seeking damages for smoking-related illnesses from the tobacco industry.

Louisiana law allows plaintiffs, in this case the state, to sue companies which have written insurance policies for the primary defendants, the tobacco companies.

However ACE's three polices, out of the thousands involved in the litigation, have put a major roadblock in the Louisiana state case. A US district judge has ruled that Louisiana must abide by the clauses in the ACE policies which require suits against the company to be arbitrated in London.

State Attorney-General Richard Ieyoub was quoted by Associated Press as saying the ruling could mean Louisana's entire case against all the insurance companies may have to be moved to London.

Mr. Ieyoub has said he will appeal the judge's ruling. He also stated Louisiana would have a harder time proving its case before a London arbitrator compared with a state or federal judge in the US.

An ACE spokesperson said it's company policy to always have clauses written into its insurance contracts requiring arbitration to be conducted either in London or in Bermuda.

The policies, she said, are for general liability and specifically exclude coverage for tobacco exposure.

"The suit really has nothing to do with ACE as a company,'' she said.

Louisiana and Wisconsin are the only two states in the US which allow litigation against parties insuring a primary defendant. Florida and Missisippi have separately negotiated their own settlements with the tobacco industry.

A proposed $368.5 billion settlement between 40 states and the tobacco industry is being reviewed by the White House and Congress. Mr. Ieyoub has said Louisiana should be able to claim $400 million.

In April Louisiana gained class action status for its suit against the companies on behalf of all smokers in the state.