On the first day of a four-day appeal of a test case brought by UK's Financial Conduct Authority (FCA) against insurers, industry lawyers told Supreme Court judges that businesses could not claim for losses stemming from nationwide lockdowns to curb the virus.
According to a report from Reuters, major insurers told the Supreme Court that thousands of small companies battered by the coronavirus pandemic were not eligible for business interruption (BI) payouts and to suggest differently was 'reverse engineering'.
Thousands of small firms say they face ruin after insurers rejected claims for BI cover.
Mr Gavin Kealey, a lawyer for insurer MS Amlin, said that only business losses related to COVID-19 infections within a 25-mile radius of insured properties were covered.
QBE lawyer Michael Crane told the live-streamed hearing that the insurer had foreseen a possible pandemic but that a government response that closed down almost the entire national economy and consigned healthy citizens to their homes was 'inconceivable' last year.
However, he said, "The fact that a contingency may have been foreseeable does not mean that an underwriter agreed to cover that contingency without limits."
Later this week, Supreme Court judges in the UK will make a final judgement after hearing the appeal over a lower court judgement on the FCA's BI insurance test case.
The judgement sought to clarify whether 21 policy wordings affecting potentially 700 types of policies and costing billions in claims cover disruption and government-imposed containment measures to stem the spread of COVID-19.
A lower court in September found mostly in favour of the FCA and the Hiscox Action Group, a policyholder action group that had joined the lawsuit when judges ruled some insurers were wrong to reject the claims.
However, the FCA and the action group are challenging elements of the ruling, including whether businesses have a valid claim if they are partially closed and when insurers can reduce payments.