Recovery of costs in litigation: Loss adjusters' fees

Where a loss adjuster is instructed by an insurer to investigate a claim against the insured, those costs may not be recoverable from the other side even in the event of a successful costs order against the other side in any subsequent litigation.

According to a decision of a costs judge in a recent case:

• Where the loss adjuster is instructed by the insurer, this is not a recoverable cost since it is the insurer’s liability not the insured’s. The insured is the party to the litigation. It is the insured’s costs which are recoverable. Subrogation does not help the insurer since this only allows the insurer to step into the shoes of the insured. The insured has no liability for the loss adjuster’s fees. There is therefore no loss to the insured for the insurer to indemnify and then be subrogated to;
• Where a loss adjuster undertakes work prior to a solicitor being appointed, the costs will not be recoverable in any event if the work is such that would normally be completed by a solicitor;
• Where a solicitor has been appointed, such work by a loss adjuster may be recoverable but as a cost not a disbursement. The court will, however, be looking for an agency relationship, evidenced by an agreement, between the solicitor and the loss adjuster;
• The position may be different if the loss adjuster is engaged to undertake work which a solicitor would NOT normally undertake. In that situation, the loss adjuster’s costs may be treated as akin to expert fees, and therefore be recoverable as a disbursement (whether undertaken before or after the instruction of a solicitor).

Further reading: see Cuthbert v Gair & Gair (t/a The Bowes Manor Equestrian Centre) (2008) SCCO 03/09/08