The cost of hiring a lawyer can seem out of reach for many people. Fortunately, anyone can get the professional legal assistance they need if they’ve been injured in an accident. This is because personal injury lawyers typically charge on a contingency basis.
This means that the client pays nothing out of pocket. The lawyer only gets paid at the end of the process – and only if they reach a settlement for you. If they don’t reach a settlement, they don’t receive any payment for their services.
How much is the contingency fee? This ranges somewhat. Some factors are the size of the potential settlement, the type of claim, and market conditions. Lawyer fees for accident settlements can typically range from 33 to 45 per cent.
Let’s say your injury lawyer gets you a $10,000 settlement and the contingency fee is 35 per cent. Does that mean you get $6,500 and your lawyer gets $3,500? Not quite. Your lawyer will first subtract disbursements from the settlement amount.
Disbursements are the various fees incurred during the process of resolving a claim. These fees include photocopying and postage, costs for medical charts obtained, court filing fees (if any), and so on. All of these fees are itemized on the lawyer’s final bill to the client.
Once a settlement is reached with the defendant (or typically with the defendant’s insurance company), the settlement funds are sent to your injury lawyer. These funds are held in trust by your lawyer. He or she then calculates the final bill and releases the balance to you.
For example, here’s what a final bill (with a contingency fee of 35 per cent) might include:
Settlement amount: $10,000
Disbursements including GST:
Faxes, photocopying and postage: $60.00
Chart copy from ABC Medical Clinic: $100.00
Chart copy from Alberta Health Services: $25.00
Total disbursements: $185.00
Fees pursuant to contingency agreement: ($10,000 – $185) x 35% = $3,435.25
Total GST on fees: $171.76
Total fees, disbursements & GST: $3,792.01
In the above example, $3,792.01 would be subtracted from the settlement amount of $10,000. You, as the client, would receive a cheque in the amount of $6,207.99.
For more information about lawyer fees, visit the Law Society of Alberta’s website.
Frequently asked questions
How much does a personal injury lawyer cost?
Personal injury lawyers tend to charge on a contingency basis. This means they receive a percentage of the settlement if and when a settlement is reached. A client does not pay out of pocket. Personal injury lawyers’ fees can range from 33 to 45%.
Are lawyer fees tax deductible in Canada?
As far as we are aware, lawyer fees are only tax deductible if they are a business expense, but you should ask your accountant.
Do I have to pay taxes on my car accident settlement?
In most cases, the answer is no. The Canada Revenue Agency does not treat compensation for motor vehicle accidents as taxable income. For more information, read our blog on the subject.