Lloyds has also advised holders of policies bearing the CFT name to take appropriate action to protect their interests.

In July this year CFT banned members of the Professional Contractors Group from taking out its Professional Indemnity insurance after grievances made by some PCG members on the private PCG discussion forums were copied to CFT's offices.

CTF responded by threatening to cancel all 150 policies it had sold to PCG members.

Jane Akshar, PCG Chairman, made this statement in July: "One of the major advantages of the PCG is that it provides its members with an ability to share information, ask questions and keep up-to-date with all developments in the contracting community. After members raised issues about the CFT insurance scheme on the forum, the company threatened to withdraw its cover from all PCG policyholders and intimated it would take legal action to prevent discussion on the forum.

"PCG has never had any commercial arrangements with this company and it is not one of our 'preferred suppliers'. However, on behalf of our members we asked CFT a series of questions that we hoped would clarify the situation. To date we have not received any answers.

"PCG cannot allow outside organisations to stifle legitimate discussion about matters of genuine concern to contractors. We have conducted an internal investigation into this matter of a possible breach of the confidentiality of our forum and have informed the police."

Shout99 interviewed Mark Stevens, CFT Manager, by telephone, in July following its announcement to ban PCG members.

Mr Stevens attributed the cause of the threat to cancel its policies to: "a hardcore group on the PCG [who] were being a problem," adding, "they had nothing better to do than cause trouble.

"We found it particularly offensive and decided not to renew their policies. We've cancelled 11 policies so far and we've decided not to cancel anymore- if clients aren't happy then they can go elsewhere."

Shout99 asked Mr Stevens to clarify his company's position regarding which underwriters it was using. He said: "I have just had a meeting with our underwriters, Lloyds, but we are in the process of changing that."

Kevin Miller, PCG Director, said of the current situation: "PCG was instrumental in alerting Lloyds of London to the possibility that CFT was engaged in fraud. Following reports by PCG members, on its discussion forums, of problems they had had with CFT, PCG contacted Lloyd's regulatory division and met with managers from Lloyds. PCG supplied Lloyds with several examples of CFT documentation that claimed that CFT used Lloyds underwriters. As a result Lloyds launched a verification of cover exercise to establish the validity of these claims. When these proved negative Lloyds called in the City of London police and PCG met with the investigating officer to brief him on the PCG concerns.

"PCG has never endorsed the CFT scheme and has always advised members that the CFT charges appeared to be too low. Nevertheless a relatively small number of PCG members chose to take out policies with CFT rather than use PCG's own PI scheme and PCG is considering what steps can be taken to help PCG members and others who used CFT.

"Where contractors bought a CFT policy on the recommendation of another intermediary such as an accountant or a financial services company then there appears to be a strong moral case (at least) for the contractor to seek compensation from that intermediary."

CFT's website at www.professionalindemnity.co.uk has disappeared and it appears not to have issued any statement.

It is believed that CFT may have issued between 5,000-10,000 policies. 150 of these belonged to members of the Professional Contractors Group.

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Richard Powell, Shout99