A FURIOUS tobacco industry closed ranks yesterday after one of its manufacturers broke the line by agreeing to settle two important liability cases in the United States.

News of the out of court deal, which sets a dramatic and unexpected precedent, sent BAT's shares tumbling in London.

Liggett, which makes about 2, per cent of American cigarettes including the Eve and Chesterfield brands, has offered to settle its portion of two class actions against the industry and could pay out between 2 per cent and 7 per cent of its pre tax income over the next 24 years to states attempting to recoup the cost of funding smoking related health care.

To settle a suit brought by 60 law firms on behalf of US smokers claiming to be addicted, Liggett has also agreed to pay a further 5 per cent of its pre tax income for 25 years.

If accepted by the courts, it would be the first time a cigarette manufacturer has paid a single cent in legal redress for tobacco related illnesses.

BAT, which is involved in the US lawsuits through its Brown & Williamson subsidiary, said it would continue to defend its posit ion aggressively.

If the court accepts the deal, Liggett would be absolved from further liability in a class action suit built on the argument that nicotine levels in cigarettes have been deliberately manipulated by US tobacco companies to foster addiction.

Anti tobacco campaigners have been increasingly confident of substantiating that claim since Dr Jeffrey Wigand, a former BAT employee in the US and the industry's highest ranking defector, turned on his former company, claiming it had long known that tobacco was an addictive drug even when it made public statements to the contrary.

Industry analysts were divided yesterday over the likely impact of Liggett's move.

Liggett is the smallest of America's Big Five tobacco makers, which also include RJ Reynolds, American Tobacco, Lorillard Tobacco and Philip Morris.