Insurers stand to reap a windfall of "tens of millions of pounds" if the House of Lords decides not to overturn the Appeal Court's decision in the Dimond v. Lovell case in January.

More than 40,000 credit hire cases are currently being held up by the legal wrangle, which is set to be heard by England's highest legal authority, the Law Lords, between January 17 and 19.

Peter Holding, legal director of Helphire, a credit hire company, said: "If the judgment is not overturned by the House of Lords it is possible that insurers will gain a windfall of tens of millions of pounds."

However, if the Lords' judgment goes the other way, thousands of customers could be in line for refunds on their credit hire agreements.

Holding said the reason the bill facing the credit hire industry has grown so much in size is that insurers have been reluctant to meet the cost of some credit hire agreements because they view such costs as "unreasonable".

He stressed that Helphire was one of the few credit hire firms not to have been affected by the Dimond v. Lovell case because its agreements have a specific exclusion clause relating to the circumstances of the case.

But Holding said many credit hire firms had "effectively gone to the wall" as a result of debts incurred because of legal doubts about the enforceability of their credit hire agreements.

One such casualty was First Automotive, a long-established firm, which Helphire subsequently rescued.

"We have been in a very frustrating position," said Holding, referring to the uncertainty facing his industry.

He said the Lord Vice-Chancellor, Sir Richard Scott, had stepped in to try and end the confusion by issuing guidance to civil court judges. Sir Richard said he believed 40,000 civil cases were resting on the House of Lords' verdict.

The guidance said: "My advice is that these cases should, unless there are other issues that can conveniently be dealt with at once, be stayed until the House of Lords' decision is known."

Holding said he expects their Lordships' judgment will be handed down before February 2000.