Category: Claims and disputes · Reviewed by the Apex broking team · Last reviewed 2026-08-21
Category: Claims and disputes Also known as: interim payment on account, payment on account of damages, CPR Part 25 interim payment Related concepts: coverage litigation, loss reserve
An interim payment is money paid before the final outcome is known, on account of what will eventually be payable. The term is used in two related settings. In litigation it means a payment on account of damages, which the court can order a defendant to make. In insurance claims handling it means a payment on account of an indemnity that has not yet been fully quantified — for example a payment towards reinstatement while a building loss is still being adjusted, or towards business interruption while the loss of gross profit is being calculated.
In both settings the payment is provisional in amount but not conditional in character: it is money the payer accepts will in all likelihood be due, paid early because waiting causes hardship or increases the loss.
In England and Wales the court’s power to order an interim payment sits in Part 25 of the Civil Procedure Rules, in the section dealing with interim payments (rules 25.20 to 25.25 following the restructuring of Part 25). The court may make an order only if one of the specified conditions is satisfied, which include:
Even where a condition is met the order is discretionary, and any sum ordered must be no more than a reasonable proportion of the likely final award. A separate rule restricts disclosure: the fact that an interim payment has been made, whether voluntarily or by order, must not be disclosed to the trial judge until all questions of liability and quantum have been decided, unless the defendant consents. That protection is what allows a defendant to pay early without prejudicing its defence.
Outside litigation, insurers make interim payments as a normal part of handling substantial losses. Common examples include payments towards clearance and temporary premises after a property loss, towards ongoing wages and continuing costs under business interruption cover, and towards defence costs under a liability or professional indemnity policy while a claim is being defended.
Whether an interim payment is available turns on three things: that liability under the policy is not in serious doubt, that some part of the loss is clearly within cover, and that the handler has the authority to release it. The last point is often decisive. Where handling is delegated under a claims handling agreement, or where a Lloyd’s subscription placement requires agreement by the claims agreement parties, an interim payment above the handler’s authority needs a referral, and the referral is usually where the delay sits.
An insurer that is reserving its rights faces a tension. Paying an interim sum while coverage is in doubt risks being said to have waived the point; refusing to pay anything at all while an insured business fails is commercially and reputationally costly, and may expose the insurer to a claim for late payment under section 13A of the Insurance Act 2015.
The usual resolution is a payment made expressly without prejudice to the coverage position, on recorded terms setting out what is and is not accepted and, where appropriate, providing for repayment if cover is ultimately declined. Where the policyholder cannot obtain that and coverage is genuinely disputed, the alternative route is coverage litigation, which may itself be capable of producing an early declaration on a discrete point.
Not necessarily. In litigation an order can be made without any admission, and the rules restrict disclosure of the payment to the trial judge until liability and quantum are decided. In claims handling a payment can be made expressly without prejudice to the insurer’s coverage position.
Part 25 of the Civil Procedure Rules, in the section on interim payments at rules 25.20 to 25.25. The conditions for an order are set out in that section, and any sum ordered must be no more than a reasonable proportion of the likely final judgment.
Sometimes. Insurers do make payments on account without prejudice to a reserved coverage position, usually on recorded terms and occasionally subject to repayment if cover is later declined. Whether it happens depends on how serious the coverage doubt is and on the handler’s authority.
This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-21. Next review: 2027-02-21.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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