Chemicals used to protect the sofas caused burns
More than 300 people who suffered burns from a chemical used on a Land of Leather sofa brand will not receive compensation, the High Court has ruled.
The chemical DMF was used on Linkwise sofas made in China and sourced by Land of Leather but insurance giant Zurich refused to pay out.
The court accepted a Zurich claim that the company had breached policy terms.
Solicitor Richard Langton, leading the group litigation, described the ruling as "a devastating blow for victims".
Lawyers for Zurich claimed Land of Leather's deal with Linkwise breached the terms of its insurance policy and this was upheld by the Court.
Mr Langton, senior litigation partner for Russell Jones & Walker, said: "A group of over 300 innocent people who sustained in many cases severe injuries, due to an admittedly faulty product, will receive no compensation.
"Consumers must beware that buying products made in China is potentially dangerous and if something goes wrong they have less chance of redress."
He added: "Zurich's delay in notifying us added insult to injury by making our clients believe they would be paid.
"Unless this decision is overturned on appeal by the Court of Appeal a great injustice will have been done."
Land of Leather was placed in administration in January 2009 but a number of test cases covering sofas sold by the company which contained DMF and which were not manufactured by Linkwise, go before the court in May.
These are being seen as a first step in assessing the compensation for those who suffered injuries.