Why Every Contingency-Fee Lawyer Needs
a “Bus Hits Me” Plan
Most law firm owners insure almost everything.
We insure our offices. We carry malpractice insurance. We buy disability insurance, life insurance, cybersecurity insurance, and umbrella coverage.
But many lawyers fail to insure one of the most valuable assets they own:
Their law firm and its pending cases.
Ask yourself a simple question:
What happens to your law firm if you get hit by a bus tomorrow?
If you own a contingency-fee law firm, it may be one of the most important questions you ever answer.
The “Bus Hits Me” Plan
Every contingency-fee law firm owner should have a written agreement providing for the orderly transfer of the firm and its cases in the event of the owner's death or permanent incapacity.
The agreement identifies another lawyer or law firm prepared to step in, protect the clients, preserve the value of the cases, and compensate the estate according to an agreed-upon valuation formula.
It creates a roadmap before an emergency occurs.
What Happens Without a Plan?
Imagine dying unexpectedly while your firm has dozens—or hundreds—of pending contingency-fee cases.
Your family may have no idea which cases are valuable, which are approaching trial, who should handle them, or what fees may ultimately be generated.
Clients may become nervous. Employees may leave. Other lawyers may contact the clients. Cases can quickly disperse among multiple firms.
Your heirs are then left trying to determine what happened to each case and whether the estate is entitled to compensation years later.
That is not a succession plan. That is chaos.
You Have Already Created the Asset
For a plaintiff's law firm, the pending case inventory may be its most valuable asset.
Think about everything that went into creating it:
Years of marketing.
Decades of reputation building.
Referral relationships.
Staff salaries.
Case expenses.
Expert fees.
Thousands of hours reviewing cases, meeting clients, taking depositions and preparing for trial.
The value did not suddenly appear when a settlement check arrived.
You created that value over many years.
Create the Agreement While You Can
The solution is a contingent agreement for the purchase or transfer of the firm and its case inventory upon a defined triggering event.
The agreement should address:
- Who assumes responsibility for the cases;
- How clients will be informed;
- How ethical obligations will be satisfied;
- How case expenses will be handled; and
- How the value of pending matters will be calculated.
Most importantly, establish the valuation mechanism before anyone has a financial incentive to argue about it.
Your family should not have to negotiate the value of your law firm while grieving your death.
The Most Important Question: Who?
The mechanics can be solved.
The valuation formula can be created.
The documents can be drafted.
But one question is entirely personal:
Who?
Who would you trust with your clients?
Who shares your values?
Who has the financial resources, staff, and infrastructure to take over your cases?
Who will treat your employees fairly?
Who will protect your reputation?
And who will treat your family honorably when you are no longer there?
That person—or firm—is the wildcard.
Only you can choose them.
What Is Your Law Firm Worth If You Die Tomorrow?
A Simple Valuation Formula for
Contingency-Fee Law Firms
Once you have selected a successor lawyer, the next question is:
How much should your estate receive for the pending cases?
For a contingency-fee injury lawyer, the answer should not depend upon guesswork after death.
The valuation formula should be established in advance.
Value the Case Based Upon Its Stage
A newly accepted case should not be valued the same way as a case that is three weeks from trial.
One practical approach is to determine the estate's share of the ultimate legal fee based upon how far the case had progressed when the lawyer died.
For example:
Status of Case at Death | Illustrative Estate Share of Ultimate Legal Fee |
|---|---|
Settlement or verdict already obtained | 90–100% |
Trial underway | 75–85% |
Trial-ready | 60–75% |
Depositions and major discovery completed | 45–60% |
Active litigation and discovery | 30–45% |
Lawsuit recently filed | 20–30% |
Pre-suit investigation substantially completed | 15–25% |
Newly accepted case | 5–15% |
These percentages are not rules of law. They are examples of how a succession agreement might be structured.
The percentages should reflect the types of cases handled by the firm, the work ordinarily required at each stage, and the future risk assumed by the successor lawyer.
Why I Like the Percentage-of-Fee Approach
Suppose a medical malpractice case is trial-ready when the lawyer dies.
Instead of trying to decide whether the case is worth $2 million, $5 million or $10 million on that date, the agreement might provide:
The estate receives 65% of the net attorney fee ultimately collected.
If the eventual fee is $1 million, the estate receives $650,000.
If the fee is $2 million, the estate receives $1.3 million.
If the case produces no fee, there may be nothing to divide.
The formula adjusts automatically to the result.
That is far easier than requiring the estate to predict the value of unresolved litigation.
Define “Net Legal Fee”
The agreement should clearly define whether the estate's percentage is calculated from the gross attorney fee or the net attorney fee.
If you use a net fee, specify exactly what may be deducted.
For example, you may permit the deduction of an outside referral fee.
But ordinary overhead—rent, salaries, technology and administrative expenses—should not become a mechanism for reducing the estate's payment.
Make the formula objective.
Treat Major Cases Separately
Some cases may deserve individual treatment.
A catastrophic medical malpractice case that has been litigated for four years and is weeks from trial may represent millions of dollars in potential fees.
The agreement could identify significant cases for separate valuation or establish a different formula for matters above a specified expected fee.
The objective is not mathematical perfection.
It is a fair and predictable system.
Have a Tie-Breaker
Even the best agreement may produce occasional disputes.
Build the solution into the document.
If the estate and successor lawyer disagree about the classification of a case, each side could select an experienced plaintiff's lawyer. If those two cannot agree, they select a third.
The decision can then be binding.
The family should not have to file a lawsuit simply to determine how a pending case is classified under the agreement.
Put the Formula in Writing
The most important feature of a valuation plan is not the exact percentage assigned to each category.
It is that the formula exists before it is needed.
Decide how the cases will be valued.
Define the fee.
Establish the percentages.
Create a dispute-resolution procedure.
And incorporate the valuation system into your “Bus Hits Me” Plan.
Don't Leave a Mess
Lawyers spend their careers helping other people prepare for contingencies.
Yet many law firm owners never create a contingency plan for themselves.
Don't leave your family a pile of files and a list of passwords.
Leave them a plan.
Choose the successor.
Establish the valuation formula.
Put the agreement in writing.
Create your “Bus Hits Me” Plan.
It may be the most important insurance policy you ever buy.
