Insurers under pressure to accept £500m pay-out for asbestos victims, or have legal ruling overturned.

The government is seeking a deal that would see insurers pay up to £5,000 each to victims of pleural plaques. The proposal follows the Prime Minister Gordon Brown’s intervention in the debate, and could cost the industry up to £500m.

Ministers are attempting to seal a deal with insurance companies amid growing concern over a recent legal ruling. This said that insurers should not have to compensate for pleural plaques – growths on the lungs caused by exposure to asbestos – because they were symptomless. Insurers are worried that the government may overturn the ruling at a cost of more than £1bn.

Last Thursday, the Prime Minister told the House of Commons: “Asbestosis and mesothelioma are terrible diseases, and all of us who have seen the effects that they cause know that we have to do more to help the victims of those diseases.

“On pleural plaques, we are looking at the matter at this very moment. We will publish a consultation document soon. We are determined to take some action.”

Within the next two weeks Brown will meet a delegation of MPs who have been campaigning to overturn the legal ruling.

“We are looking at the matter of pleural plaques at this very moment. We are determined to take some action.

Gordon Brown

An MP close to the talks said that the controversial pay-outs were one of the proposed solutions ministers were considering, and that the plan had been raised with insurers.

The ABI denied the discussions had taken place, but a senior insurance source confirmed they had and that the industry was considering a deal, adding: “It’s based on the fear that the Scottish Parliament may succeed in overturning the law and that would mean the government south of the border could follow suit.”

A Ministry of Justice spokesman said: “As the Prime Minister indicated, we will publish a consultation document soon. The Justice Secretary is looking at this very carefully.”

The legal wrangling dates back to 2004, when insurers including Norwich Union and Zurich took test cases to the High Court, and lost. However this decision was later overturned on appeal – a ruling that was confirmed in October by the House of Lords.

Since then, a delegation of 18 MPs and trade unions has been fighting to have the decision overturned.