The Duke of Sussex’s High Court defeat against the owner of the Daily Mail could send legal insurance premiums soaring, industry experts have warned.
Prince Harry, Sir Elton John, David Furnish, Liz Hurley, Sadie Frost, Doreen Lawrence, and former Liberal Democrat MP Simon Hughes brought a lawsuit against Associated Newspapers in 2022.
The group claimed serious privacy breaches dating back over 30 years against the Daily Mail’s publisher, in a case that attracted significant public attention.
The celebrity claimants had purchased After the Event insurance, commonly known as ATE insurance, to cover £16.2m of Associated Newspapers’ costs if they lost.
However, the costs ruling meant the Daily Mail group could attempt to recover the entire £34.5m in legal costs from the claimants.
Judge Matthew Nicklin said in the costs ruling he “decided not to impose a ceiling on Associated’s recoverable costs” despite their scale seeming “excessive”.
He added the amount claimed had given “rise to real concerns as to whether all of the costs now claimed by Associated were reasonably incurred and are reasonable in amount.”
The cohort of celebrity claimants were ordered to pay interim costs of £9.5m, almost £5m above the amount originally budgeted by the court, by 4pm on Friday 28th August.
Nicklin also ordered the costs to be assessed on an indemnity basis, a more favourable ruling for Associated Newspapers that could increase the amount it ultimately recovers.
Nick McDonnell, director and costs lawyer with legal costs firm Kain Knight, warned the decision could change how insurers approach future high-profile cases.
“This case may prompt ATE insurers to factor more heavily into their underwriting the risk of an indemnity costs order, particularly in complex group litigation where that can significantly increase exposure beyond an opponent’s approved budget,” he said.
McDonnell warned the shift in insurer behaviour could directly affect the affordability of cover for future claimants pursuing group litigation.
“If that perceived risk translates into higher limits of indemnity or greater pricing for the additional exposure, premiums may inevitably rise, raising a wider question as to whether adequate ATE cover remains affordable for claimants and ultimately, whether some otherwise viable group claims become more difficult to pursue,” he said.
Rocco Pirozzolo, managing director and underwriting director of City insurance firm Harbour Underwriting, said the decision “will give pause for thought for the market as once cover is in place, the insurer has no control over how a case is run.”
Pirozzolo added that “perhaps pricing should be increased to reflect the risk of indemnity costs being ordered,” signalling a potential structural shift in how ATE policies are priced going forward.
Typically, underwriters assess the legal risk and likelihood of success when evaluating a case for ATE insurance, with most insurers requiring an independent assessment showing at least a 60 per cent chance of winning.
Underwriters also typically request a formal opinion from the claimant’s barrister before agreeing to provide cover on complex or high-value cases.
Mark Borkowski, a leading PR strategist and crisis and reputation consultant, told City AM that “insurers will start asking much harder questions” following this case.