Supreme Court Rules On Non-Party Costs Order Against Insurer

In Travelers Insurance Co Ltd v XYZ [2019] UKSC 48, the Supreme Court considered the application of the discretion under s 51 of the Senior Courts Act 1981 to make a non-party costs order against a liability insurer, where that insurer, here Travelers Insurance Co Ltd (Travelers), was both funding and largely directing the conduct of the litigation in question.

The underlying group litigation which gave rise to the costs order in issue in this case concerned the supply of defective PIP silicone implants. One of the defendants in that action, Transform Medical Group (CS) Ltd (Transform) operated clinics which supplied and fitted these implants. Travelers provided product liability insurance to Transform for the period 31 March 2007 to 20 March 2011. The insurances in question were standard form product liability policies, which provided indemnity for costs (and costs liability) where the claims made giving rise to those costs fell within the scope of cover. The policies contained standard claims control clauses, allowing Travelers to conduct the litigation on Transform's behalf. Of the 623 claimants bringing a claim against Transform, 197 suffered injury during the period covered by the Travelers policies; the remaining 426 did not and were referred to as the "uninsured claimants".

In the underlying litigation, test cases were selected by the court involving four claimants, two of whom were insured and two of whom were not. During the litigation process, an application was made by the claimants in order to attempt to obtain details of Transform's insurance cover, due to concerns as to its solvency (and, in fact, Transform subsequently entered insolvent administration). Transform eventually voluntarily provided the claimants with this information and the uninsured claimants decided to continue with their claim against Transform with the express hope of obtaining a non-party costs order against Travelers if they were successful in the claim. Their evidence was, however, that had they known the insurance position at the outset, they would not have proceeded against Transform. In the meantime, Travelers was paying all of Transform's legal costs, as it was obliged to do under the policy and in accordance with settled law.

Subsequently the insured claims were settled, at which point Travelers ceased to fund Transform's defence. The uninsured claimants then obtained default judgment against Transform, and made s51 applications for a costs order...