Insurer, Zurich Insurance Plc ordered to pay Indemnity Costs to Devonshires clients due to “extraordinary behaviour”

In the judgment handed down 24 June 2025, Bellhouse & Anor v Zurich Insurance PLC [2025] EWHC 1551 (“Bellhouse 2”), which primarily addressed consequential cost issues, the High Court made clear that an insurer will be at risk of paying costs on an indemnity- effectively full reimbursement - basis  because of its conduct, and where that insurer should have known and acted better. 

This judgment followed an earlier judgment handed down on 18 June 2025, Bellhouse & Anor v Zurich Insurance Plc [2025] EWHC 1416 (Comm) (“Bellhouse 1”), where the Claimants, Mr and Mrs Bellhouse, represented by Devonshires, made an application for summary judgment and alternatively strike out of two of Zurich’s main defences to the Claimants’ insurance claim following a major fire destroying their home on 29 December 2022 (reported in the Standard, here). 

Mr and Mrs Bellhouse were insured by the Zurich Private Clients division of Zurich Insurance Plc. Despite extensive pre action correspondence, Zurich refused to agree to pay their claim and eventually, in March 2024, the Claimants sued Zurich.  Zurich in its defence claimed that in their application for insurance Mr and Mrs Bellhouse had wrongly stated that they did not intend to carry out contract works in the next 12 months (misrepresentation defence). Material to the applications before the Court, Zurich also argued that they could rely on an exclusion in the policy, which excluded damage caused by contract works (contract work exclusion). 

Mr and Mrs Bellhouse made an application for summary judgment against Zurich, and alternatively the strike out of Zurich’s defences on these issues, because of claimed clear deficiencies in Zurich’s pleaded case. 

In Bellhouse 1, the High Court agreed there were such clear pleaded deficiencies. The Judge, HHJ Hodge KC described Zurich’s statements of case among other criticisms as “turgid” and “overly long, rambling, and digressive…full of irrelevancies, and matters of background facts and evidence…they are not concise, nor do they confine themselves only to the material facts”.

In respect of the misrepresentation defence asserted by Zurich, the Judge said it was said that “it is impossible to distil from Zurich’s pleadings precisely how the qualifying misrepresentation was communicated to Zurich, or (if and when it was) exactly how, and in what way, anyone, and if so who, at Zurich relied upon it. An unkind, or cynical, reader of Zurich’s statements of case might be tempted to conclude that their very complexity and length were intended to conceal the lack of essential substance at their very heart.” 

With respect to the contract works exclusion defence, the Judge held that the pleading in its current state was “insufficiently particularised to raise a triable issue with any real prospect of success.”

The Judge’s disposal of the application was to order a strike out of part of the contract works exclusion defence but to provide that otherwise Zurich should have an opportunity to remedy those clear deficiencies that the Judge acknowledged existed, albeit which  Zurich had never previously recognised itself was necessary to do and despite repeated requests to do so by Mr and Mrs Bellhouse. 

The Judge held that Zurich was the unsuccessful party to the application. Notwithstanding that and also the Judge’s stated provisional view that costs “should be borne, at least in large part, by Zurich”, Zurich contested costs and in Bellhouse 2, the Judge principally addressed the resolution of that issue. 

The Judge ordered Zurich to pay in principle Mr and Mrs Bellhouse’s costs of the application, expressing surprise that Zurich should consider it was the successful party. 

He also ordered those costs to be assessed not on the usual standard basis but rather on a (full) indemnity basis and did so because of his expressed view of “Zurich’s extraordinary behaviour”. 

This had necessitated the application by Mr and Mrs Bellhouse, taking this case outside the ‘norm’ for consumer insurance disputes of the present kind. Indeed, It had “necessitated a vast, and wholly unnecessary, expenditure of costs by private individuals, who have suffered substantial damage to their home…”.  It had “ put the timetable for this case back by almost a full year” and had “diverted the parties’ focus away from the true issues in the case”

Finally, the Judge emphasised also that this had also involved “an unnecessary drain upon the court’s scarce resources as a result of conduct by a well-represented insurer which should have known, and acted, better.”

As can be seen from these judgments, the Courts will not shy away from basing cost orders on parties’ conduct. This case as noted was a claim by a consumer, a husband and wife, against their household insurer, and whilst the Court is- and in this case was- prepared to make case management decisions that allow a defendant (even Zurich as a well-represented insurer) to correct pleading deficiencies, such a defendant must expect to bear and pay other parties costs of doing so and particularly where it has otherwise resisted doing so. 

Devonshires Partner Stephen Netherway, and Senior Associate Grace Williams, with Counsel Mek Mesfin of 4 Pump Court, acted for the successful applicants Mr and Mrs Bellhouse.