In 2013/14 and 2014/15, Lancashire County Council (LCC) and Preston, South Ribble, Chorley, Lancaster and Ribble Valley Councils paid out on 1,112 claims from employees and members of the public.
By far the biggest compensation total was seen at LCC, which paid out £3,061,809.
The largest of the payouts was £164,207 for a claim of asbestosis, a chronic lung condition caused by prolonged exposure to asbestos, followed by a claim of £139,202 for mesothelioma - a form of cancer most commonly caused by exposure to asbestos.
County Hall also paid out £100,000 for a claim of sexual abuse and £90,000 of alleged sexual abuse. No further details have been given on those cases.
In contrast, another claim of sexual abuse for two years resulted in a £5,000 payout - less than £7,918 for the dislocation of a left thumb.
Most of the smaller payouts - under £1,500 - were made against the county council’s highways department, and related to wheel, tyre and suspension damage, and account for about half of all claims made to LCC.
With new proposals to reduce the Highways budget by £2.8m, questions have been raised over whether such claims will increase and wipe out the savings.
Colin Mahoney, founder of Leyland-based streetrepairs.com, said reports to his website about pothole damage in the county have become more and more regular.
He said: “Potholes and pothole damage has become more and more apparent in the three years the site has been running.
“Without a shadow of a doubt going forward we’re going to see roads getting worse.
“The road infrastructure in this country is in a really bad state at the moment.
“Lancashire County Council is financially up against it, but if the problems are reported to them, then they can prioritise which are the most dangerous problems and mitigate their liabilities.”
Mr Mahoney said out of all local authorities he deals with, Lancashire County Council was the most pro-active in terms of responding to reports of road problems.
The pay-out figures, revealed as part of a Freedom of Information request, show the North West shelled out the highest amount in compensation claims across the country; £21,906,616 over 2013-14 and 2014-15.
But the number of claims paid by the named councils dropped 53 per cent from 2013/14 to 2014/15 from 754 to 358.
Jonathan Isaby, chief Executive of the TaxPayers’ Alliance, said: “The compensation culture is costing taxpayers dear and every pound spent on settlements or higher insurance premiums is a pound that isn’t spent on essential services. “Of course, some of the payments made by councils will be entirely justified, as the most serious accidents can change lives. But in many cases, local authorities and their staff will be failing to live up to the standards required of them by law or paying out on frivolous claims too easily.
“Councils must do everything they can to ensure their mistakes and negligence don’t result in such large bills for hard-pressed taxpayers.
“We must also root out those who are playing the system with spurious demands for taxpayers’ cash.”
Laura Sales, director of legal and democratic services for Lancashire County Council, said: “We investigate each claim that we receive as fully as possible, and rigorously defend claims where appropriate to do so.
“We are also using procedures to detect potentially fraudulent claims.
“The county council is working to reduce the number of successful claims against it, including the operation of a countywide highways inspection regime.
“We’ve also adopted a long-term plan to improve the condition of the county’s roads.”
Preston Council paid out £183,483 on 80 claims in 2013/14, but nothing in 2014/15.
The largest payout was £13,048 for an asbestos-related incident, followed by £12,381 after a vehicle came into collision with a cyclist.
They also paid out £347 after a pedestrian walked into a council vehicle and £100 when a branch fell on a car.
Explaining the difference between claims in the two years, a spokesman for Preston Council said: “As a smaller authority compared to a few years ago, the council has less responsibility in areas where claims could be made.
“Claims are also unpredictable in their nature, so change year on year.”
Lancaster City Council has paid out a total of £26,512 over the past two years. The biggest successful claim was £6,029 after someone tripped on a housing path and broke their wrist.
The council also paid out £750 after the contents of a shed were taken in error.
Ribble Valley Council paid out £6,682 in 11 incidents over two years, and South Ribble Council and Chorley Council paid out one claim each in the time, at £60 and £50 respectively, not including claims handled by insurers.