The courts have failed to address the problem of excessive claims, say lawyers.
In a judgment of the Supreme Court Costs Office Judge Hurst ruled that employees of costs negotiators do not have rights of audience. He held that the arrangements between the negotiators and the insurers were in breach of the legal principle forbidding those not directly involved in a piece of litigation from benefiting financially from its outcome.
Costs negotiators generally receive payment based on the costs they save.
Beachcroft Wansbroughs partner Andrew Parker, who acted for the costs negotiators, said: "This decision is very disappointing. The arrangements between insurers and costs negotiators were designed to address the problem of claimants' solicitors pursuing excessive claims. The court seems to have ignored this."
Judge Hurst also held the insurers' practice of using cost negotiators to run proceedings without proper instruction from solicitors prevented negotiators from exercising rights of audience.
But Amelans senior partner Andrew Twambley, who acted for the claimants, said: "It will clean up the current mess by taking out a major protagonist in the costs war. There needs to be a fundamental change in the way insurers use costs negotiators."