Personal injury awards are almost certain to increase by up to £20m a year, following a House of Lords' landmark judgement.

The law lords ruled on Monday that the payment of social security benefits should be ignored by the courts when calculating interest payable in personal injury damages.

Tony Kennedy, partner in law firm Law lords, brought the case on behalf of his client John Wadey, a former senior fire officer. He said damages awards could rise by thousands of pounds in individual cases as a result of his client's win.

"The effect of the ruling has been to increase Mr Wadey's interest payments from £6,000 previously to more than £16,000. The total cost of cases like this could amount to £16m a year."

Mr Wadey's former employer, Surrey county council, appealed. It was supported by its insurer Zurich Municipal. The case related to £10,000 of the £224,000 Mr Wadey had been awarded by the Court of Appeal.

The council's lawyers said Mr Wadey's social security benefits should have been deducted from his past loss of earnings claim before calculating interest.

But the law lords rejected this argument since it rested on the 1992 Social Security Administration Act which had been repealed in 1997.

Kennedy said the implication of the ruling is that judges can now ignore the amount of benefits paid to claimants when they award interest.

However, the Compensation Recovery Unit will still be able to recover benefits paid to claimants after they have been awarded compensation by the courts.