The number most people remember from a first meeting with a personal injury attorney is one-third. It is the figure that appears in advertising, in conversation, and in the first paragraph of most fee agreements, and it is broadly accurate as a description of the market. It is also incomplete, because a percentage is meaningless until you know what it is a percentage of, when it is applied, and whether it stays the same from the first phone call to the verdict. Those three questions are answerable, and the answers are in the document you are asked to sign.
Gross recovery and net recovery are not the same base
Every fee agreement applies the percentage to something, and the two candidates are the gross recovery, meaning the full settlement or judgment before anything is subtracted, and the net recovery, meaning what remains after case costs are repaid. The difference is not academic. On a settlement where the costs run into the thousands, the choice of base moves real money between the two sides of the table, and it does so silently, because both versions can be described accurately as a one-third fee. A careful reader looks for the word gross or net in the operative sentence, and if neither word appears, asks for it to be written in before signing.
The order of operations matters just as much for the client's share, because liens sit downstream of both. Health insurers, Medicare or Medicaid where they paid for treatment, and medical providers holding letters of protection all have claims against the same settlement, and they are typically satisfied after the fee and costs are taken. A client who understands only the fee percentage can still be surprised by the final disbursement sheet. The fix is to ask for a written estimate of the whole waterfall, in order, using a plausible settlement figure, before the case is filed rather than after it settles.
Case costs are a separate account from the fee
Costs are the money advanced to move the case forward: filing fees, service of process, deposition transcripts, medical records, expert reports, accident reconstruction, mediator fees, and trial exhibits. They are not the attorney's compensation, and in most agreements they are repaid to the firm out of the recovery regardless of the fee. What varies is whether the client owes them if the case is lost. Many firms absorb costs on a losing case as a matter of practice, but practice is not contract, and the sentence that governs is the one specifying what happens if there is no recovery at all.
Tiered rates and the moment they step up
A large share of agreements are tiered, and the tiers track the work. A lower rate, often set below a third, may apply to a case resolved before a lawsuit is filed, with the percentage rising once a complaint goes on the docket, rising again if the case is set for trial or an appeal is taken. This is a rational structure, because litigation costs the firm far more in hours and risk than a demand letter does, but it gives the reader something specific to check: what event triggers each step, and who decides when it occurs. Filing is objective. Preparation for trial is less so, and the trigger should be tied to a date on the court's calendar rather than to a judgment call.
Where states put a ceiling on the number
Contingency fees are governed by state rules of professional conduct, which almost universally require that a fee be reasonable and that a contingency agreement be in writing, signed, and specific about how the percentage is calculated and how costs are handled. Some states go further and impose hard caps, most commonly in medical malpractice cases, where a sliding scale reduces the permissible percentage as the recovery grows. Others require court approval of the fee in claims involving minors or wrongful death. The state bar or the judiciary's self-help pages will say which regime applies, and the answer is worth reading in the original.
What the tax treatment adds
The Internal Revenue Service is responsible for how settlement proceeds are treated on a federal return, and its rules turn on what the money compensates rather than on who receives it. Compensation for physical injury is generally handled differently from interest or punitive damages, and in some situations the gross recovery, not the client's net share, is the figure that matters. That is a question worth putting to a tax preparer while the case is still open, when the allocation in the settlement documents can still be discussed.
A fee agreement is a short document, and reading it slowly costs an afternoon. Ask for the base, the cost treatment, the tier triggers, and a sample distribution on paper. Firms that work this way regularly have those numbers ready.
