Leading insurance firms and industry bodies, including Scottish Financial Enterprise (SFE) and the CBI, are preparing an attack on justice minister Kenny MacAskill's Damages Bill amid claims it will put Scotland at a competitive disadvantage to the rest of the UK.

The bill, which was introduced in June, threatens to overturn a House of Lords ruling that workers who have developed an asbestos-related condition called pleural plaques cannot claim compensation.

The ruling was based on medical evidence that the plaques, effectively scarring of the lungs, are benign and are themselves not a health risk, although people with the condition could contract more serious diseases such as mesothelioma at a later stage.

Opponents to the Bill, who include the Association of British Insurers, the SFE, CBI and the Scottish Chambers of Commerce, argue it will completely change the law of delict in Scotland which says someone is obligated to compensate another for a breach of duty of care. There is a warning that the proposed changes will mean workers can sue employers while worrying about a disease they might never contract.

At an evidence session before the Parliamentary Justice Committee on Tuesday, Nick Starling, director of general insurance and health at the Association of British Insurers (ABI), will argue the Bill will cost Scottish insurers and employers billions of pounds in claims and higher liability premiums. This will put them at a disadvantage to businesses south of the border where the law will not apply.

Starling will also raise the concerns of the wider financial services industry that Scotland will become known as a destination where it is more attractive to sue employers, which will put off many businesses from relocating or setting up here.

Ahead of his evidence session, Starling told Scotland on Sunday that the Scottish Government has miscalculated the enormous costs to both insurers and the wider business community in Scotland.

The Scottish Government estimates the bill could cost insurers, local authorities and Government departments between £5.5m and £6.5m, but research published by the UK Government, based on the calculation that around 5,000 people in Scotland are known to have pleural plaques while there could be thousands more unknown cases, has placed this figure at anywhere between £1.1bn and £8.6bn.

With Scottish companies paying £131m a year in liability premiums, the ABI argues the cost to businesses in higher insurance bills could expand exponentially, particularly if the example of pleural plaques is used to argue for compensation for similar benign conditions.

Starling said: "It absolutely fundamentally changes the law of delict. It opens the law to much wider issues than pleural plaques and it undermines confidence in the legal environment."

Iain Ferguson, policy executive at CBI Scotland, said: "There can be no doubt that it will undermine business confidence in Scotland's stable legal environment. The knock-on effects for the Scottish economy would be very detrimental, increasing costs for businesses and insurers and contributing to make Scotland a less attractive place for inward investment at a time when the Scots economy is already facing a number of challenges."

Industry sources say the Bill will be the first major test of the relationship between financial services companies and Alex Salmond's Government after an extended honeymoon period. They say it will fundamentally go against Salmond's pledges about providing a major competitive advantage "through risk minimisation and cost competitiveness".

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: "There are concerns about the legislation creating an open door for claims which would be expensive and very difficult for businesses to deal with."

Owen Kelly, chief executive of SFE, said: "We understand the ABI's concern that compensating for a condition that has been confirmed as benign by the medical profession would undermine Scotland's competitiveness."