The Law Society Council has voted to keep the Solicitors Indemnity Fund (SIF) - just as Cherie Booth QC is preparing to judicially review the fund in the High Court.
The society's ruling council last week voted against a Martin Mears-backed proposal to allow approved commercial insurers to provide indemnity cover by 1 September 2000, and a leadership-backed proposal to get the policy committee to look at ways to allow indemnity cover "primarily" through approved insurers.
Instead, it voted 38 to 22 in favour of retaining SIF while a working party investigates whether it could operate in tandem with a system of approved insurers.
Martin Mears said after the vote: "The Law Society is embarking on a collision course with a very large section of its membership who won't accept this."
Law Society vice-president Robert Sayer put a brave face on what Martin Mears called "another fudge". He stressed that if, by next January, the working party had found that it was not feasible for commercial insurers to operate alongside SIF, then the council would get the chance to vote again on retaining the mutual fund.
The working party must also detail criteria by which firms with poor claims records should be subject to "special measures" and will propose a practice rule on risk management.
Jubilant SIF chairman Peter Williamson said the decision resulted from "a sustained campaign" to persuade solicitors of the value of a mutual fund and of its "demonstrated ability over the past year to introduce substantial changes".
But City lawyers reacted angrily to the news. Holman Fenwick & Willan consultant Christopher Hales, who founded the anti-SIF November Group, said the Law Society was deliberately delaying the decision so that plans to insure on the commercial market "die a death".
"Their clear intention is to keep SIF going at all costs," he said.
Tony Sacker, chairman of the City of London Law Society, said the Law Society was creating "too much uncertainty when everybody would have liked a decision".
Meanwhile, Cherie Booth QC is to represent conveyancing solicitor Michael Dalton in a judicial review of SIF's monopolistic status, to be heard at the High Court on 16 October.
It is understood that the prime minister's wife is providing her services free of charge. Michael Kaplan, her clerk at 4-5 Gray's Inn Square, said she was sympathetic to Dalton's case: "He's the one who's putting his head on the chopping block, and many other solicitors could be suffering too."
In his application to the High Court, Dalton will argue that the Law Society is maintaining an unfair monopoly by insisting all members join SIF at rates double those offered by commercial insurers.