The Solicitors Indemnity Fund (SIF) has finally yielded to pressure from City firms to allow bigger "deductibles" on their SIF contributions.
The climbdown, announced at last week's Law Society council meeting, comes a year before the monopoly is to fold.
Council members voted to let the 67 firms in the country that earn more than u1m gross fees find up to the first u1m of cover themselves, instead of buying it through SIF as presently demanded.
Current regulations state that all firms with more than 50 partners can find up to the first u150,000 cover themselves per claim, for up to three claims per year maximum. However, many big firms, have to pay more than u1m in premiums to SIF to receive u1m cover.
Under the new rules, firms can take a deductible of up to u1m per claim, again up to three per year. However, a SIF spokeswoman explains that the rules contain restrictions that limit the size of the deductible allowed based on the turnover of the firm. The bigger the turnover, the bigger the deductible allowed; a firm with a u20m turnover will be allowed a deductible of up to u600,000, for example.
Law firms will also still have to obtain a further u1m top-up cover through SIF but will pay less for this than under current arrangements.
SIF chairman Peter Williamson says: "The new system will not allow bigger firms to escape from making any SIF contribution."
He admits there is no "cast-iron guarantee" the move will not force smaller firms to pay higher premiums, but adds the new system has been considered carefully and higher deductibles are likely to lead to a small net gain.
Tony Sacker, chairman of the City of London Law Society, says: "This is a step in the right direction. It's a goodwill thing and some firms will be able to save money."
The revised deductibles system was unveiled as SIF announced that the total contribution requirement has had to be increased to u319.8m for 1999-2000 - up u79.8m on the figure agreed in April. And Williamson warns that this hike in contributions may have to be increased further.
The Law Society council has warned that solicitors' practising certificate fees may have to be increased to cover the u11m it has approved for improving the Office for the Supervision of Solicitors. However, newly-elected president Robert Sayer says a rise is unlikely to be necessary.