Contingency Fee: What It Is, Typical Percentages, and How It's Calculated

A contingency fee is a legal fee that is paid only if the case recovers money. The lawyer takes an agreed percentage of the settlement or court award. If there is no recovery, there is no fee.

That part is simple. It gets harder once you put real numbers on a case. What percentage is normal? Are case costs taken out before or after the fee? Where does the settlement money sit before anyone gets paid? Clients ask these questions, and so do the finance staff who handle the money.

This guide answers all of them. It covers typical contingency fee percentages, the legal caps, a step-by-step calculation, and what the firm has to do with settlement funds once the check arrives. If you're comparing pricing models, our guide to hourly vs. flat fee vs. contingency billing shows how contingency compares with the others.

What Is a Contingency Fee?

A contingency fee is a fee arrangement where the lawyer's payment depends on the outcome of the case. The fee is "contingent" on winning or settling. The lawyer is paid a percentage of what the client recovers, usually from a settlement, a jury verdict or an arbitration award.

Firms most often use contingency fees in cases where the client has a claim for money but can't pay a lawyer up front:

• Personal injury and car accidents
• Medical malpractice
• Workers' compensation
• Employment claims, such as wrongful termination or discrimination
• Social Security disability
• Some insurance disputes and business litigation

The law firm takes on the risk. It may spend hundreds of hours and pay thousands in case costs, then collect nothing if the case is lost.

Contingency fee vs. contingent fee

The two terms mean the same thing. "Contingent fee" is the wording used in the ABA Model Rules of Professional Conduct and in most state ethics rules. "Contingency fee" is the more common term in everyday use and in search.

What Is the Typical Contingency Fee Percentage?

There is no single standard contingency fee. One-third (33⅓%) is the figure used most often, especially in personal injury cases that settle before trial. Rates commonly fall between 25% and 40%, depending on the type of case, how risky it is, and how far it goes before it resolves.

The percentage is negotiable in most cases. Some states require the agreement to say so. What is fixed is the outer limit. A fee must be reasonable under ethics rules, and some types of cases have hard caps set by law.

Contingency fee caps set by law

Here are a few real caps that show how much the allowed percentage can vary:

• Federal Tort Claims Act (claims against the U.S. government): Under 28 U.S.C. § 2678, a lawyer can't charge more than 20% of an administrative settlement, or more than 25% of a judgment or a settlement reached after a lawsuit is filed. Going over the cap can lead to a fine of up to $2,000, up to one year in prison, or both.
• Social Security disability: Under the fee agreement process, the fee can't be more than 25% of past-due benefits or $9,200, whichever is less. The $9,200 limit applies to favorable decisions issued on or after November 30, 2024.
• Florida medical malpractice: The Florida Constitution entitles the client to at least 70% of the first $250,000 and 90% of anything above that. In practice, the lawyer's fee is capped at 30% of the first $250,000 and 10% of the rest, unless the client waives this in writing.

What affects the contingency fee percentage?

A firm usually weighs four things when setting the rate:

• Risk. If liability is unclear, the case is more likely to be lost, so the firm charges a higher percentage.
• Case stage. A case that goes to trial or appeal takes far more work than one that settles early.
• Cost of the case. Expert witnesses, depositions and medical records can cost a firm tens of thousands of dollars before any recovery.
• Local practice and ethics rules. ABA Model Rule 1.5(a) lists the factors that make a fee reasonable. These include the time and skill required, the amount involved, the fee customarily charged in the area, and whether the fee is fixed or contingent.

How Is a Contingency Fee Calculated?

A contingency fee is calculated by multiplying the recovery amount by the agreed percentage. The detail that changes the result most is whether case costs are taken out before or after the fee is calculated.

Contingency fee calculation: step by step

Here's an example. A personal injury case settles for $300,000, and the agreement sets the fee at 33⅓%. The firm advanced $18,000 in case costs. The client also has a $40,000 medical lien that must be paid from the settlement.

Same case, same percentage, and the client's share changes by $6,000. That's why ABA Model Rule 1.5(c) requires the written agreement to say which method the firm uses.

Is a contingency fee calculated before or after costs?

Either method is allowed. What matters is that the agreement states which one applies and the client understands it before signing. Calculating the fee on the gross recovery means a higher fee for the firm. Calculating it on the net recovery is more favorable to the client.

Who pays case costs if the case is lost?

That depends on the agreement. Some firms absorb the costs when a case is lost. Others make the client responsible for them either way. Under Rule 1.5(c), the agreement must clearly tell the client about any expenses they'll owe whether or not they win.

Types of Contingency Fee Arrangements

Not every contingency fee is one flat percentage. Here are the most common variations.

Sliding scale contingency fee

A sliding scale contingency fee changes the percentage based on how far the case goes or how large the recovery is. A common version is a lower rate if the case settles early and a higher rate if a lawsuit is filed or the case goes to trial.

Florida's Rule 4-1.5(f)(4)(B) gives a clear example of this. In personal injury cases, the fees presumed reasonable are:

• Before the defendant answers or arbitration is demanded: 33⅓% of the recovery up to $1 million, 30% of the portion between $1 million and $2 million, and 20% of anything over $2 million
• After an answer is filed, through judgment: 40% of the recovery up to $1 million, 30% of the portion between $1 million and $2 million, and 20% of anything over $2 million
• Appeal or postjudgment action: an additional 5%

On a $1.5 million recovery after the answer is filed, the fee would be 40% of $1 million ($400,000) plus 30% of $500,000 ($150,000), for a total of $550,000.

Hybrid contingency fee

A hybrid fee combines a reduced hourly rate or flat fee with a smaller contingency percentage. The client pays part of the fee as the work happens, and the firm takes a lower percentage at the end. Firms use this when a case has a decent chance of recovery but the client can afford some fees up front.

