Financing your legal defence via insurance? Here’s how to avoid costs disputes



06 July 2022

Disputes with insurers over defence lawyer fees are common. A recent Court of Appeal judgment provides some guidance on when how much could be too much.

Hourly rates for lawyers vary wildly. You may have valid reasons for choosing at the top of the market and there are certainly many advocates for the payment of high fees being the only sensible choice.

It is difficult to analyse empirically whether the ‘reassuringly expensive’ argument holds water.

Whilst many of us wince at the hourly rates of plumbers, there is usually some idea of what the final cost will be, and an objective way of telling whether our boiler has been fixed or the quality of the bathroom installation. 

When it comes to litigation lawyers, such objectivity is more difficult to find.

In the end, a party may have won, lost or settled without any real feeling as to the difference their legal team has made.  Would a cheaper firm have won as easily?  Did the expensive firm’s valiant defence limit what could have been a more damaging loss?  How do you confirm you have had value for money, when the entire outcome may turn on the witness most considered to be truthful? 

The situation becomes worse when complex claims drag on, meander and expand into new areas, making overall costs estimates difficult. The COVID (and general court) backlog means hearing dates can be shunted many months down the line, with the parties rarely missing the opportunity to sling more mud (and incur more fees). 

Samsung vs. LG in the Court of Appeal – what it means for you

In the case of Samsung v LG[1], the Court of Appeal considered there was a limit on lawyers’ rates, and that rates of up to $1,475 (approximately £1,100) were too high. 

The context of the judgment was a claim for costs by the victor in an underlying appeal (it being uncontroversial that, as a general point, LG was entitled to payment of its legal costs by Samsung, as assessed by the Court). Whilst a complex matter, the Court saw no justification for such an extreme departure from its top guideline hourly rate of £512.

The fact that Samsung was paying these rates in the first place is indicative of the wider issue: when looking to instruct, it is perfectly normal for some quoted rates to be double or triple those of the alternatives in the pack. The specialism involved, size of the law firm and geography of the dispute all factor into the price.  The bulk buying power of Insurers means that they can obtain discounted rates for policyholders using their preferred firms.

The discrepancies in rates are so dramatic that disputes with insurers over defence lawyer fees are an issue we frequently need to address.

Work with insurers to avoid problems with pay-outs

The notion that it is easier to ask forgiveness than to get permission was popularised by a US Navy Admiral, Grace Murray Hopper. She certainly wasn’t talking about insurers signing off on legal fees.

An insurance policy will provide coverage for “reasonable” (or “reasonable and necessary”) legal fees in respect of a covered claim: it will not provide carte blanche for the insured to instruct at the top of the market.  So how do you ensure you are not left with a large uncovered defence costs bill at the end of an expensive piece of litigation?

Consent is the key. 

The policy will almost certainly require insurer agreement to costs being incurred, and bringing insurers along on the journey is more likely to achieve a favourable outcome than presenting insurers with an invoice after the event.  There are often clear reasons why an insured requires the appointment of a particular firm, and presenting that justification (as well as some evidence of negotiation on fees) all helps smooth the process.

Insurers also have extensive experience of defence lawyers, and may have viable options available at good rates (given the repeat work they give those lawyers, economies of scale are at play). The policy excess means that the insured will usually be picking up the first chunk of legal fees, and there is a clear financial benefit to taking advantage of insurers’ lawyers in an appropriate case.

This article was authored by members of Howden’s Legal, Technical & Claims team. The Legal, Technical & Claims team is made up of senior insurance lawyers and experienced claims professionals, and provides support on insurance claims, policy wordings and legal and regulatory developments as they impact your business. If you have any queries on the issues raised, please feel free to contact a member of the team directly.

James Wakefield, Claims Handler:

T: +44 (0)2038 087561 E: [email protected]

Neil Warlow, Divisional Director:

T: +44 (0)7923 208441 E: [email protected]

Sam Vardy, Divisional Director:

T: +44 (0)7719 928600 E: [email protected]

Carey Lynn, Executive Director:

T: +44 (0)7923 229882 E: [email protected]


[1]              [2022] EWCA Civ 466