The Small-Business Owner's Guide to Advertising Injury

Chapter 6: The High Cost of Advertising Injury Lawsuits
Part 2: The Cost of Hiring an Attorney

If a case against your small business is dropped, you'll still be responsible for paying attorneys' fees. And even though a judgment or settlement could cost millions, legal expenses alone can easily set you back thousands of dollars.

To give you an idea of the cost of retaining legal counsel, let's look at some financial projections for attorney's expenses.

Contingency Fees and Retainers

Typically, attorneys are paid through contingency fees, which range from 25 to 40 percent of a settlement or court-ordered award, or hourly rates. The beauty of charging contingency fees is that they tend to weed out meritless cases from the start. After all, the attorney will only be paid if the case is strong enough to go to court or warrant a settlement.

Typically, personal injury lawyers receive 33 percent of any settlement. So for example, if your business settles out of court and agrees to pay $30,000 for damages, the plaintiff's lawyer would receive $10,000.

If you're a defendant, your attorney will likely ask for a retainer fee up front, which is essentially an advance on the case's expected fees and costs. The retainer fee can be as little as several hundred dollars or as much as tens of thousands. It all depends on the claim and a case's projected expenses.

Attorneys' Fees for Defendants in Advertising Injury Cases

When you're sued and you lose the case against you, it's your responsibility to pay your legal defense fees — but in many cases, you'll also have to pay for the plaintiff's legal representation.

After the lawsuit is over, if you're held liable for advertising injuries, the plaintiff's attorneys will file an application for their fees with the court. The application will include time records and an affidavit that justifies their hourly rate.

Meanwhile, your lawyer will try to whittle down this amount as much as possible. They may argue that the hourly rate is too high or that the case was only partially successful. The judge will ultimately decide the final fee amount, and you will be responsible for paying it.

If you have the appropriate small business insurance — in social media advertising injury cases, General Liability Insurance — you won't have to pay these costs out of pocket.

Costs and Expenses in Advertising Injury Cases

In addition to legal defense costs, advertising injury cases come with other fees. Some attorneys cover these costs and deduct them from the settlement amount. Others bill clients for the costs as they arise.

In an advertising injury case, related court costs may include…

  • Medical records.
  • Police reports.
  • Expert witness fees.
  • Postage.
  • Filing fees.
  • Investigators.
  • Depositions.
  • Trial exhibits.

These expenses alone can be a few thousand dollars. But again, with adequate GL coverage, your insurance company can pay for attorney's fees, settlements or judgments, and related court costs.

Next: Part 3: Dealing with Frivolous Advertising Injury Lawsuits

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