The Law Society has urged Yorkshire Building Society to reconsider its decision to remove law firms from its panel for choosing the wrong insurer. 

Calling for talks with the lender, chief executive Desmond Hudson today said the policy of removing firms that rely on unrated insurers was 'very disappointing', and that Yorkshire had produced no evidence of malpractice or loss they have suffered from one of the affected firms.

He added that the decision, which the Gazette reported exclusively last Friday, places in jeopardy the future of many small firms of solicitors and their staff without consultation or notice.

Yorkshire Building Society told the Gazette last week that it had decided to require all applicants to its conveyancing panel to be with rated insurers following the recent collapse of unrated providers such as Lemma and Quinn.

The lender said it was 'not actively removing existing firms from the panel prior to 1 October, unless they need to reapply for membership and are not insured appropriately'. However the Gazette understands that the process of removals has already begun. 

Hudson said the Law Society is open to discussing any concerns Yorkshire might have about its panel firms, many of which are accredited with its Conveyancing Quality Scheme (CQS).

'The Law Society has worked with lenders to introduce its CQS scheme ensuring that all work undertaken by CQS accredited firms reaches the highest standard of client care,' said Hudson. 'This includes a rigorous examination of those firms and their insurers' responses to any complaints or claims. Firms that do not have an adequate track record do not obtain or retain accreditation.  

'The fact that an insurer is unrated does not of itself mean that they are risky - some well-established, trusted insurers have chosen not to seek a rating. Indeed many of the financial instruments and banks who failed in 2007/08 were rated.'

Hudson said Yorkshire's decision will also reduce the options available to its clients by removing certain law firms.

'This decision is likely to have the effect that many clients will be unable to instruct the solicitor of their choice - particularly if they wish to have the personal, high-quality attention given by smaller firms or those from the black, Asian and minority ethnic community who are, typically, those insured by unrated insurers.'

The Society has stated its opposition to SRA proposals to ban all unrated insurers from the solicitors PII market, on the grounds that it will restrict choice and increase costs.

The SRA says the ban will increase protection for clients and ensure a minimum financial strength for insurers entering the solicitors PII market.

Frank Maher, partner at Liverpool firm Legal Risk, said he 'would not be surprised' if other companies with law firm panels took the same decision as Yorkshire. 'You only have to look at the number of firms in the lurch over Lemma, Balva and ERIC to see the reason for the concern,' he added.

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