The City regulator will on Monday begin a test case on behalf of thousands of businesses that claim they should have been paid by insurers to cover closures during the coronavirus pandemic. Insurers were inundated with claims under business interruption policies – many of them from small firms – after the government in March mandated the closure of companies across the UK to prevent the spread of Covid-19. Many insurers have declined to pay out, arguing that the policies were not designed to cover a government-imposed lockdown. The refusal of some insurers to pay out sparked anger among businesses that believed they were covered, prompting the Financial Conduct Authority (FCA) to start a test case covering many of the disputed policy wordings. Two other groups representing clients of Hiscox and companies in the hospitality industry have joined the FCA as claimants. The case represents a rare intervention by a regulator stepping in on behalf of claimants. It is also the first action of its kind by the FCA since it was established in 2013, as well as the first usage of the financial markets test case scheme designed to bring legal actions to court. The regulator hopes the test case will be the quickest route to clarity for both the companies and insurers without the need for each claimant to bring individual cases at a time when many smaller companies are facing the threat of going out of business. The FCA last month said that some insurers had paid out under business interruption policies after previously arguing the pandemic was not covered. The FCA has whittled the claim down to 17 representative policy wordings that a judge will scrutinise. The case will be streamed live online over eight days on Monday to Thursday this week and next. Eight insurers are directly involved in the case, but the FCA believe the trial’s outcome will be relevant to approximately 370,000 policyholders, although only a small proportion of those policyholders are likely to have a claim affected by the ruling. The insurers that agreed to defend the case are Arch, Argenta, Ecclesiastical, Hiscox, MS Amlin, QBE, Royal & Sun Alliance, and Zurich.