It's all in the wording....

The website for the FTSE 250 insurance firm Hiscox proudly announces that it is "Helping you stay one step ahead". However, the firm finds itself facing the threat of a class legal action following its refusal to pay some companies who had taken out business continuity insurance. Whilst it is promising to help "provide greater certainty for customers", the reality is that it is not "certainty" that customers are looking for but a pay-out from a policy that they have often paid £10,000s for.

The argument centres around the terms of the policy and the extent to which the phrase "due to restrictions imposed by a public authority during the period of insurance following an occurrence of a notifiable human disease" covers the COVID19 outbreak. It is currently unclear on what basis Hiscox is refusing to pay out although it appears that they are arguing that the policy is limited to events that happen within the nearby vicinity of the business and that the global pandemic was not an "occurrence" as anticipated by the policy. Whilst the wrangling over the terms is inevitable, it is perhaps more perplexing that Hiscox later stated that the outbreak was "simply too large and too systemic” to underwrite. The question inevitably is whether this is about a legitimate basis on which to refuse to pay out or simply the economic fact that it cannot afford to open that floodgate.

View: irrespective of how this matter resolves, Hiscox' reputation is under threat. The policy drafting may give some latitude on how it is to be interpreted and it is fair to say that we are in unchartered territory for everyone. However, the use of word play to exclude liability is going to severely undermine the credibility of taking out such policies going forward.