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A London judge has given Prince Harry and six co-claimants just a week to find more than £9.5 million between them. The way he arrived at that figure is the part worth paying attention to if you underwrite or broker cover for big-ticket litigation, royal watchers or not.
On Friday, Mr Justice Nicklin ordered the group, which includes Sir Elton John, his husband David Furnish, actor Elizabeth Hurley, Baroness Doreen Lawrence, actor Sadie Frost and former Liberal Democrat minister Sir Simon Hughes, to pay an interim £9,544,355 to Associated Newspapers Limited (ANL), publisher of the Daily Mail, by August 28. It is a down payment on a much larger bill still to be worked out.
The seven had sued ANL over allegations of unlawful information gathering, including phone hacking and "blagging" of private records. Nicklin threw out every claim in a judgment handed down on July 7, after an 11-week trial, finding the case had been built on evidence that "lacked a proper evidential foundation." A separate two-day hearing then dealt with the costs fallout, and that is where the story gets interesting for the insurance market.
Losing parties in English litigation almost always pay something towards the winner's costs. The usual yardstick is the "standard basis," where costs have to be reasonable and proportionate. Nicklin instead ruled that ANL's costs should be assessed on the tougher "indemnity basis," a stricter test reserved for cases where a court takes a dim view of how a claim was run, and one that tends to produce a bigger bill for the losing side.
ANL had put its total defence spend at roughly £34.5 million, a figure the judge himself described as "exceptionally high." The claimants' barrister, Nicholas Bacon KC, pushed back hard on the indemnity finding, arguing his clients had acted in good faith throughout and that ANL's spending reflected an "unconstrained approach to litigation costs" rather than any misconduct on the claimants' part.
The claimants had offered roughly £8 million as an interim payment; ANL wanted closer to £9.9 million. Nicklin landed close to ANL's figure, at £9.54 million, with a full assessment of the total bill still to come.
Insurance Business has covered this case before. As reported in our earlier piece on the shortfall, the claimants had arranged a combined £16.2 million in after-the-event (ATE) cover against adverse costs, a policy type designed to protect a claimant if they lose and get hit with the other side's legal bill. Against a defence spend north of £34 million, that left a gap of roughly £18 million even before Friday's indemnity ruling made the claimants' exposure worse.
That gap matters to ATE insurers because an indemnity costs finding can sit awkwardly with policy wording written on the assumption of a standard-basis outcome. Our UK colleagues asked exactly whether Harry could lose his insurance cover altogether after the court loss, noting that ATE policies typically respond to a lost case but can get complicated once a court's findings turn on how the claim was conducted, rather than simply whether it succeeded.
Australian insurers and brokers don't need a London courtroom to know this problem. Local courts have grappled with similar questions about whether ATE-style cover is solid enough to rely on. In one recent Queensland case, the Supreme Court knocked back an attempt to use ATE insurance as security for costs, instead ordering cash or a bank guarantee, a reminder that courts on both sides of the world are increasingly sceptical of treating a policy limit as a guaranteed safety net.
For brokers placing cover for high-net-worth clients or group litigation, the Harry case is a useful, if extreme, illustration of a familiar risk: a policy limit fixed at the outset of a dispute can look badly undersized once years of disclosure fights, expert evidence and an 11-week trial have run up the other side's bill. Multi-claimant actions compound the problem, since each claimant can be jointly liable for costs well beyond their individual share.
Nicklin has refused to cap ANL's total recoverable costs, so the £9.54 million is very unlikely to be the final figure. A costs judge will ultimately decide how much of the £34.5 million claim is actually recoverable. Harry and Lawrence have called the underlying judgment "a complete and obvious whitewash." Any appeal against Nicklin's original ruling must be filed by October 2, with a further deadline of November 6 for challenging the costs decision itself. Until then, the claimants, and whoever is left holding their ATE risk, are on the hook for a bill that keeps growing.
