Fighting Insurance Claim Denials: Will an Attorney’s Contingency Fee Eat Into My Benefits?
If your health insurance, life insurance, or long-term disability claim for benefits has been denied, it can be a medical or financial catastrophe. You need to fight that denial, and you are probably going to want to hire an experienced and successful insurance law attorney to represent you, whether applying for an internal review or appeal and especially if going to court. What if you can’t afford an attorney, especially one with a record of success going up against the biggest insurers? Thankfully, your lawyer will probably take your case on a contingency fee basis and won’t charge you anything upfront. Learn more below about contingency fees and how they can impact your insurance benefits claim.
What Is a Contingency Fee?
Are you a billionaire? We didn’t think so. Do you know who is a billionaire? The insurance company you are going up against. If you had to pay a lawyer by the hour to take on the insurance company and represent you through multiple levels of internal reviews and appeals, you could end up racking up more in legal fees than the cost of the insurance benefit you are going after. Alternatively, you might be comfortable with the idea of paying by the hour, but can you afford one with the level of skill, experience and resources your case requires?
Enter the contingency fee. A “contingency fee” means that the lawyer’s fee is contingent on the lawyer winning your case. In this context, that means getting your claim for benefits approved, along with compensation for any harm done to you by the denial (such as out-of-pocket expenses, a worsened medical condition, emotional pain and suffering, etc.). If the attorney is unsuccessful, you aren’t charged any fee.
How Much Is a Contingency Fee?
Contingency fees are tied to the amount of money the lawyer recovers for you. For instance, a typical amount is one-third of the amount they recover. This might sound like a lot, but in almost every case, an attorney will recover substantially more money overall than you would have gotten if you were able to settle your case on your own. Also, insurance claim denial cases are not like auto accident cases, where if liability is clear you are sure to get something from the insurer. If your health, life or disability claim has been denied, getting the insurance company to reverse its decision is not likely something you can do on your own, unless the denial was due to some clerical mistake which you can easily demonstrate. Insurance policies are extremely complex documents, as are insurance laws and court cases. Giving up a third of your settlement is fairly attractive when weighed against getting nothing at all.
Another advantage of the contingency fee is that it incentivizes the attorney to maximize your recovery. The more they recover for you, the more they earn. While a lawyer is ethically bound to provide diligent, competent representation to every client, one can’t help but think they’ll work extra hard when their financial interests are tied to yours.
Note that the typical “one-third of the recovery” normally applies when the lawyer settles out of court through a negotiated agreement. If they have to file a lawsuit, litigate, go to trial or appeal, the percentage likely creeps up, as does the amount of work involved. Contingency fee rates may rise to 40% if the case goes to trial or 50% if either side appeals, for instance. Contingency fee rates should be discussed with you at the outset and provided to you in a written agreement. If you think the lawyer is charging too much, interview another firm or call the local bar association for confirmation the fees are reasonable. As a further check, judges have the power to review a lawyer’s fees and lower them if they are unreasonable.
We should also note that some law firms in certain parts of the country are starting to offer lower than market-rate contingency fees, such as 25% when the going rate is 30%. While it’s too early to tell if this is the start of a new trend or a competitive bidding war among lawyers, it does serve as a reminder to always evaluate the quality of a lawyer before you hire them. Check their record of success, which may be listed on their website. A lawyer who is undercutting competitors to get business might not be the best one to take on a sophisticated case like an insurance claim denial.
What About Court Costs?
Attorneys working on a contingency fee frequently advance all costs of litigation, so you don’t have to pay a dime out of pocket to have them represent you. Filing papers with the court, deposing witnesses, even obtaining copies of relevant documents, all add up. You’ll want a law firm with the means to advance these costs, but know they will recover these expenses out of the recovery they obtain. Make sure you understand this upfront, including whether expenses are deducted before or after legal fees are calculated. You want costs deducted before the recovery is split to maximize the amount of benefit you retain. This should be spelled out in the fee agreement, including whether you might be liable for any special costs, such as expert consulting fees, if the lawyer is unsuccessful.
Key Takeaways
To sum up, fighting a claim denial on your own is akin to banging your head against the wall; they both cause major headaches without positive results. Lawyers consistently get bigger recoveries than people who don’t have counsel, and contingency fee arrangements allow anybody to obtain high-quality legal representation without having to worry about the cost. Just make sure the fees are outlined in a written agreement and adequately explained to you before you hire the attorney to represent you.
