Talks between liability insurers and the Forum of Insurance Lawyers (Foil) have failed to resolve a dispute which has left thousands of after-the-event (ATE) cases in a legal limbo.

Foil president Andrew Parker said liability insurers were maintaining an almost blanket refusal to settle cases when ATE premiums, mainly linked to conditional fee agreements, had been paid before proceedings had formally begun.

He said: “When I met with four of the top five liability insurers on Monday, I stated very firmly that we should try and resolve this question without going to court.” The top five according to the Association of British Insurers (ABI) are: CGNU, Royal & Sunalliance, New Hampshire, Zurich and Axa.

But he added: “At the moment, liability insurers are standing firm and will not settle on cases where premiums have been paid before proceedings have been issued.”

Some legal firms, such as Amelans in Greater Manchester, have taken ATE liability insurers to court in an attempt to obtain payment using new cost recovery procedures – so-called part 8 civil proceedings. But cases can only be brought one at a time.

Legal guidance issued last month by senior high court cost judge Master Peter Hurst was meant to have resolved the matter, but Amelans' partner Martin Cockx said the legal rules on recovering ATE premiums were still open to broad interpretation.

Cockx said: “The law is in limbo as far as claims solicitors are concerned and many do not know whether they can obtain ATE insurance for their client or not.”

He added that unless urgent clarification of the rules was forthcoming, the ATE market and thousands of claimants could suffer.

“At least 50% of personal injury claims solicitor firms are not taking out ATE policies because of the uncertainty and this is having a detrimental effect on clients. They may be left uninsured and face the prospect of paying thousands of pounds in costs if they lose an action.”