Insurers fear that claims costs will rocket after claimant lawyers were given a "licence to print money" by a Court of Appeal ruling on success fees.

The judgment in KU v Liverpool City Council ruled that courts have no power to direct that a success fee is recoverable at different rates for different periods of proceedings.

This in effect means an end to the 'multi-stage' success fee process, where fees can be varied if the assessment of the risk attached to a case changes.

A QC with experience of cost cases said Lord Justice Brooke's ruling was certain to cost insurers. "Where is the incentive for a claimant lawyer to set a lower success fee when he knows the other side can't do anything about it?"

It is estimated that the ruling could affect a third of all claims.

AXA claims director David Williams said: "There is a strong possibility that this could be used to justify success fees way over what we have been getting at the moment. At day one you rarely know the risks involved in a case."

Norwich Union head of technical claims Dominic Clayden said the judgment showed that the industry still did not have full clarity on the application of the Access to Justice Act.

But he added that it was too early to say whether the ruling would lead to increased costs.

Disease legal costs to reduc
Insurers' legal costs in long-tail disease claims are set to be "dramatically reduced" after the Civil Justice Council (CJC) reached "agreement in principle" on success fees.

CJC chief executive Bob Musgrove said agreement had been reached after "very difficult" negotiations.

The agreement is due for implementation in the autumn, thought to be in October, subject to approval from the rules committee.

A source close to the negotiations said success fees related to asbestosis, mesothelioma and pleural plaques had been significantly reduced.

The agreement paves the way for the CJC to begin work on public liability claims.