Hiscox must pay out on some of its clients’ disputed business interruption insurance claims, the High Court of England and Wales ruled yesterday.

The Bermudian re/insurer reckons the judgment will result in less than £100 million ($129 million) of additional Covid-19 related claims across the group’s businesses, around £150 million less than its worst-case projection.

Shares of Hiscox surged 17 per cent by the close on the London Stock Exchange yesterday in response to the news.

The UK insurance industry test case was brought by British financial regulator the Financial Conduct Authority on the contractual interpretation of business interruption wording in certain UK property insurance policies.

Hiscox, which before the case was already facing the threat of legal action from the Hiscox Action Group, made up of hundreds of its UK business clients who dispute the insurer’s refusal of their business interruption claims, was one of seven insurers involved.

According to the 160-page ruling, the majority of businesses who held business interruption insurance and were forced to close due to the Covid-19 pandemic are entitled to insurance payouts that would, subject to policy limits, return them to the position they would have been in had the pandemic never happened.

Mark Killick, a HAG steering committee member, said: “Today’s judgment represents a huge victory for the Hiscox Action Group.

“We led this campaign and our stance has been fully vindicated by the court. The most important thing now is that the insurers accept this ruling and start to pay out rather than embark on a fruitless appeals process that will just cause more suffering for the very policyholders they were meant to protect.”

In a statement, Hiscox said the judgment clarified that “fewer than one third of Hiscox’s 34,000 UK business interruption policies may respond”. Coverage under these policies is essentially limited to those customers who were mandatorily closed by government orders, and then only in certain circumstances.

Hiscox added that it was “assessing the judgment in detail to ascertain how the court’s conclusions should be applied to the claims and circumstances of individual Hiscox policyholders. Any issues not addressed by the judgment will be assessed on a case-by-case basis as part of the normal insurance loss adjustment process for claims.”

The insurer added: “Hiscox recognises these are extremely difficult times for businesses and regrets any contract dispute with customers, which is why it is committed to seeking an expedited resolution through this industry test case.”

Christopher Woolard, interim chief executive of the FCA, commented that the case was brought to the High Court in order to resolve the lack of clarity and certainty that existed for many policyholders making business interruption claims, and the wider market.

Mr Woolard said: “We are pleased that the court has substantially found in favour of the arguments we presented on the majority of the key issues.

“The judgment is a significant step in resolving the uncertainty being faced by policyholders. We are grateful to the court for delivering the judgment quickly, which it was reached reflects well on all parties.”

Irrespective of any possible appeals, insurers should consider the steps they must take to progress claims that the judgment says should be paid, Mr Woolard added. They should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain the next steps.

Should any parties appeal, Mr Woolard urged them to do it as rapidly as possible in line with the agreement made with insurers at the start of the process. Mr Woolard added: “As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”

Also in its statement yesterday, Hiscox gave an update on its third-quarter business. Gross premiums rose 19 per cent across the group in July and August, compared to the same period last year.

Hiscox’s retail insurance business saw premium growth of 7 per cent, and 6 per cent in the UK. Hiscox London Market saw 19 per cent growth during the two months.

The group’s reinsurance division, Hiscox Re and ILS, which writes much of its business out of the group’s Bermuda head office, “experienced accelerated rate momentum and double-digit premium growth at the July renewals”.