Non-party costs orders against liability insurers – Travelers Insurance Co Ltd v XYZ in the Supreme Court

Yesterday, the Supreme Court handed down judgment in Travelers Insurance Co Ltd v XYZ.[1][2019] UKSC 48.] This was an application for non-party costs against liability insurers made under s 51(3) of the Senior Courts Act 1981 by claimants in the PIP breast implant group litigation.

I have previously written about non-party costs order against insurers, including commentary on the Court of Appeal decision in Travelers v XYZ, and I will be updating that post in the light of the Supreme Court decision.

In the meantime, here are my initial thoughts on the decision.

Travelers v XYZ involved a Group Litigation Order (‘GLO’), and the facts were unusual. They are summarised briefly in my earlier blog:  for present purposes, the key point is that some of the claims against the insured which were within the GLO were covered by insurance, but others were not.

Although the facts were unusual, the Supreme Court took the opportunity to review the principles applicable to non-party costs orders against liability insurers.

Much of what is in the Supreme Court decision amounts to confirmation of well-established principles from earlier authorities in relation to applications for non-party costs orders against liability insurers:

  • The proper participation of the insurer in the funding, conduct and control of the insured’s case is regulated by long-settled principles, which are in addition to the contractual terms of the policy itself. As Sir Wilfrid Greene MR said in Groom v Crocker[2][1939] 1 KB 194 at 203., insurers must act in what they consider in good faith to be the common interest of themselves and their insured.
  • There are two bases on which a non-party costs order against liability insurers might be made: intermeddling; and becoming the ‘real defendant’ to proceedings.[3]TGA Chapman Ltd v Christopher [1998] 1 WLR 12, CA; Travelers v XYZ, para 36 (Lord Briggs, with whom Lady Black and Lord Kitchin agreed.
  • Exceptionality’ is not a useful test for determining whether a non-party costs orders should be made against liability insurers.[4]TGA Chapman Ltd v Christopher [1998] 1 WLR 12, 20, CA; Citibank NA v Excess Insurance Co Ltd [1999] Lloyd’s Rep IR 122, 131 (Thomas J); Travelers v XYZ, paras 33 and 34 (Lord Briggs).
  • In order to identify whether a liability insurer has become the ‘real defendant’ to proceedings, the principles laid down by the Court of Appeal in TGA Chapman Ltd v Christopher[5][1998] 1 WLR 12 should be applied.[6]Travelers v XYZ, paras 52 and 77 (Lord Briggs).
  • As there is no obligation on insurers to disclose policy information including limits of cover, a failure to do so is unlikely to justify a non-party costs order.[7]Cormack v Excess Insurance Co Ltd [2002] Lloyd’s Rep IR 398, CA, 406, col 2 (Auld LJ); Travelers v XYZ, paras 67 and 81 (Lord Briggs).
  • If the other ingredients for a non-party costs order are present, causation remains an important element, and it is the costs attributable to the intermeddling that the meddler is likely to be ordered to pay: if the costs would have been incurred in any event, an order is unlikely.[8]Travelers v XYZ, paras 66 and 80 (Lord Briggs).

Liability insurers will be reassured in particular by the clear statement that non-disclosure by insurers of policy limits is unlikely to justify a non-party costs order.

Key points of interest in the decision are:

  • The analysis and application of the principles relevant to intermeddlers, rather than the ‘real defendant’ principles, because the insurer had become involved in uninsured claims.[9]At paras 52 to 56 (Lord Briggs). On this basis, the ‘real defendant’ principles established in TGA Chapman Ltd v Christopher are confined to claims in which the limit of indemnity is insufficient to cover the costs of the successful party.[10]At para 78 (Lord Briggs).
  • The significance accorded by the Supreme Court to the fact that in liability insurance, the insurer’s involvement arises from a framework of contractual obligation as between the insurer and the insured: Lord Briggs said that if the insurer has not gone beyond the confines of those contractual obligations and attendant rights as explained in Groom v Crocker, ‘liability as an intermeddler may be very hard to establish’.[11]At para 55.

One element of this framework of rights is the established principle that, in relation to issues common to insured and uninsured claims, insurers may not[12]Unless the policy expressly permits this. apportion their contractual liability to pay defence costs.[13]Travelers v XYZ, para 13 (Lord Briggs), referring to New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237, PC, approved: International Energy Group Ltd v Zurich Assurance plc [2016] AC 509, paras 36 to 38.

This meant that insurers were funding the common costs of the defence of both insured and uninsured claims.  Lord Briggs noted[14]At para 63 that solicitors who were jointly instructed by the insured and the insurer played an advisory role in the insured’s decision not to disclose the limits of its insurance cover earlier, when uninsured claimants might have abandoned their claims, and successfully to resist an order for disclosure. That advice was, Lord Briggs said, ‘given in good faith without a perception by the solicitors that there might be (as the judge held that there was in fact) a conflict between the interests of the insured and the insurer’ in whether to make the disclosure.

