After being in a car accident, the injured party often wonders if he needs an attorney. Or more specifically, “is it worth getting an attorney?”
Typically, in car accident cases, attorneys work on a “contingency fee,” which means the attorney takes a percentage of the money they recover on behalf of their client. This also means that if the attorney does not recover anything for you, you do not owe him anything. The average attorney contingency fee percentage for non-litigation settlement is 33% of the money recovered for the client. Taking the attorney fee into account, the question as to whether it is worth it for an injured party to hire an attorney is legitimate.
Numerous studies have been done on car accident settlements, comparing accident settlements between those injured and represented by attorneys to those who opted not to hire an attorney. There were significant differences.
Valuing a Car Accident Claim
Before discussing the differences, it is important to understand what goes into valuing a car accident injury claim.
There are three main components that affect the value of your car accident claim:
1) Whose fault was the accident;
2) How badly you are hurt; and
3) the at-fault party’s insurance policy.
As to fault, if liability is not clear, then the settlement offer will reflect that. For the best settlement, the other party needs to be 100% at-fault and that needs to be made clear, by the attorney, very early on.
Once fault has been determined, you are entitled to compensation for your injuries, pain and suffering, and lost wages. How much you are entitled to depends on the severity of the injuries, any short-term or permanent disabilities suffered, and any lost wages as a result of the car accident.
There is one limiting factor though: the at-fault party’s insurance policy. If your damages exceed the at-fault party’s insurance policy, you might be left with a limited recovery. To recover beyond the at-fault party’s policy limits in a car accident, you would have to sue the at-fault party personally; and even if successful, you would have to collect on the judgment against the at-fault person. This can be difficult to impossible—and in most cases would be dischargeable in bankruptcy. Most attorneys therefore will not proceed through litigation on a contingency fee basis to pursue a judgment beyond the insured’s policy limits.
However, one exception to the above is underinsured or uninsured motorist coverage with your own insurance company. If you are in an accident and the at-fault party’s insurance coverage is insufficient to cover your damages, you can pursue the difference through your own uninsured/underinsured policy coverage, should you have it. This insurance allows you to make a claim against your own insurance company, up to the policy limits of your policy for the uninsured/underinsured motorist coverage.
How an Attorney Adds Value to Your Claim
We just covered the basics of what goes into a car accident claim, but we have not addressed the role of an attorney in this process; and whether having an attorney increases the value of your claim.
In short, injured parties with attorneys in personal injury cases receive vastly higher settlements than those who do not hire an attorney—even after accounting for the attorney fee.
Lawyers.com did a survey of personal injury litigants, both with and without attorneys. The clients who had an attorney received on average $77,600.00. Those who did not: $17,600.00. Those who hired an attorney for their personal injury matter received almost 4.5x the recovery compared to those who did not hire an attorney.
Having an attorney also affects whether an injured person gets anything at all for their injuries. In the same study, 91% of those injured who hired an attorney received some compensation. Whereas only 51% of those injured who did not hire an attorney received some amount of compensation.
The downside? Your case will take longer if you hire an attorney. On average, a personal injury claim for those with an attorney takes 15.7 months, as compared to only 7 months to resolve if you do not hire an attorney. It is easy to see why this is the case when you consider half the people without attorneys get nothing. An insurance company can close files in rapid fashion when half the injured are paid nothing and the other half are paid $0.25 on the dollar for their injuries.
The question then begs: why does hiring an attorney increase an injured person’s recovery so dramatically?
The answer involves several factors:
- The attorney can make sure you are medically treating appropriately for your injuries. Those who are injured and do not know how to “prove it” to the insurance company will get less. “Proving it” to the insurance company often requires medical records, examinations, and treatment.
- The attorney knows how to properly present your claim to the insurance company.
- The attorney can determine the policy limits of the at-fault party’s insurance policy.
- Lawyers negotiate for a living. Plus, the lawyer’s fee is contingent on the recovery, therefore he has incentive to negotiate as hard as possible, for the highest settlement.
The Power of Filing a Lawsuit
There is one last factor that can affect the value of your settlement: filing a lawsuit. Most car accident attorneys do not file lawsuits—and the insurance companies know this. Instead, these firms attempt to negotiate your claim during the entire statute of limitation period (generally two years), and if they are unable to settle the case before the statute of limitations expire, they send the case to an outside litigation firm. The original firm often splits the fee with the litigation firm therefore the original firm will keep the case as long as possible, to the client’s detriment.
This is not an efficient way to get settlement for your client. There are many instances where the attorney can tell from the very first communication with the insurance company that there might be trouble with the claim because the insurance company is being unreasonable. In these cases, I often do not even bother further negotiation—I sue them.
What does suing them do? The first thing it does is move the file from the “adjustor” pre-litigation division of the insurance company, to the litigation division—which is often outsourced to private attorney firms. This creates a cost to the insurance company that did not exist when they were only paying their staff adjustor to monitor the claim. This alone will almost always bring better offers than before filing a lawsuit.
We have had cases where the insurance company was offering zero, literally denying all responsibility; and then after filing a lawsuit, we immediately received significant settlement offers.
To recap, if you have been in a car accident you stand a much higher chance of getting a financial settlement if you hire an attorney, the financial settlement is generally much higher for those who hire an attorney compared to those who do not; and if the attorney you hire litigates, you stand a better chance of receiving a higher offer.
Lastly, as to when you should hire an attorney, the answer is as soon as possible. The insurance company will begin trying to settle the claim directly with you—from day one. This includes low-ball offers and requests for recorded statements wherein they can trick you into saying you are not hurt, or you may have been partially at fault for the accident. It is critical that you do not accept any offers or provide any unnecessary information to the insurance company that could compromise the value of your claim. Lawyer up.