If you are suffering from a long-term disability, you can file a claim for long-term disability benefits. Should you do it yourself or hire a lawyer, and what will the lawyer cost? The answer depends on who you are claiming from. A Social Security claim is subject to a fee cap set by the Social Security Administration. A claim against an insurer covered by the Employee Retirement Income Security Act (ERISA) can be handled hourly or on contingency, and the court can order the insurer to pay your fees. A claim against a private insurer outside ERISA is usually handled on contingency, with the lawyer taking 30% to 40% of what is recovered.
The Three Fee Structures at a Glance
| Who you are claiming from | How the lawyer is paid | Limits |
|---|---|---|
| Social Security | Contingency only; no upfront fee except reasonable actual costs | 25% of past-due benefits or $9,200 (the cap in effect since November 30, 2024), whichever is less, unless the SSA approves more |
| ERISA-covered insurer | Hourly or contingency (30% to 40% plus actual costs) | Court may order the insurer to pay your attorney’s fees under 29 USC § 1132(g)(1) |
| Private insurer outside ERISA | Usually contingency (30% to 40%); hourly is possible | Each side pays its own lawyer under the American rule |
Social Security Claims
Under Social Security Administration (SSA) guidelines, a disability lawyer cannot charge you an upfront fee. The only exception is reasonable actual costs, such as obtaining copies of medical records, travel, filing fees, postage and deposition costs.
The SSA also caps the fee: 25% of the past-due benefits recovered or $9,200, whichever is less. If your lawyer obtains a favorable decision awarding $40,000 in back pay, 25% of that is $10,000, but because of the $9,200 cap the lawyer receives $9,200.
There are two exceptions. If you appeal after a hearing before an Administrative Law Judge (ALJ) and the Appeals Council agrees the ALJ erred and sends the case back for a new hearing, the lawyer can ask for more than $9,200, subject to SSA approval. And if two lawyers work on your case, for example because you fired the first and hired a second, their combined fees may exceed $9,200, but they must file a fee petition with the SSA to get it.
ERISA Insurers
If you are claiming long-term disability benefits from an insurer covered by ERISA, your lawyer can charge an hourly rate or a contingency fee. On contingency, the lawyer takes 30% to 40% of any amount recovered plus actual costs. If the lawyer bills hourly, they can petition the court to direct the insurer to pay your attorney’s fees. Under 29 USC § 1132(g)(1), a court may award fees and costs as long as you achieved some degree of success on the merits. Hardt v. Reliance Standard Life Ins. Co., 560 US 242 (2010).
In deciding whether the insurer should pay your fees, the court considers whether the insurer acted in bad faith, whether it can afford to pay, whether an award would deter others from similar conduct, whether the litigation benefited other plan participants in the same position, and whether there was merit to the insurer’s position. A fee award covers only the lawyer’s time in the district and appellate courts, not the administrative process inside the insurer.
Private Insurers
If the insurer is private and not covered by ERISA, the lawyer may charge hourly or propose a contingency arrangement. In practice it is almost always contingency, because a disabled client usually cannot pay hourly rates. Under the American rule each party pays its own lawyer, so there is no fee-shifting. The lawyer receives nothing unless the claim succeeds, by settlement or award, and then takes 30% to 40% of the recovery.
Two Things to Watch in the Fee Agreement
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Actual costs, or out-of-pocket expenses
Actual costs are the expenses of the claim apart from the attorney’s fee: the lawyer’s travel, long-distance calls, photocopying, transcripts and depositions, and filing fees, among others. A lawyer working on contingency may ask for an upfront deposit to cover them. That deposit goes into a trust account, and the lawyer must tell you each time money is withdrawn, usually when submitting an itemized bill of the costs.
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Contingency on future benefits
When you are found disabled, the judge may award back pay from the date of disability, and you also start receiving monthly benefits from the date of judgment. Ask whether the contingency fee reaches those future benefits. If giving up part of every monthly check seems too much, shop around.
You Can Negotiate
When a lawyer proposes a contingency fee, remember that it is negotiable. If the proposal is 40%, counter at 30%. Your lawyer will know whether your case is strong, because disability is proven with medical records and the opinions of medical experts.
Claiming disability benefits does not have to be difficult or expensive, and a good lawyer improves the odds of a successful claim. If you need help, call us at 212-233-1233 or email [email protected].