This is an interesting remark: the good faith of the solicitors, and their failure to identify the conflict, while explaining why an insurer has strayed beyond the proper ambit of its role as outlined in Groom v Crocker, does not mean that that has not happened. Lord Briggs expressly left open[15]At para 64 the question of whether it would be right, in those circumstances, for the insurer to take responsibility for the advice.

The basis of Lord Briggs’s conclusion on this point was, in fact, simply that the advice fairly reflected the insurer’s rights, and was not therefore conduct which amounted to unjustified intermeddling in the uninsured claims for the purposes of the proceedings.[16]At para 64

How far this might be pushed in practice is unclear: Lord Briggs said that it might even have extended to the insurer’s involvement in settlement and admissions in relation to uninsured claims, although he did not reach a firm conclusion on this, and that the court should be slow to second-guess jointly instructed solicitors where they allow the insurer a role in decision-making about claims raising common issues, notwithstanding that some of the claims are uninsured.[17]At paras 73 and 83 He also recognised that, where there was a connection between uninsured and insured claim, what he described as ‘the legitimate interests of the insurer’ might justify some involvement by a liability insurer in decision-making and even funding of the defence of the uninsured claims without exposing the insurer to liability to pay the successful claimant’s costs.[18]At para 79.

Ultimately, though, Lord Briggs preferred to rest his decision on the absence of any relevant causative link in relation to the incurring of costs.[19]At para 74.

Lord Sumption, who said that he agreed broadly with Lord Briggs’s analysis of the relevant principles and their application in this case, made a series of potentially significant observations in a concurring judgment.

Lord Sumption too emphasised the importance of the insurer’s contractual right to direct the conduct of the litigation, but he developed the analysis differently. He said that this was a form of compulsory agency and was a right to direct the litigation ‘in his assured’s interest, and not his own, even though their interests will usually coincide’.[20]At para 114.

This is in contrast to the assumption implicit in Lord Briggs’s judgment that, where the interests of the insured and the insurer conflict, the insurer’s contractual right to control the litigation entitles the insurer to act in accordance with its interests rather than those of the insured. Lord Sumption said that the solicitor who the insurer appoints is the insured’s solicitor, who owes all the usual professional duties to the insured and is entitled to look to the insured for his fees, notwithstanding that his instructions come from the insurer.

Lord Sumption said that this feature in particular meant that the insurer could not be regarded as the real defendant, that this left unjustified intermeddling as the only basis on which a liability insurer might be at risk of having a costs order made against him, and that cases in which a costs order might be made against a liability insurer on this basis were ‘likely to be rare’.[21]At para 116. He added that:

  • A liability insurer has an obvious legal interest in the performance of his contractual duties under the policy and the exercise of his contractual rights.
  • That interest is limited to the defence of insured claims and different considerations may arise if he steps outside that role.
  • As Travelers v XYZ illustrated, the proper defence of claims may involve steps which directly or indirectly affect uninsured claims.
  • This is an area in which a person conducting or directing the conduct of litigation is entitled to a large margin of judgment and hindsight is not usually an adequate tool for assessing how he exercises it.
  • If he acts in good faith in the interest of the assured qua the defendant to insured claims, he should not incur liability in costs.
  • He would expect this to be equally true of the case where the potential liability of the assured is subject to a limit of cover which is exceeded, but that was not an issue which needed to be examined because it did not arise on the facts of the appeal.

Although Lords Briggs and Sumption both considered that insurers should be afforded a significant degree of latitude in decision-making in litigation against insureds which they were contractually entitled to control, Lord Sumption placed at the heart of his analysis the insurers’ obligation to act in the interests of the insured. If liability insurers do this, they should not be exposed to liability for non-party costs orders. If they prefer their own interests, they should be prepared for a less benign outcome. Which side of the line their conduct will fall if they act on flawed advice from a jointly instructed solicitor is unclear. Lord Briggs’s judgment could be interpreted as hinting that an order should not be made; and the opposite could be said for Lord Sumption’s.

Alison Padfield QC


1 [2019] UKSC 48.]
2 [1939] 1 KB 194 at 203.
3 TGA Chapman Ltd v Christopher [1998] 1 WLR 12, CA; Travelers v XYZ, para 36 (Lord Briggs, with whom Lady Black and Lord Kitchin agreed.
4 TGA Chapman Ltd v Christopher [1998] 1 WLR 12, 20, CA; Citibank NA v Excess Insurance Co Ltd [1999] Lloyd’s Rep IR 122, 131 (Thomas J); Travelers v XYZ, paras 33 and 34 (Lord Briggs).
5 [1998] 1 WLR 12
6 Travelers v XYZ, paras 52 and 77 (Lord Briggs).
7 Cormack v Excess Insurance Co Ltd [2002] Lloyd’s Rep IR 398, CA, 406, col 2 (Auld LJ); Travelers v XYZ, paras 67 and 81 (Lord Briggs).
8 Travelers v XYZ, paras 66 and 80 (Lord Briggs).
9 At paras 52 to 56 (Lord Briggs).
10 At para 78 (Lord Briggs).
11 At para 55.
12 Unless the policy expressly permits this.
13 Travelers v XYZ, para 13 (Lord Briggs), referring to New Zealand Forest Products Ltd v New Zealand Insurance Co Ltd [1997] 1 WLR 1237, PC, approved: International Energy Group Ltd v Zurich Assurance plc [2016] AC 509, paras 36 to 38.
14 At para 63
15 At para 64
16 At para 64
17 At paras 73 and 83
18 At para 79.
19 At para 74.
20 At para 114.
21 At para 116.

