The judgment removes an established right to compensation, which had existed for 20 years, to allow people with pleural plaques - scars on the lungs - to claim damages.
Those affected claim these scars can develop into more serious conditions including cancer. However, their longstanding right to compensation was subject to an appeal by insurance companies, with the Court of Appeal finding in the companies' favour last year that pleural plaques was not a disease.
Unions appealed this and the controversial case went before the Lords yesterday, where the Court of Appeal decision was upheld.
The five Law Lords who heard the cases agreed that the appeals should be dismissed because the law does not offer compensation to victims of injuries which cause no or trivial damage.
Activists have now pledged to ask the Scottish Parliament to bring in new legislation in Scotland to reverse the Lords' judgment.
They have prepared a bill, which has cross-party support, and will submit it to Kenny MacAskill, the justice secretary, urging him to change the law north of the Border.
Harry McCluskey, secretary of Clydeside Action on Asbestos, which represents hundreds of families of former shipyard and factory workers, said: "The judgment has gone against the workers who have to live with the condition with the appalling fear that it could develop into mesothelioma [a form of cancer].
"It is a ridiculous judgment and the injustice is cruel."
Ian Tasker, of the STUC, said: "The STUC has supported asbestos groups and we are extremely disappointed that this is another injustice to the victims of asbestos.
"The legal system pays too much attention to business and it doesn't pay enough attention to the victims."
Pleural plaques can, over time, make breathing difficult and, in some cases, can be accompanied by the development of serious respiratory diseases including mesothelioma and lung cancer.
Previously, victims could claim between 6,000 to 10,000 if they had pleural plaques and more if they developed mesothelioma.
Bill Kidd, an SNP MSP and Robert Brown, a Liberal Democrat MSP, backed the move to introduce new legislation at the Scottish Parliament.
Mr Kidd said: "This decision by the House of Lords flies in the face of common sense and has to be rectified as quickly as possible."
Bill Butler, a Labour MSP, added: "[The ruling] comes down on the side of the employers and insurance companies and disregards the legitimate case of victims and their families."
Solicitor-advocate Frank Maguire, of Thompsons Solicitors, a leading campaigner for asbestos victims, said: "This judgment will only diminish respect for the law by showing how divorced it can be from reality."