Law firm partners fined £80,000 for selling insurance through own broker

Two directors at flight delay compensation law firm FairPlane UK have been fined a total of £80,000 by the Solicitors Disciplinary Tribunal for selling after-the-event (ATE) insurance through a broker they had a financial interest in.

Simon Solomon Pinner and Daniel Edward Morris, FairPlane UK’s two directors, were held to task by the Solicitors Regulation Authority (SRA) for arranging ATE insurance for thousands of clients through broker Box Legal, without disclosing to customers that the pair jointly owned this second business.

Furthermore, Pinner and Morris, as well as their wives, have an additional financial interest in the insurance firm Leeward, which receives the profits derived from ATE policies arranged through Box Legal.

By not adequately disclosing to customers the financial interest that FairPlane UK has in Box Legal and Leeward, the SRA argued that this breached its 2011 principles and code – this states that firms must not allow their independence to be compromised and that clients should be fully informed of any interests that the firm has in other recommended businesses, so that customers are able to make an informed choice about their policy purchase based on their needs and preferences.

Presenting the case

During the hearing in September 2019, the Solicitors Disciplinary Tribunal heard how FairPlane UK’s clients were recommended to obtain ATE insurance via Box Legal with Leeward; unless they actively opted out, clients would be committed to purchasing this policy.

In addition, the tribunal found that documentation from FairPlane UK did not disclose the pair’s ownership of Box Legal, while financial interest in Leeward was indirectly disclosed.

In the court documents, published on 25 October, the presiding official A Horne said: “The Tribunal considered that the first and second respondents had placed themselves in a situation which gave them a real conflict of interest; an entity, Box Legal, which they wholly owned, made a referral which led to them deriving a financial benefit from their clients taking out an insurance policy that they recommended, and which the client automatically purchased unless they ‘opted out’.

“This obscured or hid the fact that the respondents were using a broker which they wholly owned, and of which they were the sole directors. The fact that the respondents considered that the policy was of benefit to the clients, and they believed it to be the only one of its kind, did not relieve them of their obligations as solicitors.”

Facing fines

The tribunal fined Pinner £30,000 and Morris was ordered to pay £25,000 as a result of their actions. Furthermore, the duo were charged an extra £25,000 to be jointly paid in order to cover the hearing costs.

Horne added: “In not asking clients about any other insurance cover they might have, before referring them to Box Legal, the respondents failed to act in the best interests of each client; given the opportunity, clients might wish to make that check before deciding to allow the purchase of the Leeward policy to proceed.

“The fact that clients might well not have to pay the premium was irrelevant to the issue of whether they should have been asked the question. The Tribunal found that the respondents breached principle four by their failure to ask. The clients looked to the respondents for advice, and the Tribunal determined that delivering a proper standard of service included asking the question, and the respondents breached principle five by not doing so.

“The tribunal considered that failing to ask the question was compounded by the fact that a policy was automatically purchased for each client unless they opted out. The tribunal considered that in these circumstances, there was a failure to maintain public confidence, and so principle six was breached.”