When Are Indemnity Costs Ordered - And What Happens on Assessment?
- Feb 3
- 2 min read
Updated: Feb 19
The Difference Between Standard and Indemnity Basis
Indemnity costs are not simply “higher” costs. They alter the approach the court takes to assessment. Under the standard basis, costs must be both reasonably incurred and proportionate. Under the indemnity basis, proportionality falls away and doubt is resolved in favour of the receiving party. This shift can materially affect the outcome of a detailed assessment.
or a practical guide to how detailed assessment proceedings are conducted in practice, and how assessment strategy impacts recoverability outcomes, see our specialist costs support overview.
When Do Courts Order Indemnity Costs?
Indemnity costs are typically ordered where the court considers conduct to be “out of the norm”. This may include unreasonable litigation behaviour, refusal to engage in settlement, pursuing weak or exaggerated claims, or procedural misconduct. However, the threshold is not defined by rigid rules; it depends on judicial evaluation of the overall conduct of the litigation.
Why Indemnity Costs Do Not Guarantee Full Recovery
An indemnity costs order does not mean every item claimed will be allowed. Assessment still applies, and the court will still examine reasonableness. Excessive, duplicated or unnecessary work remains vulnerable. Indemnity basis shifts the margin of doubt — it does not remove scrutiny.
The Role of Indemnity Costs in Between-the-Parties Disputes
Indemnity costs arguments frequently arise in between-the-parties costs disputes, particularly where conduct, Part 36 consequences or litigation behaviour are raised as issues. These arguments can influence both negotiation strategy and the approach taken on detailed assessment.
Indemnity Costs and Recoverability Risk
Where conduct is criticised, arguments may extend beyond basis of assessment to questions of recoverability, delegation and proportionality. Indemnity costs disputes often intersect with wider issues about how litigation was conducted and how work is justified in the bill.
Why Indemnity Costs Are a Strategic Issue
For litigators, indemnity costs are often seen as a remedy. For costs professionals, they are a strategic variable that can alter risk exposure, negotiation leverage and the likely outcome of assessment proceedings. Understanding how the court applies the indemnity test in practice is therefore critical.
Because indemnity costs disputes sit within the broader framework of assessment strategy and recoverability risk, they are typically addressed by specialist costs lawyers with experience of detailed assessment proceedings.
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