What Legal Costs Can Insurers Really Recover in Irish Civil Litigation?

Marguerite Seymour | Of Counsel, Financial Lines

Mark Healy | Of Counsel, Financial Lines

In most Irish civil claims, a winning insurer recovers only 60–70% of its actual legal spend. This is because Irish courts generally award ‘party-party’ costs rather than the full ‘solicitor-client’ costs a legal team has billed, and because judges retain wide discretion to depart from the usual rule that costs follow the event. For insurers, that gap has a direct bearing on reserving, claims strategy and settlement decisions from day one.

Key Takeaway: Even a successful outcome in litigation rarely means full cost recovery. Insurers should build a 30–40% costs shortfall into reserves as standard practice and factor the courts’ broad discretion on costs into the claim’s strategy from the outset.

What types of legal costs are there?

Irish law recognises two main categories of legal costs; Party-Party and Solicitor-Client. Understanding the difference is central to setting realistic reserves.

What are party-party costs?

Party-party costs are the costs a court orders the losing side to pay the winning side. They cover the necessary and reasonable expenses of running the case – but they are not full recovery. In practice, party-party costs generally cover only 60–70% of the total costs a party has actually incurred. This is the most common costs order made by the Irish courts.

From an insurer’s standpoint, this creates a built-in shortfall between what is recovered and what is actually spent, which needs to be reflected in reserves and overall claims strategy. The courts limit recovery to party-party costs on grounds of proportionality: a losing party should not be saddled with legal expenses that go far beyond what was strictly necessary to resolve the claim.

What are solicitor-client costs?

Solicitor-client costs are the full fees a solicitor charges their own client for everything done on a case – taking instructions, correspondence, case management, trial preparation and the hearing itself. These costs are necessary to run a case properly, but they are not fully recoverable from the other side.

As a result, even a successful litigant – whether an insured party or an insurer – will usually remain responsible for a portion of their own legal costs, often in the region of 30–40%. In other words, winning on liability does not automatically mean full financial recovery. This is an important factor when managing the financial exposure on a claim.

Who pays the legal costs?

The general rule in Irish civil proceedings is that ‘costs follow the event’ – in plain terms, the losing side pays. This is not an absolute rule, though. The courts retain broad discretion and can depart from it depending on the circumstances of the case and how the parties conducted themselves during the litigation.

When will the courts depart from the usual rule?

Irish courts have shown a clear willingness to use their discretion on costs where fairness requires it. Three recent cases are instructive for insurers.

• John Magnier & Ors v Barne Estate Ltd & Ors [1]: the plaintiff lost his challenge to the sale of a Tipperary estate to a rival bidder. In awarding the defendants higher-than-usual costs, the High Court pointed to the plaintiff’s conduct and evidence, described as evolving on “shifting sands”. The scale of the claim – approaching €15 million – combined with credibility and consistency issues in the plaintiff’s evidence, led the court to award costs at a higher-than-usual level. The case shows that where standard party-party costs would not fairly address the prejudice suffered, the court may intervene.

• Central Bank of Ireland v Walls Construction Limited [2]: the Court of Appeal confirmed that a party can be deprived of its costs – or even made liable for another party’s costs – even where it was successful on the application itself. In this recovery action brought by insurers, the court dismissed the defendant’s motion to strike out the proceedings for delay, but because of the plaintiff’s own delay in progressing the case, the costs of that motion were still awarded against the plaintiff, with no stay on the order. This is a useful reminder that winning an application is not, on its own, a guarantee of recovering its costs.

• Hand v McGregor and Lawrence [3]: the court awarded the plaintiff her costs against Conor McGregor, against whom she succeeded, but made no order as to costs on her unsuccessful claim against James Lawrence. The decision confirms that costs are not allocated purely by reference to the final outcome, but by a broader assessment of conduct and circumstances across the proceedings.

Why are litigation costs rising in Ireland?

The rising cost of high-value and specialist litigation has been the subject of multiple reports in recent years. Growing legal, expert and procedural costs have prompted closer scrutiny from stakeholders, with working groups examining possible fee scaling or cost-capping measures in areas such as planning and environmental judicial review and medical negligence. Any reform is likely to focus on the recoverability of costs as between parties, but the Bar of Ireland has voiced “profound concern” about the impact on risk allocation and access to specialist legal services. As the gap between solicitor-client costs and party-party recovery continues to widen, these proposals raise real questions about proportionality – and are worth watching closely.

What should insurers do now?

A few practical steps can help insurers manage costs exposure more effectively:

1. Build the shortfall in from the outset. Reserve on the basis that even a win will likely leave a 30–40% costs gap, not full recovery.
2. Use formal offers strategically. A well-timed Calderbank or formal settlement offer can shift costs risk onto the other side if the eventual outcome is no better than the offer.
3. Watch the forum. Where a claim could proceed in either the Circuit Court or the High Court, the choice of forum can materially change the costs ultimately recoverable.
4. Keep conduct in mind throughout. As the case law above shows, how a case is run – not just who wins – increasingly influences how costs are awarded.
5. Revisit reserves as a case develops. Costs exposure is not static: delay, additional applications and expert evidence can all increase the gap between costs incurred and costs recovered.

Common Mistakes

1. Assuming a win means full cost recovery, rather than the usual 60–70% under a party-party order.
2. Failing to update reserves as interlocutory applications and delay drive up costs exposure.
3. Overlooking the strategic value of formal settlement offers as a way of shifting costs risk.