Zurich Municipal has reached a giant settlement with a schoolteacher in a case that emphasised the costs of workplace stress.

Janice Howell retired after suffering two nervous breakdowns while teaching at one of Newport council's schools. The Welsh council, insured by Zurich, admitted liability and settled out of court for more than £250,000.

Howell was made to teach a class containing 11 pupils with learning or behavioural difficulties, a boy who had been expelled from two other schools previously and two Ethiopian refugee children who did not speak English.

Zurich Municipal spokesman David Forster said stress was a growing issue for insurers, but said he did not expect the case to set off a flood of similar claims.

“There's no such thing as a standard stress claim,” he said.

“We don't see this becoming the door through which thousands of claims will be able to come.”

Forster said Zurich had very carefully examined the evidence before settling the claim.

The Association of Local Authority Risk Managers (Alarm) confirmed that stress was becoming an issue for local authorities.

An Alarm survey showed that 85% of public sector risk managers identified workplace stress as one of the ten most important emerging risks.