With hundreds of millions of pounds at stake, three battling families who lost loved ones to killer asbestos exposure are embroiled in the test case at London's Appeal Court.

Among them are Mrs Joan Eddleston, of Low Moor, Clitheroe, and her daughter, Anita Gayle Fleming, of Ullswater Close, Rishton. They are claiming £178,000 in relation to the death in July 1996 of Mrs Eddleston's husband, Arthur. He had worked as an erector, foreman and joiner and was employed by Premier Construction Co Ltd from 1974 to 1994. He was exposed to asbestos between 1974 and 1982 and was diagnosed with the disease in March, 1996, four months before his death.

Also making similar compensation claims are families from Mansfield, in Nottinghamshire, and Speke, near Liverpool, who each lost loved ones through mesothelioma, a cancer of the lining of the lungs, almost invariably linked to asbestos exposure.

Despite the might of the insurance industry ranged against them, the families last year saw off the threat of their compensation claims – and thousands of others like them – being sucked into what leading judge Mr Justice Burton referred to as a legal "black hole".

Now, in a new legal case before three of the nation's top judges and in a courtroom with standing room only, the families are facing a massive legal push by insurers to turn their previous victory to ashes.

About 2,000 people-a-year die in the UK from mesothelioma, which is notorious for its slowness to develop, incurability, and for the agony suffered by victims. The disease, which can be triggered by exposure to a single asbestos fibre, can take up to 40 years to develop and, due to the intensity of workplace asbestos exposure in the 1960s and 1970s, is still killing thousands today.

It is the long delay in the disease developing that lies behind the epic Appeal Court struggle, which is expected to last three weeks and in which insurers say they should not be held liable for asbestos exposure so many years ago.

With many insurance companies, and firms that employed asbestos victims decades ago now defunct, changed beyond recognition or insolvent, those arguments – if successful – would leave an an uninsured "black hole" and dash the compensation hopes of thousands.

However, Mr Justice Burton last year handed victory to thousands of mesothelioma victims, or the loved ones they left behind, when he ruled the liability to compensate mesothelioma sufferers arises at the time of exposure to asbestos and not, as insurers have claimed, at the point where the tumour actually begins to develop.

It was that critical ruling which is now the principal target of attack by insurers, whose arguments – if they succeed in the Appeal Court – could leave mesothelioma victims effectively with no-one to sue if their former employers are now defunct, or were no longer insured, by the time their tumours began to develop.

The judge's decision meant compensation must be paid under insurance policies in force at the time of the original asbestos exposure. And, even if the insurance companies concerned are insolvent, or no longer exist, mesothelioma victims can still seek payouts through the Financial Services Compensation Scheme or under the terms of the Pneumoconiosis (Workers Compensation) Act 1979.

However, in a case being heard by Lord Justice Rix, Lord Justice Sedley and Lady Justice Smith, insurers are now arguing at the Appeal Court that the judge misinterpreted the terms of insurance policies and reached the wrong conclusion on the law.

The Appeal Court hearing continues.