Liability insurance: liability of insurer for costs

Under section 51 of the Senior Courts Act 1981 the court may make a costs order against any person, whether or not a party to the proceedings. In practice that jurisdiction has been exercised in exceptional circumstances only, eg, against a non-party whose interventions – generally by funding – have caused an action to be brought or defended when that would not otherwise have been the case.

The jurisdiction has been most widely discussed in the context of liability insurance, where a liability insurer has defended a claim in the name of an assured who is insolvent and who has no interest in the outcome: the courts have decided that the defence is purely for the benefit of the insurers and that, if unsuccessful, the insurers should pay the claimant’s costs independently of any policy limits.