Britain's markets watchdog has taken eight insurers, including Hiscox, RSA, QBE and Zurich, to court.
The businesses, from restaurants to leisure groups, said they faced ruin after insurers rejected their attempts to claim millions of pounds collectively in compensation for lost business.
Colin Edelman, a lawyer representing the Financial Conduct Authority, told the court on the first day of an eight-day hearing that the 17 policy wordings under scrutiny in the case were similar to wordings used by more than 60 insurers in total. Around 370,000 policyholders could be affected, he said.
The FCA says the pandemic should trigger payments under the policies, which provide cover when insured premises cannot be used because of restrictions imposed by a public authority and in the event of a notifiable disease.
The insurers say the policies covered local incidents, rather than a pandemic and national lockdown.
"They're not to be protected from the fact that a cataclysmic event has happened. That's just bad luck being an insurer," Edelman said.
The FCA, which is concerned customers should be treated fairly, said in its skeleton argument published last week that the policyholders in the case were "generally not sophisticated or well-resourced insurance buyers".
The hearing is due to conclude on July 30.
(Editing by Kirstin Ridley and Barbara Lewis)
By Carolyn Cohn