Michigan PI Contingency Fees: Why 33% Isn't the Whole Story

You were told it’s one-third. “No fee unless we win.” Simple, right? Then the check arrives, and it’s a lot smaller than the two-thirds you had in your head. The rest went to line items you never saw coming: case costs, liens, health plan reimbursement, a “litigation expense” here, a “file administration fee” there.

Most of this is legal and standard under a Michigan personal injury contingency fee agreement. But “disclosed” and “explained” are two different things, and the firms pitching you this week (especially the billboard firms) may be counting on you not asking for the explanation.

If you were hurt a few weeks ago and you have a stack of retainer agreements on your kitchen table, read this before you sign any of them.

How much can a Michigan injury lawyer charge?

One-third, at most. In Michigan personal injury, wrongful death and no-fault benefit cases, MCR 8.121 caps the contingency fee at one-third of the amount recovered. Anything above that is treated as a “clearly excessive fee” under MRPC 1.5(a). The only exception is a fee a court separately awards, such as no-fault attorney fees an insurer has to pay under MCL 500.3148.

That cap applies whether your case settles after a demand letter or after a jury verdict. Firms in some other states use 33/40/45% tiers that rise as the case moves toward trial. In a Michigan injury case, a fee that climbs above one-third is not allowed. Fees below one-third are allowed (MCR 8.121(D)), and you can ask for one.

Michigan also requires the agreement to be in writing with a copy given to you (MCR 8.121(F)). Before you sign, the lawyer must tell you that other fee arrangements, such as hourly billing, exist (MCR 8.121(E)).

Is the fee taken from the gross settlement or the net?

The net. This one word is worth thousands of dollars, and in Michigan injury and no-fault cases the court rule settles it: MCR 8.121(C)(1) says the one-third is computed on “the net sum recovered after deducting from the amount recovered all disbursements properly chargeable” to the case.

Here’s why that matters, using a $100,000 settlement with $8,000 in case costs:

Fee on net (what Michigan requires in these cases): - Gross settlement: $100,000 - Case costs (off the top): $8,000 - Net: $92,000 - Attorney fee (one-third of net): $30,667 - Subtotal to you, before liens: $61,333

Fee on gross (not allowed here, but common elsewhere): - Attorney fee (one-third of $100,000): $33,333 - Case costs: $8,000 - Subtotal to you: $58,667

That’s a $2,667 difference on a mid-size case. If a Michigan injury retainer calculates the fee on the gross, ask why, and get a free second opinion before you sign.

What case costs come out of your share?

The expenses the firm advances to build your case. Under most Michigan PI retainers, you reimburse them from the recovery. Whether you owe them after a loss depends on your agreement, so read that section. Typical costs on a moderate auto case can include:

• Medical records retrieval
• Police reports and crash reconstruction
• Expert witness fees (orthopedic, biomechanical, economist)
• Deposition transcripts and court reporters
• Filing fees and service of process
• Mediation and case evaluation fees
• “Litigation support” or “file administration” fees (read this one carefully)

That last line is where retainers get creative. A flat “administrative fee” or “technology fee” tacked on at settlement may not be a real case cost. It’s overhead dressed up as a cost, and because costs are deducted before the fee, padding costs shrinks your share. MCR 8.121 only allows deducting disbursements “properly chargeable” to the case. If you see a vague category, ask what’s in it.

Ask for a sample closing statement from a past case, with names redacted. A firm that won’t show you what the math looks like at the end may not want you doing the math at the end.

Who else gets paid from your settlement?

Often your health coverage, and sometimes the government. The attorney’s fee isn’t the only thing coming out of the settlement. Depending on your coverage:

• Health plans (employer plans, Blue Cross, Priority Health and others) may have reimbursement or subrogation rights for injury-related care they paid. Some self-funded employer plans have especially strong rights.
• Medicare must be repaid for injury-related care it paid for under the federal Medicare Secondary Payer law (42 U.S.C. § 1395y). The claim has to be resolved before funds are paid out. Reductions exist but are limited and follow federal rules.
• Medicaid has recovery rights under Michigan law (MCL 400.106).
• Unpaid provider balances for treatment not covered by PIP or health insurance get paid from the settlement. (If PIP ran out mid-treatment, see lien doctors and who pays when Michigan PIP runs out.)
• No-fault coordination. If you chose coordinated PIP coverage, your health plan pays first under MCL 500.3109a, which affects who has a claim against your recovery.

A good firm checks every claimed lien for accuracy and negotiates where the law allows. Before you sign, ask: “Do you negotiate medical liens and reimbursement claims, and who does that work?” If the answer is “we pay what’s owed,” press for details.

What does the realistic net look like on a $100,000 case?

Often well under two-thirds of the gross. Here’s an illustrative breakdown on a $100,000 auto settlement resolved after suit was filed. These numbers are made up to show the order of operations, not a prediction for your case:

• Gross settlement: $100,000
• Case costs (expert, depositions, records, filing): –$7,500
• Net for fee purposes: $92,500
• Attorney fee (one-third of net): –$30,833
• Health plan reimbursement ($18,000 claimed, negotiated to $11,000): –$11,000
• Unpaid provider balances (co-pays, out-of-network): –$6,500
• To you: $44,167

That’s about 44% of the gross. Not 67%. Your numbers will differ, but this is the kind of figure that should be in your head when a firm tells you “we only take a third.”

Which retainer terms should you push back on?

Six of them. Before you sign:

1. Fee on net, at one-third or less. In a Michigan injury case, this is the rule, not a favor. Lower is allowed.
2. No fee above one-third at any stage. Strike any “40% if suit is filed” or “45% at trial” language in an injury or no-fault case.
3. Lien negotiation. The retainer should say the firm reviews and negotiates medical liens and reimbursement claims for you.
4. No vague “administrative” costs. Or a cap on them.
5. An itemized closing statement. MRPC 1.5(c) requires a written statement at the end showing what you received and how it was calculated. Ask to see it before money is paid out.
6. Withdrawal and termination terms. If the firm drops your case, or you fire it, what do you owe? (The fee is shared out of the same cap. See will firing my lawyer cost me?)

Michigan firms know these are standard asks. If they flinch at any of the six, you’ve learned something. If they walk you through each one, you’ve learned something better. For more pre-signing questions, see 10 questions to ask a personal injury lawyer, and for whether the gross number itself is fair, see what’s a fair settlement for a Michigan car accident.

This article is general information about Michigan law, not legal advice for your specific case.