainer agreement describing the percentage of any settlement or verdict they were going to charge.

First you should know that, at least in Florida, personal injury attorneys are only permitted to charge certain percentages from their clients’ ultimate recoveries (by Florida Bar rule). This percentage for permissible attorneys’ fees varies depending on whether the attorney must file a lawsuit (as some claims are resolved pre-suit), whether the insurance company admits liability when they formally answer the lawsuit, the amount of damages, whether an appeal must be filed, and various other factors.

So, for example, in a personal injury case, if the personal injury attorney never files a lawsuit, or if he files a lawsuit, but is able to settle the case before the defendant files an answer, then Florida personal injury attorneys cannot charge more than 33 1/3 % of any recovery up to one million dollars, 30% for any recovery between 1 million and 2 million, and 20% of any recovery above 2 million. (Note that a judge can approve higher amounts but that is exceedingly rare. Also any mandatory arbitration clauses can change the requirement to file an answer.) On the other hand, if the defendant files an answer and denies liability, then a Florida personal injury attorney may charge 40% of any recovery up to one million dollars, 30% of any recovery between one million and two million, and 20% of any recovery over 2 million (another wrinkle is that these percentages stay at 33%/20%/15% if the defendant files an answer but admits fault or liability for the case, which means that only the amount of damages are disputed, not whether the defendant was at fault).

An additional requirement of the Florida Bar is that we must disclose these percentages, in writing, in our retainer agreements.

So here came the shocker. This particular firm did not disclose, in their retainer agreement, the percentages for their fees when they file a lawsuit. In other words, they only disclosed the pre-suit percentages of 33 1/3%, 30% & 20% and did not mention the higher percentages they would charge if they had to file a suit and the defendant denied liability. On my first quick glance over their agreement, I could not understand why they didn’t include those various percentages applicable in different scenarios.

What Percentages Can A Personal Injury Attorney Charge For Fees In Florida?

For example, this is the required section regarding attorneys’ fees from my retainer agreement (excerpt in italics):

1. The client will pay the attorney for his services:

(a) Before the filing of an answer or the demand for appointment of arbitrators or, if no answer is filed or no demand for appointment of arbitrators is made, the expiration of the time period provided for such action:

1. 33 1/3% of any recovery up to $1 million; plus
2. 30% of any portion of the recovery between $1 million and $2 million; plus
3. 20% of any portion of the recovery exceeding $2 million.

(b) After the filing of an answer or the demand for appointment of arbitrators or, if no answer is filed or no demand for appointment of arbitrators is made, the expiration of the time period provided for such action, through the entry of judgment:

1. 40% of any recovery up to $1 million; plus
2. 30% of any portion of the recovery between $1 million and $2 million; plus
3. 20% of any portion of the recovery exceeding $2 million.

(c) If all defendants admit liability at the time of filing their answers and request a trial only on damages:

1. 33 1/3% of any recovery up to $1 million; plus
2. 20% of any portion of the recovery between $1 million and $2 million plus
3. 15% of any portion of the recovery exceeding $2 million.

(d) An additional 5% of any recovery after notice of appeal is filed or post‑
judgment relief or action is required for recovery on the judgment.

The Only Way Around Disclosing Those Percentages

But this other law firm had only one section, in which they only disclosed the amount of their fees if they never filed suit, rather than four sections involving various stages of pre-suit, litigation or any appeal. Their agreement had words to this effect:

The client will pay the attorney for his service

1. 33 1/3% of any recovery up to $1 million; plus

2. 30% of any portion of the recovery between $1 million and $2 million; plus

3. 20% of any portion of the recovery exceeding $2 million.

This was very curious since, as I said, all personal injury attorneys are required to disclose the amount of fees for both pre-suit, in suit and appeal. But they found an ingenious loophole, which also represented what I considered a shocking arrangement with this particular client (and one can only guess many other clients since most firms use standard form agreements in this type of case). In addition to disclosing only the pre-suit percentage of fees, they also said words to the effect of “we do not anticipate filing a lawsuit in your case.” That was a SHOCKING statement! Since they never intended to file suit, I suppose they would not have to disclose the percentage that they would charge after the outcome of any lawsuit (ergo, the loophole).

When You Should Seriously Consider Running From Your Chosen Or Preferred Personal Injury Attorney

In my very, very strong opinion, this type of language in any retainer agreement is a HUGE red flag and you should run in the other direction if any personal injury attorney or firm ever asks you to sign an agreement telling you that they do not anticipate filing a lawsuit. I do not believe attorneys can come close to maximizing the value of most personal injury claims without filing a lawsuit. We have no special powers with insurance companies or defendants unless or until we file suit. Until we file suit, in many cases, we are just begging them to be fair without any real stick to make it happen.

When Are Personal Injury Lawsuits Not Justified Or Necessary?

That being said, sometimes a personal injury lawsuit truly is not justified. For example, your damages might not be high enough to justify the significant time and money needed to file and handle a lawsuit. This most often happens in cases involving relatively minor or temporary injuries. In other cases, a lawsuit simply is not needed to get the full value of any insurance policy. This might happen if the obvious damages clearly exceed the value of any insurance coverage, which very often causes the insurance company to settle for the policy limits without requiring any lawsuit. (As an aside, the only reason insurance companies settle in those situations is because they fear another lawsuit claiming that they clearly acted in “bad faith” when dealing with the injured person, which can be demonstrated much more easily when the value of the claim clearly exceeds the insurance coverage. Bad faith lawsuits are the only stick we personal injury attorneys have pre-suit, since a successful bad faith lawsuit would put the insurance company on the hook for the entire value of any claim, above any coverage limits). But in many, many cases, a lawsuit is necessary to maximize the value of a personal injury case.

