Tort law reform is back in the spotlight after a NSW Court of Appeal decision gave an insurer the right to full cost recovery from an unsuccessful plaintiff.

The decision means NSW plaintiffs will face unlimited liability for insurers’ costs if their personal injury claims fail in the courts.

Even if they are successful, any award will be limited by capping laws that have been in place since 2002. The laws were designed to discourage the then increasing number of small and nuisance claims.

Justice Murray Tobias decided the cap on legal costs should not apply to insurers defending claims. “Those restrictions were aimed at the legal service providers and their clients who were, on the one hand, the instigators of claims for personal injury damages and, on the other, the recipients of those claims.”

The case is likely to be very carefully studied by tort law proponents and opponents. Lawyers have already warned that under the decision there is now little incentive for insurers to limit their costs during personal injury cases.