Supreme Court decision clarifies when non-party costs orders should be made against insurers

The Supreme Court has overturned the Court of Appeal's decision to award non-party costs against an insurer under section 51 of the Senior Courts Act 1981, which gives the court full power to determine by whom and to what extent costs are to be paid: Travelers Insurance Company Ltd v XYZ [2019] UKSC 48.

The decision brings some much-needed clarity to the question of when an unsuccessful party's insurer can be held liable for a non-party costs order, in circumstances where either those costs exceed the policy limits or (as in the present case) where the claims are uninsured .

The court emphasised that the purpose of its judgment was not to reassess the generally applicable principles relating to non-party costs orders outside the insurance context. Lord Briggs, who gave the main judgment, commented that he was "reluctantly prepared to assume but without deciding" that those generally applicable principles are limited to: (i) whether the case is exceptional; and (ii) whether the making of an order accords with fairness and justice. However, both he and Lord Reed, who gave a concurring judgment, expressed concern as to the lack of content, principle or precision in the concept of exceptionality as a useful test. It may be, therefore, that those principles are ripe for review in an appropriate case.

For more information on the decision, see this post on our Insurance Notes blog.