Product liability insurers will now be familiar with the qualified one-way costs shifting regime (QOCS) that has applied to personal injury cases since April 2013. The effect of QOCS is that a defendant that successfully defends a personal injury claim will not recover its costs, unless the claimant has been awarded damages. The rule is subject to various exceptions (such as statutory rights or where proceedings have been brought dishonestly) but the basic principle means that liability insurers will generally not recover costs, even if their insured successfully defeats a claim. Now, a recent Court of Appeal case has highlighted the ability for some parties to personal injury cases to recover costs, notwithstanding QOCS.

In a judgment handed down on 31 July 2014 in Wagenaar v Weekend Travel Ltd t/a Ski Weekend4, important guidance was issued. In that case, the claimant brought a claim for damages against the defendant tour operator for personal injuries sustained in a skiing accident. The tour operator joined the ski instructor into the action as a third party. The claim was dismissed and neither the tour operator nor the ski instructor were found liable. On costs, the judge ruled that QOCS applied to both the tour operator’s and the ski instructor’s costs. The ski instructor appealed.

The Court of Appeal allowed the ski instructor’s appeal. In doing so, the Court of Appeal noted that “if QOCS is intended to apply to all parties to any proceedings in which any claim for personal injuries is made, it will have far-reaching economic repercussions in many fields – medical negligence claims, road traffic claims and industrial accident claims to name but a few.”

The Court of Appeal ruled that QOCS does not apply to all litigation arising from a personal injury claim in which commercial parties dispute responsibility for the payment of personal injury damages. To illustrate the point, Lord Justice Vos stated: “in medical negligence  claims, a claimant may sue a doctor, a health authority and the manufacturer of some piece of medical equipment. It would be strange if there could be no costs orders enforced between the defendants.”

The effect of this judgment is that defendants must consider the risks of joining third parties to claims in which the claimant has QOCS protection. Whilst the defendant will not be able to recover its costs, if it is successful, it can still be liable for third parties’ costs.

This is positive news for insurers of medical device manufacturers who may deal with cases where the defendant, such as a hospital or surgeon, joins their insured to a personal injury claim. The Court of Appeal’s decision clarifies that the manufacturer that successfully defends such a claim will be able to recover its costs, despite QOCS. However, in the event that a manufacturer is sued by a patient, it may want to consider carefully whether to join a hospital or surgeon to the proceedings because even if it defeats the patient’s claim, it could be liable for the doctor or hospital’s costs.