The Law Society has caved in to overwhelming pressure from the City and signalled that law firms should be allowed to opt out of the Solicitors Indemnity Fund (SIF).
The move, which SIF claims may threaten the fund's viability, represents a major victory for the November Group of commercial firms which has been campaigning for SIF's abolition since 1995. The decision has been forced on the society by the results of its consultation on SIF's future.
Although a majority of smaller firms favoured SIF, firms with more than 25 partners voted by 2 to 1 in favour of the open market option. The City of London Law Society (CLLS) submitted a scathing attack on SIF branding it as “wholly discredited”.
Last week, the society's policy committee bowed to the inevitable and backed a plan by ex-society president Martin Mears to allow firms to end SIF's compulsory status.
Richard Tapsfield, chair of the CLLS working party on SIF, hailed the news as a “victory” for the City and said its firms would be “delighted”.
Russell Wallman, Law Society head of policy, said the change of policy was because “there was no overwhelming majority across the profession in favour of either a mutual or the open market”.
He said research was being commissioned into the viability of running SIF alongside a system of approved insurers – the open market option – and insisted that SIF could survive without the City's support.
But Elizabeth Mullins, managing director of SIF, said: “It would be very easy for insurers, once they know the SIF rates, to offer attractive premiums to those firms who present the better risks. Attractive risks would transfer to the market and there would be a danger of SIF being the “dumping ground' for the firms which were far less attractive to insurers.”
The result would be even higher SIF premiums for firms who remained with the mutual.
Martin Mears welcomed the Law Society's adoption of his proposal but warned: “If we are not careful the scheme might get sent off to a committee and smothered.”
London sole practitioner Wendy Gray, who recently founded the Millennium Group to campaign for an open market, said the Law Society was still dragging its feet and should allow firms to opt out of SIF now.