Reverse contingency fee

A reverse contingency fee is based on how much the lawyer saves the client rather than how much they recover. It's mostly used when defending a claim. ABA Formal Opinion 93-373 allows it if the amount saved can be reasonably measured and the client gives informed consent.

What Must a Contingency Fee Agreement Include?

A contingency fee agreement must be in writing and signed by the client. Under ABA Model Rule 1.5(c), it must state:

• How the fee is determined, including the percentage that applies if the case settles, goes to trial or goes to appeal
• Which litigation and other expenses will be deducted from the recovery
• Whether those expenses are deducted before or after the fee is calculated
• Any expenses the client will owe even if they lose

States adopt their own versions of this rule, and some add more. Florida, for example, requires specific wording and a client statement of rights in personal injury cases. Check the rule in each state where the firm practices.

When are contingency fees not allowed?

ABA Model Rule 1.5(d) prohibits contingency fees in two situations:

• Domestic relations matters where the fee depends on securing a divorce, or on the amount of alimony, support or a property settlement
• Criminal defense, where a lawyer can't charge a contingency fee for representing a defendant

Some states allow narrow exceptions, such as collecting past-due child support after a judgment.

How Do Law Firms Handle Contingency Fee Settlements in Trust?

This is where contingency cases create the most work for a firm's accounting team. The settlement doesn't belong to the firm when it arrives. Part of it belongs to the client, part to lienholders, and part to the firm. Until it's divided, it has to sit in a client trust account.

Step 1: Deposit the settlement check into trust

The full settlement goes into the firm's client trust account, usually an IOLTA account, and is recorded on that client's trust ledger. It never goes into the operating account first, even though part of it is the firm's fee.

Step 2: Wait for the funds to clear

Disbursing against a check that hasn't cleared means paying out other clients' money. Most state rules prohibit this, and it's one of the most common causes of trust account shortages.

Step 3: Disburse the fee, costs, liens and client share

Once the funds are available, the firm pays out each portion from trust:

• The earned contingency fee goes to the operating account
• Reimbursement of advanced case costs goes to the operating account
• Medical, insurance or government liens go to the lienholders
• The rest goes to the client

The fee should be moved out of trust once it's earned. Leaving the firm's own money in the trust account is commingling, which is an ethics violation in its own right.

Step 4: Give the client a written settlement statement

Rule 1.5(c) requires a written statement when the matter ends. It must show the outcome, the amount sent to the client, and how that amount was determined. This is usually called a settlement statement or closing statement. It lists the gross recovery, the fee, each cost, each lien and the client's net amount.

Step 5: Reconcile the trust account

After the disbursements, the client's ledger for that matter should be at zero, and the trust account should still balance. A monthly three-way reconciliation compares the bank statement, the trust journal and the client ledgers, which catches errors before they turn into a bar complaint.

How to Account for Contingency Fees and Case Costs

Contingency cases also affect how a firm tracks money while the case is open.

Track advanced case costs by matter

Costs the firm pays on a client's behalf, like filing fees, expert witnesses and medical records, are expected to be repaid from the recovery. Many firms record them as client cost advances tied to each matter instead of general expenses. This makes it easy to see what each case owes the firm when it settles. It also shows how much cash the firm has tied up in open cases.

Know when contingency fee revenue is earned

A contingency fee isn't earned until the case resolves and the amount is known. Before then, the firm may have hundreds of hours of work on a case with no income on the books. Firms with a heavy contingency caseload often go months between large settlements. Planning for cash flow is as important as the fee percentage itself.

Track time on contingency cases anyway

Even without hourly billing, recording time on each contingency matter shows which case types are profitable. It also gives the firm a record if a fee is challenged, a client changes lawyers, or a court has to approve the fee.

Frequently Asked Questions About Contingency Fees

What is a contingency fee in simple terms?

A contingency fee is a legal fee paid only if the client wins or settles the case. The lawyer receives an agreed percentage of the money recovered. If nothing is recovered, the lawyer is not paid a fee.

What percentage do most lawyers take on contingency?

One-third (33⅓%) is the most common contingency fee, especially in personal injury cases that settle before trial. Rates usually fall between 25% and 40%. Some case types have legal caps, such as 25% for Federal Tort Claims Act lawsuits.

How do you calculate a contingency fee?

Multiply the recovery by the agreed percentage. Your agreement will say whether the fee applies to the gross recovery or to the amount left after case costs are deducted. On a $300,000 settlement with $18,000 in costs, a 33⅓% fee is $100,000 on the gross amount or $94,000 on the net amount.

Is the contingency fee taken before or after expenses?

It can be either. The written agreement must state whether expenses are deducted before or after the fee is calculated. Taking expenses out first leaves the client with more money.

Does a contingency fee agreement have to be in writing?

Yes. Under ABA Model Rule 1.5(c), a contingent fee agreement must be in writing and signed by the client. Most states follow this rule.

Can a lawyer charge a contingency fee in a divorce or criminal case?

No. The ABA Model Rules prohibit contingency fees for criminal defense. They also prohibit them in divorce cases where the fee depends on getting the divorce or on the amount of alimony, support or property awarded.

Where does settlement money go before the client is paid?

The settlement is deposited into the law firm's client trust account. Once the funds clear, the firm pays its fee and costs, pays any liens, and sends the rest to the client with a written settlement statement.

Can the lawyer's contingency fee percentage be negotiated?

In most cases, yes. Contingency fee percentages aren't set by law, except where a statute or court rule caps them. Clients with strong cases sometimes negotiate a lower rate.