Some Personal Injury Attorneys are Continuing to Overcharge Clients

Despite an Ethics Opinion from the Alabama State Bar prohibiting “double dipping” on contingency fees, some Alabama personal injury attorneys appear to be continuing to overcharge their clients.contract-image Several years ago, a number of personal injury firms in Alabama (not Boteler, Finley & Wolfe) began charging an additional contingency fee on the “back-end” of a claim or case for negotiating a reduced repayment on behalf of the client for medical bills or insurance subrogation claims. These claims were asserted against the client’s settlement money by hospitals, medical providers or health insurance carriers. The attorneys would charge a 30-45% contingency fee against the gross settlement amount and then an additional 40-50% of the amount of any reduction or waiver resulting from the lawyer’s negotiating work after the settlement of the claim or case. For example: A person is injured in a car wreck and has a liability claim against the at-fault driver’s insurance. He or she hires a lawyer and agrees to a 40% contingency fee from the gross settlement amount. The client incurs $5,000 in medical care for the injuries. Medical liens and/or subrogation claims in the amount of $5,000 are asserted against the settlement funds. The attorney is charging an additional 50% fee against any negotiated reduction of those asserted medical claims. The claim settles for $15,000 and the lawyer then gets the $5,000 medical claims reduced to $2,000, a “savings” of $3000 to the client. Under the above scenario, the attorney fees charged would be $7,500. Which is $6,000 on the “front end” and $1,500 on the “back end.” Or half of the settlement! The problem with this scenario is that negotiating and handling repayment of medical claims has traditionally been encompassed as a part of the lawyer’s obligation under the initial contingency fee agreement! Any negotiated reduction is a benefit that should pass 100% to the client. In 2015 the Alabama Office of General Counsel issued Ethics Opinion RO-2015-01 which prohibited “double dipping” as described in the example above: “Absent extraordinary circumstances, a lawyer may not enter into an agreement for, charge, or collect an attorney’s fee based on the gross recovery or settlement of a matter, and in the same matter charge an additional contingent fee for the negotiation of a reduction of third party liens or claims, where the liens or claims are related to, and to be satisfied from, the gross settlement proceeds from that matter.” The opinion went on to say even if the client “agrees” to such an arrangement in writing, it is still not permissible because negotiating repayment is part of what the lawyer is being paid for from the front end contingency fee: “[A] lawyer may not, even if in writing and signed by the client, enter into an agreement or agreements which call for an attorney’s fee based on the gross recovery or settlement of a matter and in the same matter charge an additional contingent fee for the negotiation of a reduction of third party liens or claims which are related to, and to be satisfied from, the gross settlement proceeds from that matter. This is because the negotiation of a reduction of third party liens and claims is incident to normal personal injury representation. Frequently necessary to reach a settlement of a client’s personal injury claim, this service is a routine element of case management.” Even though this procedure was deemed improper and unethical in 2015, we have recently seen two fee contracts executed in 2016 from different lawyers and/or law firms still containing the “double dipping” clause. In both situations, the clients had become dissatisfied with the lawyers during the course of representation and discharged the lawyers before the claim was settled so no illegal fees were actually charged. However, since this unethical practice appears to be continuing, personal injury victims should be aware of this practice when considering hiring an attorney. If you or a friend or family member, have been the victim of this type of improper fee arrangement, you can contact the Alabama State Bar Association for more information about how to file a grievance and seek a recovery for the excess attorney fees: 1 800-354-6154 (toll free) or follow the following link: ASB Grievance Procedure. Or contact Mark Wolfe at Boteler, Finley & Wolfe for more information: or 251 433-7766.     REQUIRED DISCLAIMERS: Alabama Rule of Professional Conduct 7.2: No representation is made that the quality of legal service to be performed is greater than the services provided by other lawyers. The Mississippi Supreme Court advises that a decision on legal services is important and should not be based solely on advertisements. Free background information is available upon request to a Mississippi attorney. The listing of any area of practice by a Mississippi attorney does not indicate any certification of expertise therein. See Mississippi Rules of Professional Conduct Rule 7.2(d), Rule 7.4(a), Rule 7.6(a) (1997). General Disclaimer: This information is posted for general information purposes to help those interested parties or persons with potential civil claims better understand their rights and potential causes of action. If readers are currently represented by an attorney on the subject matter of this post then they are encouraged to continue with said representation. No attorney-client relationship is established by this post.

Recommended Posts