As a long term disability lawyer, I am often asked about legal fees. Clients typically retain me on a contingency fee basis, which means my fees are a percentage of the total recovery, usually 25 to 30% depending on the complexity of the claim. Different lawyers have different rates, with 25 to 40% of the total recovery being the usual range. In addition, there is HST on the fees, plus disbursements (out of pocket expenses) incurred to advance the claim.
About Contingency Fee Retainer Agreements
Historically, lawyers in Ontario were not permitted to offer contingency fee retainer agreements. When this changed, each lawyer or law firm drafted their own version of contingency fee retainer. Now the Law Society requires that lawyers use a standard form of agreement, drafted with consumer protection in mind. The Law Society’s standard form agreement can vary in several important ways, including:
- The percentage: long term disability lawyers typically charge anywhere from 25% to 40% of the total recovery, plus HST and disbursements. I typically charge 25% to 30%, depending on the complexity of the claim.
- What the percentage fee applies to: There are two types of long term disability settlements, lump sum and reinstatement. In the event of a lump sum settlement for past and future benefits, the fee applies to the entire amount (other than disbursements and HST on fees paid by the insurer). In the event of reinstatement, the past benefits are paid, and you are back on claim. Some LTD lawyers apply their fee percentage to the past benefits owed plus one or two years of future benefit payments. My practice is to only charge fees on the past benefits recovered when there is a reinstatement.
- Escalating fees: Some lawyers charge different percentages depending on what stage the file resolves at. For example, a lawyer might charge 25% if the case settles before examinations for discovery, 30% for settlements after discovery but before pre-trial, and 35% if the case resolves after pre-trial. My fees are a fixed percentage, regardless of what stage the claim resolves at.
- Disbursements: These are out of pocket expenses required to advance a lawsuit. Court filing fees, medical records, and obtaining other documents typically cost $1,000 to $3,000, but can be much more depending on the size and complexity of the case. Expert reports can cost anywhere from $2,500 to $10,000 per report. Many LTD claims will require at least one, sometimes two, expert reports. Most long term disability lawyers will agree to pay these expenses up front, and only bill the client disbursements at the conclusion of the file. Many LTD lawyers charge the client disbursements even if there is no recovery. I do not charge the client disbursements in the event of no recovery.
How much do you charge for long term disability claims?
I typically charge 25 to 30% of the total recovery (depending on the complexity of the case), plus HST, plus disbursements. The percentage does not change regardless of how far the case advances. In the event of no recovery, there are no fees, HST, or disbursements billed to the client. Fortunately, it is very rare for there to be no recovery.
Examples of Legal Fees for Long Term Disability Settlements
John retains my firm with a 25% retainer agreement. The disability insurer was paying him $2,000 per month, but he was cut off after two years when the test of disability changed from “own occupation” to “any occupation”. By time we get to mediation, which is a settlement meeting, John is owed $18,000 of past benefits. The insurer agrees to pay this, plus several years into the future, so the total benefits payment is $90,000. In addition, the insurance company contributes $10,000 towards legal fees, $1,300 for HST on legal fees, and the full $6,000 of disbursements incurred. The total cheque from the insurance company is $107,300.
The 25% contingency fee applies to $100,000 (benefits and legal fees paid by the insurer), but not the HST on legal fees paid by the insurer or disbursements.
The total account is therefore $25,000, plus HST of $3,250, plus $6,000 of disbursements (which have been paid by the insurer), for a total account of $34,250.
The insurance company issues a cheque in the amount of $107,300 to my firm in trust. The bill of $34,250 is paid, and John receives the remainder of $73,050, together a detailed account.
Sharika’s claim is denied due to an exclusion clause contained in the policy. The exclusion is potentially an absolute barrier to recovery. Overcoming the exclusion will require a complex analysis of the facts and the law. Her case is considered complex with significant risk of no recovery, so Sharika agrees to a 30% retainer agreement. Her policy is supposed to pay $5,000 per month. Eventually the insurer agrees the exclusion does not apply, pays the past benefits owing, and puts Sharika on claim. Past benefits owing are $30,000. In addition, the insurance company contributes $3,000 towards legal fees, $390 for HST on legal fees, and the full $1,000 of disbursements incurred. The total cheque from the insurance company is $34,390. In addition, the insurer will pay $5,000 per month for so long as Sharika remains disabled.
The 30% contingency fee applies to $33,000 (past benefits and costs paid by the insurer).
The total account is therefore $9,900, plus HST of $1,287, plus $1,000 of disbursements (which have been paid by the insurer), which amounts to $12,187.
The insurance company issues a cheque in the amount of $34,390 to my firm in trust. The bill of $12,187 is paid, and Sharika receives the remainder of $22,203 with a detailed account. She also receives $5,000 every month directly from the insurer.
Have More Questions About Legal Fees and Long Term Disability Claims?
I would be pleased to discuss any further questions you may have regarding legal fees, or anything else related to long term disability or other insurance claims.
About The Author
Michael Jordan is a long term disability lawyer with more than 17 years experience litigating all types of insurance claims. He is a founding partner of the Bay Street firm Jordan Honickman Barristers. Michael represents clients across all of Ontario, with satellite offices in Ottawa and London.
Direct Cell: 416-460-6823