Insurers could escape liability for £1bn worth of asbestos claims after the high court handed down an insurer-friendly judgment this week.

Mr Justice Curtis overturned years of established case law to rule in favour of defendant insurer AIG in the case of Fairchild vs Leeds city council and Waddingtons, a factory owner.

Chris Phillips, head of litigation at Halliwell Landau and lawyer for AIG in the case, said: “This case could be the biggest single decision in the history of insurance law.”

He explained: “It will hugely assist insurers when their insured has one or two, or more recorded sources for asbestos exposure and it can be shown other parties probably exposed the claimant to more dangerous fibres than the insured.”

Insurers predict asbestos-related illnesses are likely to become the largest industrial killer, causing up to 40,000 fatalities over the next 20 years.

The judgment is having an immediate effect. Phillips has advised one insurer client with 50 asbestos cases that these may now be defendable, saving it up to £1m. He calculates that if 10,000 cases a year, costing an average of £150,000 per claim, were halted, the saving could be around £1.5bn.

He also believes the ruling offers a lifeline to failed liability insurer Chester Street that recently crashed, owing more than £250m.

Chester Street has more than 12,000 asbestos-related claims dating back to the 1950s. Last week it entered into a deal with its creditors.

Occupational disease lawyer Philip Tracey at Beachcroft Wansbrough was more cautious about the judgment's implications.

He said: “It's too early to say whether this could be a landmark case, although it has a potential impact for building owners.”

Fairchild was a building contractor who died of mesothelioma, an asbestos-related lung disease

in 1996.

His widow sued the defendants for £150,000, claiming her husband had contracted the illness after working at their properties when they were being stripped of asbestos material.

However, the claimant's case suffered a serious blow when it was revealed that Fairchild may have been exposed to a third source of asbestos, not connected to the case.

The three medical experts in the case agreed that Fairchild's illness could have been triggered by this additional exposure.

Mr Justice Curtis said this evidence introduced an element of doubt into Fairchild's case as it meant his illness may not have developed from exposure at the defendants' properties.

He said: “There was no scientific means of ascertaining from which source of exposure came the single asbestos fibre, or fibres, responsible for the malignant transformation of the pleural cell.

“It follows that the exposure causing the disease could be at either of the named premises or in combination.”

The judge ruled the court could not find either defendant liable for Fairchild's death.

The case is likely to reviewed by the court of appeal.