Category: Claims handling · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-11
A Part 36 offer is a formal settlement offer made under Part 36 of the Civil Procedure Rules, the acceptance or rejection of which engages a code of automatic costs and interest consequences designed to incentivise reasonable settlement.
Part 36 is the single most important settlement device in English civil litigation. An offer made in the prescribed form triggers a defined set of cost consequences depending on whether it is accepted, rejected and then beaten or rejected and then not beaten. The architecture is designed to reward parties who make reasonable offers and to penalise parties who refuse to accept them.
For an insurer defending a claim, Part 36 is a primary tactical lever. A well-pitched Part 36 offer can transfer the costs and interest risk of the litigation onto the claimant, forcing them to either accept or proceed at risk. For a claimant, Part 36 is a means of pushing the defendant toward settlement by exposing the defendant to enhanced costs and interest if it fights and loses.
Part 36 is contained in CPR Part 36 (rules 36.1 to 36.30) and its supporting Practice Direction 36A. The rule is self-contained — it operates as a code rather than as supplements to ordinary settlement principles.
Key features:
CPR 36.17 contains the operative consequences. CPR 36.16 protects offers from disclosure until liability has been determined.
The leading interpretive authorities include Carver v BAA plc [2008] EWCA Civ 412 (since modified by rule changes), Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC), and Smith v Trafford Housing Trust [2012] EWHC 3320 (Ch). The Court of Appeal has emphasised that the costs consequences are presumptive, not automatic — the court can depart from them where injustice would otherwise result.
Part 36 strategy is sequential. A defendant typically makes its first Part 36 offer once it has a defensible view of value — often after counsel’s preliminary view, sometimes earlier. The offer is set at a level that is realistically the lower end of the likely settlement range, calculated to be just acceptable to the claimant.
A claimant typically responds with a counter-offer set at a level that the claimant judges the defendant cannot prudently reject — high enough to be meaningful, low enough to be defensible if beaten.
The offers are exchanged in writing, with the prescribed Part 36 language. Each carries a relevant period of 21 days minimum. Within the relevant period, the offeree may accept and end the matter; outside it, the offeree may accept on more onerous costs terms but engages the Part 36 consequences if rejected and then not improved.
The offer is not disclosed to the trial judge until liability has been determined. This rule prevents the offer from influencing the substantive decision but allows it to control the costs decision.
Offers are recorded carefully on the file. The history of offers exchanged is critical at the costs stage; an offeror who has made a “good” Part 36 offer earlier in the litigation may be in a stronger position even if the offer was later overtaken by events.
For insurers, Part 36 strategy is shaped by the policy structure. Where defence costs erode the indemnity limit, an early reasonable Part 36 offer that is accepted preserves the limit for the indemnity payment. Where defence costs are separate from indemnity, the calculus is different — early settlement may be less commercially attractive.
“Without prejudice save as to costs” offers (Calderbank) achieve some but not all of the Part 36 effects without the prescribed Part 36 form.
“Conditional” Part 36 offers — offers conditional on some external event — are permitted but constrain the operation of the rule.
“Time-limited” Part 36 offers expire automatically at the end of a stated period. The court has discretion as to costs consequences after expiry.
“Withdrawn” offers — Part 36 offers can be withdrawn but only after the relevant period; the operation of the rule is then modified.
“Improved” offers — a series of escalating offers as the claim develops; each carries its own relevant period and costs consequences.
A claimant solicitor issues proceedings for £1.4m PI damages against a defendant accountant. The defence solicitor (instructed by the PI insurer) makes a Part 36 offer at £620,000 inclusive of interest, eight months after the issue of proceedings, with a 21-day relevant period. The claimant rejects. The matter goes to trial fifteen months later. Judgment for £580,000. The claimant has failed to beat the defence’s Part 36 offer. The court orders the claimant to pay the defence’s costs from the end of the relevant period to judgment, calculated at approximately £180,000. Net recovery to the claimant: £580,000 (damages) minus £40,000 (its own irrecoverable costs after the relevant period) minus £180,000 (defence’s costs) = £360,000. If the claimant had accepted the £620,000 offer, it would have received £620,000 plus its costs to the date of acceptance (then approximately £90,000 of its costs were recoverable). The Part 36 offer cost the claimant approximately £260,000 by being rejected.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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