They were asked to 'refrain from precipitate action' until further talks have taken place between the MMI group, the Government, local authority representatives and the Association of British Insurers.
Yesterday's meeting involved the Association of Metropolitan Authorities, the Association of District Councils and the Convention of Scottish Local Authorities.
It followed a day in which a number of councils, including Exeter, Braintree and Huntingdon, had suspended some services because they said that they no longer had full insurance cover.
MMI, with which 90 per cent of councils have policies, has hit financial problems partly because of escalating claims. Although the company is not technically insolvent it has been forced to stop paying out. Guidelines to councils issued after yesterday's meeting said: 'Our general advice to authorities is to ask them to refrain from precipitate action, except for those with renewal dates in the immediate future. In addition, authorities are asked not to take action as creditors of MMI in the period in which the company has frozen payment of claims.'
The local authority organisations say that, although some claims under present policies might not be fully reimbursed, their position as creditors will be improved if their action is co-ordinated.
Some of the councils most immediately affected have already taken out new policies. Exeter, where services were paralysed on Thursday, announced last night that facilities would reopen today after new insurers had been found to provide cover in a three-year deal costing an additional pounds 146,000 a year in premiums.
The local authority organisations hope that the position will be clearer by the time 600 council representatives meet to discuss MMI in London next Wednesday. However, the public can still claim from councils even if they are not insured.
Meanwhile, the Holmwoods Insurance Group yesterday offered to take over any existing MMI personal accident policies after MMI announced that it was transferring all such business.
MSF, the finance union, which has 1,500 members among MMI's 2,500 staff, is meeting the company on Tuesday and it is thought highly likely that redundancies will be announced.
Tony Whiteley, a national officer of the MSF, said: 'If there was a liquidation our members would be in severe difficulty as far as jobs and their mortgages are concerned. If we are not careful, 2,000 people could be out of work.'