Was A Lawsuit Really Necessary In The Case I Was Reviewing?

In this particular case (in which the retainer agreement said that the firm “did not anticipate filing suit,”) there was no reason, at least none that I could discern, why we should not file a lawsuit (and fast!). This client’s potential damages were significant because of a clearly permanent and significantly disabling injury. There was also a big chance that the insurance company would dispute liability for various reasons. In short, this client potentially has a valuable lawsuit of the catastrophic variety, yet the fault of the defendant and the amount of insurance coverage was such that the insurance company almost certainly would not settle for maximum value without suit (and, if they were inclined to admit liability after we filed suit, then they would have the opportunity when filing their answer).

Lawsuits Are Very Often Necessary In Serious, Catastrophic Or Permanent Injury Cases

Unfortunately, filing a lawsuit is very often the only way to maximize the value of any significant personal injury case. In other words, if your personal injury attorney does not file suit (and some do not), in many, many cases, he cannot possibly maximize the value of your claim (again there are important exceptions). (As another aside, a case might seem minor to you but still be significant enough to justify a lawsuit.)

Was This Routine For This Orlando Personal Injury Firm?

I have no way of knowing whether this was a standard form agreement that this firm required all of their personal injury clients to sign. My guess is that they use the same agreement for all clients and, therefore, try to settle all injury cases rather than ever filing suit. The basis for my guess is that most firms use the same agreement for all clients in similar types of cases. However, it is possible that whoever initially interviews the client (for that particular firm) decides the anticipated severity of the claim and then chooses between various retainer agreements based on their preliminary assessment. In other words, maybe they file suit in some accident cases and not others, and therefore use different retainer agreements depending. Even if that were true, I’m not sure how they would know whether suit would be justified when first signing a client, as the damages and available insurance coverage for a personal injury case are usually uncertain during the initial consultation.

Either way, at least in the case that I was reviewing, I believed that we needed to file a lawsuit to maximize the value of the claim, so I have since filed suit in that case, which is still pending.

(I wrote an article before explaining how some high volume personal injury settlement mills handle cases, based on data collected in the referenced Stanford Law Review article (reviewing extensive evidence and data related to these types of firms). At least those firms reviewed in that article (which included some of the largest mill firms in the country) often tried to convince clients to settle for whatever the insurance company offered after an injury or accident, such a car accident, without ever having to file a lawsuit or investigating the facts to determine the true merit or value of the claims. In other words, again according to Professor Engstrom, the only fight in serious accident cases was with the client, not the insurance company, regarding why they needed to accept less than was fair! According to Professor Engstrom, that extremely “minimalist” approach allows some personal injury firms to rely largely on non-lawyer staff to handle high volumes of personal injury cases and make money from volume rather than maximizing the value of each case.)

You Want A Personal Injury Attorney Who Is Fully Willing To File Suit When Appropriate

Although the fact that a personal injury firm would set in stone that that they never intended to file suit shocked me, a few weeks later I had another new client ironically tell me that he was unhappy with his existing personal injury attorney in part because his attorney wanted to file suit. In his situation, I had to tell him that filing suit is, very often, what you WANT your personal injury attorney to do. He believed that the attorney only wanted to file suit to get the higher percentage of attorneys’ fees. As I told him, trust me, if I could settle a case for what I considered a good amount without filing suit, then I would, regardless of the percentage of fees. The reason is that filing a lawsuit involves MUCH more work. Additionally, if the insurance company or defendant is going to pay without disputing liability, then the attorney fee stays the same, at least in Florida, even if suit is filed (meaning if the defendant only disputed damages, not liability or fault, then the percentage for attorneys fees would be the same as if the personal injury attorney had never filed suit).

I imagine this would be confusing as heck to a non-lawyer consumer. But the bottom line is that if the insurance company is going to play fair, then they have every opportunity to do so, both before and after a lawsuit is filed. If they do not, then, assuming your case justifies a lawsuit (as most permanent, serious and/or catastrophic personal injury claims would), you need a Florida personal injury who will file a suit. You do not need, in those situations, a personal injury firm that warns you that they will never file suit right in the retainer agreement! That would be run-the-other-way bad news!!

What If I Were You?

Put differently, if I were permanently injured, then I would never, ever, in a billion zillion years, hire a law firm unwilling to file suit from the beginning. I would also get a second opinion if the law firm didn’t want to file suit later in the representation (which I would only expect if my injuries were minor or completely resolved with relatively little treatment). The bottom line is this: if a personal injury law firm or attorney asks you to sign an agreement saying that they do not anticipate filing suit, at a minimum, you should get a second opinion regarding whether filing suit might significantly increase your ultimate settlement or verdict amount. I would also get a second opinion if your personal injury attorney ever refuses to file suit, which again is sometimes appropriate but definitely not always.

Related Posts:

Dangers Of Hiring High Volume Personal Injury Mills

Hire A Lawyer, Not A Paralegal

How Do Personal Injury Mills Get Away With Their Approach?

How To Maximize The Value Of Your Personal Injury Case

Never Deal With An Insurance Company Without A Lawyer