Law firm directors have been fined a total of £55,000 after arranging ATE cover with clients but not telling them they had a financial interest in the business.

Simon Solomon Pinner and Daniel Edward Morris, the only two directors of flight delay firm FairPlane UK Limited, arranged for thousands of clients to insure themselves against any costs liability after starting their business in 2015.

But they did not disclose to clients that they also jointly owned broker Box Legal. Pinner and Morris also had a financial interest in the insurance firm Leeward, and they and their wives received the profit Leeward derived from ATE policies arranged by Box Legal.

The Solicitors Disciplinary Tribunal heard that clients who instructed the firm to make claims were recommended to obtain ATE insurance via Box Legal with Leeward, and would be committed to purchasing such a policy if they did not opt out.

The tribunal said Pinner and Morris, who acted for around 1,000 new clients a month, failed to make any mention of their ownership of the broker, and did not refer to their financial interest in the insurer in any document provided directly to their clients. Taken together these disclosure failures comprised the ‘mischief’ in their case.

Financial interest in Leeward was only indirectly disclosed, and it required effort by the clients to track down the relevant policy wording.

The tribunal found the pair had placed themselves in a situation which gave them a real conflict of interest. Advice to clients that ‘we are not insurance brokers’ obscured or hid the fact they were using a broker which they wholly owned. The fact they considered the policy was of benefit to clients did not relieve them of their obligations.

The tribunal judgment said their motivation ‘lay in their attempts successfully to operate at a profit the business model they had selected; they had tens of thousands of clients who, by default, were committed unless they actively opted out’.

Their actions were ‘clearly planned’, and formed part of a chain through which they failed to help clients understand the nature of their conflict.

In his mitigation, Pinner, a solicitor for 38 years, said this was not a case of clients being kept out of an otherwise open market by the firm keeping business for itself. No real alternative insurance policy was available and the policy taken out was plainly for the clients’ benefit and to their advantage. The disclosure failing on Leeward was a ‘misjudgement, not something more nefarious’.

Morris, a solicitor for 22 years, said the firm’s approach was a ‘at worst a culpable oversight, but not an attempt to deceive clients or a deliberate attempt to conceal information from them’. Although both solicitors contested allegations, they had changed their practices as soon as issues were brought to their attention. Clients now paid a £25 administration fee rather than a £20 insurance premium.

Pinner was fined £30,000 and Morris fined £25,000, with the pair ordered to jointly pay £25,000 in costs.

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