Contingency fees also provide a powerful motivation to the attorney to work diligently on the client's case.
Finally, because lawyers assume the financial risk of litigation, the number of speculative or non meritorious cases may be reduced.
Attorneys who practice in the area of civil litigation typically will not accept a case on a contingency fee bases without clear liability and a means of collecting a judgment or settlement, such as through a defendant's insurance coverage.
BTE insurance may pay for the legal costs when making a claim for compensation, whether the client wins or loses.
According to law professor Herbert Kritzer, as of 2004 contingent fees for legal services were allowed in the following countries: Australia, Brazil, Canada, the Dominican Republic, France, Greece, Ireland, Japan, New Zealand, the United Kingdom and the United States.
[citation needed] In Australia, conditional fee agreements are permitted under the Uniform Law, applied in NSW and Victoria by local application Acts.
However, in claims sounding in money, the total of any such success fee payable by the client to the legal practitioner may not exceed 25% of the total amount awarded or any amount obtained by the client in consequence of the proceedings concerned, which may not, for the purposes of calculating such excess, include any costs.
[16] The decision provoked widespread outcry from criminal defense lawyers, particularly former judges and prosecutors who had been able to charge very high success fees due to clients' belief that their connections could help them win the case.
In 19th century English law, conditional fees were controversial, especially in the Swynfen will case, as they were held to offend ancient prohibitions against champerty and maintenance.
[22] The changes were prompted by large rises in litigation costs and the proliferation of ambulance chasing advertisements and claim farmers.
[23] Following the introduction of contingent fees, the National Health Service had to pay out hundreds of millions of pounds in compensation for malpractice claims.
[24] The status of contingent fees is different in Scotland, where it is lawful to agree that the lawyer gets paid only if the case is won (the speculative action).
[25] Most jurisdictions in the United States prohibit working for a contingent fee in criminal cases or certain types of family law claims,[why?]
In the United States, contingency fees are standard in personal injury cases and are less common in other types of litigation.
Many states impose additional restrictions on contingent attorney fees in medical malpractice cases.
As of 2003[update] 16 states (California, Connecticut, Delaware, Florida, Illinois, Indiana, Maine, Massachusetts, Michigan, New Jersey, New York, Oklahoma, Tennessee, Utah, Wisconsin, and Wyoming) have regulated contingency fees for medical malpractice cases.
Some states cap fees at a flat rate; for example, 33.33% of net judgment or recovery in Tennessee and Utah.
Florida establishes different fee limits depending on the stage of the case at the time damages are recovered.
Instead of a specific limit or a sliding scale, six states (Hawaii, Iowa, Maryland, Nebraska, New Hampshire, and Washington) require or authorize court approval of the reasonableness of attorney fees under various circumstances.