Facts
Susan Cuthbert claimed damages for personal injuries suffered at
a horse show held at the defendants' equestrian centre.
The defendants' insurers appointed loss adjusters to investigate
the claim. The loss adjusters corresponded with the claimant's
solicitors and the insured, repudiated liability, prepared witness
statements, considered the medical report, nominated a solicitor
and sent the papers to that solicitor once he was appointed.
Shortly before trial, the claim was discontinued. The
defendants' costs were assessed by the court, but the claimant
appealed against the order on the grounds that fees of just under
£2000 paid to the loss adjusters should not be recoverable.
Judgment
The costs judge hearing the appeal agreed that the fees could
not be recovered.
Until a solicitor is appointed, a party to an action is a
litigant on person. The court rules provide that a litigant in
person is entitled to recover the sort of disbursements that would
have been allowed if they had been incurred by a legal
representative on that person's behalf (CPR 48.6(3)). A barrister's
or expert's fees, for example, would fall into this category.
But a legal representative would not incur as a disbursement
fees and expenses for work he would normally do himself.
Consequently, such costs are not recoverable as a disbursement by a
litigant in person (Agassi v Robinson [2005]).
Solicitors, however, sometimes instruct third parties to act as
agents to carry out certain tasks on their behalf. The fees of such
an agent are recoverable as part of the solicitor's bill of
costs.
In this case, most of the work was carried out before a
solicitor was appointed to act for the defendants and involved
tasks a solicitor would normally have carried out. Those fees were
not recoverable as a disbursement.
A small proportion of the loss adjusters' work, however, was
carried out after the solicitor was instructed. Were these fees
recoverable as part of the solicitor's costs? The costs judge held
they were not, because there was no evidence of any agency
relationship between the solicitor and the loss adjusters.
The judge also dismissed the argument that costs incurred by
insurers should be treated as the costs of the defendants for
recovery purposes. Insurers exercising subrogation rights can
recover the losses of the insured – they "step into the shoes" of
the insured. But these defendants had not suffered any loss in
respect of the fees because they had no liability to pay them,
either directly or through their insurers.
Commentary
The moral of this story appears to be that, if insurers want to
be able to recover loss adjusters' fees for work that a solicitor
would normally undertake, they should first instruct a solicitor to
act on the insured's behalf and that solicitor should formally
appoint the loss adjuster as its agent.
This agency relationship should be confirmed by a letter of
instruction and terms of engagement and the loss adjuster should
address all invoices to the solicitor.
Cost incurred by insurers who carry out similar tasks
in-house as part of their claims handling function, however, remain
unrecoverable.
