In Ghadami and Ghadami v Lyon Cole Insurance Group [2010] EWCA Civ 767, the Court of Appeal considered whether the deputy judge at first instance had erred in assessing that the claimant’s liability was limited to paying the excess of the insurance policy.

The case concerned whether an agreement had been reached between Cole and its solicitors, CMS Cameron McKenna, as to McKenna’s costs in defending Cole against a claim brought by Mr and Mrs Ghadami. The Ghadamis’ claim was dismissed and they were ordered to pay Cole’s costs. Cole was covered for its costs of defending the claim by a professional indemnity insurance policy issued by Markel which was subject to a £1,000 excess. It was understood by all the parties that Cole would pay the £1,000 excess and would be indemnified by Markel for costs incurred by Cole in excess of £1,000. The Ghadamis argued that Cole had agreed with McKenna that Cole would only be liable to McKenna for the £1,000 excess and not any additional costs. Accordingly, the Ghadamis argued, they could not be liable to pay any of Cole’s costs which were in excess of £1,000.

The Court of Appeal found that there was no such agreement between Cole and McKenna. The Court criticised McKenna for failing to provide Cole with a client care letter, which would have set out details concerning McKenna’s costs. Nonetheless, there was an implicit agreement between McKenna and Cole that McKenna would act as its solicitors in the proceedings brought by the Ghadamis. McKenna was therefore entitled to charge reasonable costs for the work reasonably done, and Cole was able to recover the same from the Ghadamis.

This case shows the importance of solicitors complying with their obligations to provide a client care letter at the time of engagement by the client.