The changing face of the Commercial Court


This post was published on 30 June 2019. On 16 July 2019, the appointment of five new judges to the Court of Appeal was announced. This includes three Commercial Court judges: Carr, Phillips and Popplewell JJ.

The Commercial Court recently published its first annual report for some years. Given the pressure on court staff due to the chronic underfunding of the English and Welsh court system – from which the Commercial Court is not immune[1] – it seems likely that the decision to recommence publication of annual reports now is part of the ongoing drive to attract business to the Commercial Court in an increasingly competitive international market.

The Commercial Court Report 2017-2018 reveals changes in the Court’s constitution and its business. Here are a few interesting snippets:

The constitution of the Commercial Court

At the time of publication,[2] the judges of the Commercial Court were Teare J (Judge in Charge of the Commercial Court), Andrew Baker, Bryan, Butcher, Carr, Cockerill, Jacobs, Robin Knowles, Males,[3] Moulder, Phillips, Picken,[4] Popplewell, Waksman and Walker JJ.[5] This means – although the Report does not comment on this – that there are now, for the first time ever, three female Commercial Court judges, and one Commercial Court judge who is a former solicitor.

Recently retired judges who are still authorised to sit in the Court include Sir William Blair, Sir Ross Cranston, Sir Michael Burton and Sir Andrew Smith. The London Circuit Commercial Court Judge (from 1 July 2019, this will be HHJ Pelling QC[6]) and a number of specialist commercial Queen’s Counsel are also authorised to sit as deputy judges in the Court. Deputies are used only when the parties agree, or when the Judge in Charge of the Commercial Court consider that this is appropriate.

Commercial Court judges, as judges of the Queen’s Bench Division, sit on circuit hearing criminal trials for part of the year.[7] They may also hear cases in the general Queen’s Bench list, the Administrative Court and the Court of Criminal Appeal.

Commercial Court business

The balance of work has changed since the last report was published: international insurance and reinsurance disputes, together with shipping disputes, previously dominated the Court’s time. These remain among the larger categories of business, but now alongside commercial fraud, actions arising out of commercial sale and purchase agreements, and claims relating to banking, financial services and securities transactions. ‘Now the Court sees many more banking and financial services disputes than it used to, and disputes (based either in contract or tort) between high net worth individuals from around the world now provide a considerable share of the Court’s business.[8]

Seventy per cent of cases were international.[9] About a quarter of the claim issued related to arbitration: challenges to awards, applications for injunctions or for enforcement of awards, and other applications including for the appointment of an arbitrator.

Eight hundred and sixty-four claim forms were issued in the Commercial Court[10] in 2017-2018 (slightly down on 2016-2017, when 888 claim forms were issued). There were 57 trials (up from 51 in 2016-2017). The settlement rate was 60%. About half of the trials were under a week in length, 30% were one to two weeks, 16% were three to four weeks, and 5% were over four weeks. The largest claim was for US$3bn and there were over a dozen claims worth over £100m. In addition, many arbitration claims concerned awards for extremely substantial sums, sometimes into the billions of pounds.

The workload of the Financial List, established in 2015, remains at about 15 cases a year – apparently in line with predictions.

Alison Padfield QC

  1. The impact of this on the Court features obliquely in the Report’s introduction. This thanks the Court staff for their ‘very hard work and unfailing help’, which ‘has always been given unstintingly and without complaint, despite the pressure and difficult circumstances under which the Court staff have had to work’ (Report, page 5).
  2. On 27 February 2019.
  3. Males J has since moved to the Court of Appeal.
  4. Since January 2018, Picken J has also been the Presiding Judge of the Wales Circuit.
  5. Report, page 6.
  6. See (accessed 30 June 2019).
  7. An interesting point of distinction between the Commercial Court, as part of the Queen’s Bench Division (of the High Court) and the Chancery Division (of the High Court), whose 15 judges do not go out on circuit to sit in criminal trials.
  8. Report, page 7.
  9. Report, page 9: ‘A domestic case is one in which the subject matter of the disputes between the parties’ concern property or events situated in the United Kingdom and the parties are UK based relative to the dispute. For these purposes a party is “UK based relative to the dispute” if the part of its business which is relevant to the dispute is carried on in the UK, irrespective of whether it is incorporated, resident or registered overseas. All other cases are “international cases.”
  10. This excludes the Admiralty Court, for which separate figures are kept (see the Report at page 12 for details).