Michael McGrath (Cork South Central, Fianna Fail)
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199. To ask the Minister for Finance if his attention has been drawn to situations in which insurance companies are pursuing claimants or plaintiffs for their High Court and-or Court of Appeal costs even when the claim is successful; if the Central Bank has a regulatory role in the pursuit of legal costs by insurance companies; and if he will make a statement on the matter. [24358/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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As Minister for Finance, I have no role in how an insurance company seeks to pursue the recovery of legal costs no matter what the circumstances of the case. It should also be noted that the Central Bank of Ireland does not have any regulatory role in relation to this matter either.

Notwithstanding the above, the Cost of Insurance Working Group, chaired by Minister of State Michael D’Arcy TD, examined the issue of the discretion of the court to exercise in favour of the winning party - the ‘costs follow the event’ principle, as part of its examination of the cost of Employer and Public Liability Insurance. This was as a result of business stakeholders expressing frustration at the lack of consistency in the application of this general principle where a claim is dismissed and the insurer is still required to meet its own costs. It was argued by such stakeholders that failure to follow this principle meant that these costs were ultimately reflected in an increase in the premium of policyholders, even though the claim had been found to have no basis.

The Cost of Insurance Working Group, in its report, acknowledged that the determination of who is to pay costs is ultimately at the discretion of the judge in any given case on the basis of the relevant facts, and that in certain cases costs not following the event can be appropriate, for example, in cases involving the State where an important legal principle has been raised. However, there was a view expressed that inconsistency in the application of this principle may lead insurers to settle an otherwise defendable case, unilaterally, or in consultation with the policyholder, solely because that strategy is more cost efficient than successfully defending an action, and not being able to recover their costs.

The Cost of Insurance Working Group believes that a consistent application of the ‘costs follow the event’ principle – recognising that it should remain a matter for the independent judiciary to be the key decision makers in this regard – would probably be one of the most effective ways of tackling fraud and exaggerated claims, as it would give insurers the confidence to challenge more robustly cases which they have doubts about. It would also remove the common reason expressed by insurers that uncertainty in relation to legal costs forces them to settle regularly on the court steps rather than to dispute a case in court. In addition, it would mean that the minority of plaintiffs who seek to exploit the system through fraud or exaggeration would have to think more carefully about the consequences for themselves, should they lose the case. The Cost of Insurance Working Group believes that such an approach should have no bearing or impact on plaintiffs who have a deserving case, and genuinely feel it needs to be settled in court.

Finally, I understand that the Legal Services Regulation Act 2015 , which my colleague, the Minister for Justice and Equality, Charlie Flanagan TD, has responsibility for, makes extensive provision for a new and enhanced legal costs regime that will bring greater transparency to how legal costs are charged by legal practitioners, along with a better balance between the interests of legal practitioners and those of their clients. Section 169 of the Act puts the general principle of ‘costs follow the event’ on a statutory footing. I understand that this section will become operational once the Office of the Legal Costs Adjudicator is established, which is currently projected for Q3 of 2018 and as Minister for Finance, I welcome this.