Beverley Palmer, 41, a nurse, is suing Tees Health Authority for failing to diagnose Shaun Armstrong's psychiatric personality disorder and releasing him from their care to abduct, sexually abuse and murder her three-year- old daughter Rosie.
Mrs Palmer is seeking pounds 200,000 in damages. Her case was dismissed by the High Court last year.
Rosie was last seen buying an ice-cream at a shop close to her home in Hartlepool, Cleveland. Three days later her body was found near by, in the house where Armstrong was staying.
Armstrong, 36, was jailed for life at Leeds Crown Court in July 1995 after pleading guilty to Rosie's murder. If Mrs Palmer wins her Court of Appeal case it will set new standards of care for health authorities who release violent psychiatric patients into the community.
Robert Sherman, representing Mrs Palmer, told three appeal judges that Armstrong had told nurses that he was in the Falklands campaign and had sexually mutilated bodies, that he had sexual feelings towards children, and that a child would die if he was released from hospital.
No attempt was made by the health authority to find out about his medical history when he came under its care in 1992, although it was known he was a violent man with a drink and drugs problem who had sexually abused children.
Mr Sherman said: "We are not dealing with an act of minor incompetence or negligence, we are dealing with a catalogue of errors which reached gross negligence."
The court proceedings are being closely observed by Michael Howlett, director of the Zito Trust, which is helping 12 other families who have suffered after mentally ill patients were released from health authority care. He said their legal actions were awaiting the outcome of the Palmer case.
Mr Sherman said Mrs Palmer had been a successful nurse with two children, happy in her relationship with her second husband. Since the murder, she has attempted suicide 10 times and is claiming damages for the "nervous shock" which has prevented her working.
Mr Howlett said that the law "was being asked to be more flexible" so that health authorities were more accountable to the people, or families of people, who were killed or injured as a result of the authorities' lack of care.Reuse content