Out-Law Guide 2 min. read
22 Oct 2008, 11:02 am
Susan Elizabeth Cuthbert v Stephen Ronald Gair and another
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.
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 ).
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.
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.