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12 October 2011 Last updated at 11:28 GMT The UK Supreme Court judge Lord Hope dismissed the appeal by insurance companies
The UK Supreme Court dismissed their case, a decision which will enable people with pleural plaques to claim compensation.
Insurers previously failed to overturn the laws at the Court of Session.
Most Scots affected by pleural plaques had worked in heavy industry, such as shipbuilding.
The House of Lords ruled five years ago that victims could not claim compensation, but the Scottish government disagreed. MSPs passed the Damages Act in 2009, allowing claims to be made - with the likely cost estimated at between £7m and £9m.
Scottish Justice Secretary Kenny MacAskill said insurance firms must now recognise the law, but industry body the Association of British Insurers maintained the Damages Act was flawed.
Pleural plaques are not themselves a disease and have no symptoms, but the thickening of lung membranes is an indicator of past exposure to asbestos.
Scottish ministers argued pleural plaques could give rise to more serious conditions, such as lung cancer, mesothelioma or asbestosis.
Continue reading the main storyI've got to get on with my life, but I don't know how much life I've got left in me”End Quote John Ferguson Former shipyard worker But insurance firms vigorously attacked the legislation, alleging it infringed on human rights laws.
The industry argued that it broke European Convention on Human Rights provisions on property rights and constitutes unreasonable legal interference.
But Supreme Court justices in London dismissed an appeal by several insurance companies - including AXA - against an April decision by Court of Session judges in Scotland, who rejected argument that the legislation was unlawful.
The Supreme Court ruled that it could not be said that the "judgment of the Scottish Parliament was without reasonable foundation".
Mr MacAskill said: "I warmly welcome this significant decision, not least for the sake of people with pleural plaques and all those who campaigned so vigorously to help them.
"We firmly believe that people with this condition should be able to raise a claim for damages, and we are delighted that this decision has gone in their favour - a result that will surely bring them some comfort."
Continue reading the main story
Reevel Alderson Home affairs correspondent, BBC Scotland This is a highly significant judgement.
The UK Supreme Court has said the judgement of the Scottish Parliament as an elected body about what constituted the public interest, should be respected.
In earlier cases, the Supreme Court had overturned decisions relating to Scots law.
Although pleural plaques are not in themselves a disease, and have no symptoms, they indicate previous exposure to asbestos.
Victims say it causes them great distress and concern that they may develop a more serious condition.
Insurance companies say they should not have to pay compensation for something which has not, and may not, happen.
The justice secretary added: "It is our sincere hope that the insurers will now reflect carefully on the decisions reached by the Scottish Parliament, by both the Outer and Inner Houses of Scotland's Court of Session, and now by the UK's Supreme Court and settle those claims that have been stalled for so long."Scottish Labour leader Iain Gray added: "This is tremendous news for all those in Scotland who have had to suffer the trauma of being told they have pleural plaques and will now, after two and a half years of delay, be able to pursue the damages they are entitled to."
Former west of Scotland shipyard worker John Ferguson, who helped build the QE2, said his employer failed to warn him of the dangers.
"I now have pleural plaques and that hangs over my head," he said.
"I've got to get on with my life, but I don't know how much life I've got left in me - I'd like to see people higher up pay for this in some way."
Nick Starling, director of general insurance and health for the Association of British Insurers, said after the ruling: "Insurers remain fully committed to continuing to pay compensation to people with asbestos-related conditions, such as mesothelioma.
"The insurers brought this case because they believe that the Damages Act is fundamentally flawed in that it ignores overwhelming medical evidence that pleural plaques are symptomless, and the well-established legal principle that compensation is payable only when there is physical harm.
"We are very disappointed that the court has not found in our favour on this important principle of law. Insurers will now consider carefully this judgment and what it means for them."
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