Insurers could face a £4bn bill after the Court of Appeal last week upheld the legality of no-win, no-fee deals.

The ruling signalled that insurers are not permitted to challenge conditional fee agreements (CFAs), or no-win, no-fee deals.

Up to 250,000 victims are now in a position to continue previously thwarted personal injury claims.

Claims specialists, like The Accident Group (TAG), said this could cost the insurance industry as much as £4bn.

The exact cost of CFAs to the industry is still fiercely debated. According to Carters Solicitors, which acted on behalf of Admiral Insurance in a previous case, the amount of after-the-event (ATE) premiums recoverable by firms such as TAG was between £367.50 and £621.13.

But lawyers representing insurers claim the judgment has given firms like TAG little room for manoeuvre. They say "claims farmers" would find it hard to exploit personal injury victims.

Beachcroft Wansbroughs litigation partner Andrew Parker, who acted for one of the insurers, said: "This judgment re-emphasises the need for consumer protection. This is far from the victory for claimants, trumpeted by TAG."