Insurers are legally obliged to pay costs to claimant solicitors for initiating claims in the RTA portal, the Law Society has submitted to the Supreme Court. 

In written evidence, the Society said insurer Haven should be obliged to pay around £12,500 in costs to north-west firm Gavin Edmondson Solicitors in a dispute over local value RTA claims. 

After receiving claims notification forms relating to six individuals in 2012, Haven settled the claims directly and subsequently refused to pay costs as set out in the pre-action protocol.

The case, won by the law firm at the Court of Appeal, has been heard in the Supreme Court this week as justices attempt to resolve issues around the practice of insurers settling claims directly.

In its intervention, the Law Society said the court ought to deploy the principle of equitable interference to protect the entitlement of the solicitor to receive these costs. Solicitors were entitled under the terms of the protocol to fixed fees from insurers, as there is no contractual liability applying to the clients, Chancery Lane said. 

‘There is constituted a tripartite arrangement which is binding between the client, the solicitor and the insurer,’ the submission stated. ‘If the insurer chooses to become an authorised user and a claim is properly made by a solicitor acting on behalf of a client then, if the insurer sends an electronic acknowledgement [to the CNF], it becomes liable to pay the stage one costs.’

The Society said the case raises a point of law of general public importance: namely the extent to which the court can intervene to protect a solicitor’s entitlement to costs.

In what it called ‘changing modern conditions’ of civil litigation, the Society said appeal judges had been right to apply the equitable intervention principle in this case. It added that solicitors now want guidance from the court as to whether and to what extent equitable interference can apply in a fixed costs regime in which the indemnity principle does not apply.

‘The Court of Appeal’s ruling in the decision clearly by implication applies the equitable principle to a situation in which there is no contractual liability on the client to pay the solicitor its costs.

‘The Society submits that this is an appropriate application or extension of the principle of equitable interference.’

No date has been set for the Supreme Court to make its ruling. The outcome could potentially lead to other law firms making costs claims against insurers that have settled directly.