Mr Jones and Ms Gibson were joint tenants who brought an action against their Landlord for housing disrepair. Their Landlord (Mr Francis) then counterclaimed.  Both claimants had the same Solicitor who obtained an ATE policy from ARAG, however they only named Ms Gibson on the policy application and subsequently the insurance certificate and failed to request a policy in Mr Jones’ name or to include both claimants on the one policy.

The Claimants’ claim ultimately failed and they were ordered to pay the Defendant’s costs in the sum of £40,000. ARAG paid these costs under the policy but then rather surprisingly pursued Mr Jones for a 50% contribution as he was not named on the certificate and therefore not insured.

HHJ Keyser QC held that the effect of the original order to costs was to impose on the Claimants a joint and several liability to pay costs of £40,000 to the Defendant. Mr Parsons (for Mr Jones) submitted that because the ATE insurance policy insured Ms Gibson against liability to pay Mr Francis’s costs of the proceedings this was an agreement to meet Mr Francis’s losses. Judge Keyser stated that was incorrect. The Policy insured Ms Gibson against a loss, namely liability to Mr Francis for his costs. ARAG fulfilled their obligation to Ms Gibson by paying the costs and that payment was a discharge of Ms Gibson liability. The fact that the payment came from the Insurer is irrelevant, the payment is seen as being paid directly by Gibson.

Although both Ms Gibson and Mr Jones where liable for the costs Ms Gibson settled the entire costs liability. Therefore she is entitled to a contribution of 50% from her co-claimant and, because she discharged the costs liability by means of an indemnity from her ATE insurer, the insurer is therefore entitled to be subrogated to that right (of a 50% contribution). It was consequently held that Mr Jones, or in effect his solicitor who was indemnifying this claim due their negligence of not naming him on the certificate, must pay his contribution of £20,000 to ARAG.

We at Box Legal appreciate that it is not always easy to identify all parties at the outset of a claim, but it is of course best that all are named on the certificate. If unsure you can always contact us. It is free and easy to update our policies either via our website or by contacting a member of the team by email on info@boxlegal.co.uk or by calling us on 0870 766 9997.

This case also, however, highlights the importance to obtain legal expense insurance for all housing disrepair claimants, who are at risk of adverse costs on the standard basis, as a failure to do so could be considered negligent and cost a firm significantly. It is best not to leave a claimant without cover.