The UK liability sector could reach crisis point if the government allows the NHS to claw back charges for all types of accident and injury.

The extra costs to insurers could run into millions of pounds.

Currently under the Road Traffic (NHS Charges)Act, insurers must stump up the costs of those injured in motor accidents.

The money is recouped by a government department, the Compensation Recovery Unit (CRU).To date it has raised about £98m.

But the Lord Chancellor's department is looking at proposals to extend the unit's remit and to recover costs from a range of accidents, such as those involving employers' and public liability.

It is understood the Lord Chancellor's office is to produce a report on the feasibility of the scheme by the end of the year.

Lawyers are warning the government that the scheme is another stealth tax of potentially massive proportions.

Davies Arnold Cooper partner David Pipkin said the scheme could come into operation very quickly.

"If a report is produced by the end of the year and it is brought in without new legislation, then we could get a government announcement by next March," he said.

Pipkin, who sits on the customer liaison panel for the CRU, said the unit was operating with increasing efficiency and would easily be able to obtain costs for other accidents."

He said motor insurers, currently meeting the costs under the scheme, faced more bad news.

"There are moves to increase the maximum £10,000 which can now be claimed [by the NHS ]and to raise it to around £33,000." The Department of Health says this is in line with inflation." It said the extended scheme would bring in an extra £56m a year.

Its consultation document closed to responses last month and it is expected to make an announcement soon. Crutes partner Tim Wallis said: "There are fears this is going to happen. The govern- ment has staff making decisions who have no real understanding of insurance.

They see it as a sector with enormously deep pockets." Wallis, who is also president of the Federation of Insurance Lawyers (Foil),said the UK must set up an insurance defence research unit, an idea that is currently used in the US.

This would bring together insurance and legal experts and would look at more effective ways of defending insurance claims and would also lobby government.

"Grouping together would make a lot more sense than just thinking about competitive advantage,"he said.