Hiscox has offered goodwill payments to small businesses to apologise for failing to make it clear that pandemics were not covered when it sold them interruption insurance.

The insurer offered three-figure sums to a small number of firms that had claims rejected but were potentially misled when they renewed their policies, sources said.

Hundreds of firms are threatening to sue Hiscox over its refusal to pay out on their claims.

Lowaire Digital, a six-person web design and marketing company in Leicestershire, was offered £500 by Hiscox, which admitted its explanation of when its policy would cover losses caused by Covid-19 “should have been clearer”.

Adam Coley, managing director of Lowaire, said: “I don’t know what you’re going to do with £500 apart from buy three months’ worth of coffee.”

Mr Coley amended his firm’s policy just 12 days before lockdown began. He said Hiscox told him Covid-19 losses would be covered if authorities ordered the business to shut. Hiscox is refusing to pay out because tech firms were not ordered to close. The offers of goodwill payments were first reported by Insurance Insider.

A Hiscox spokesman said: “We understand these are difficult times for businesses, and we are paying claims that are covered by the policies we issue fairly and quickly. If we have provided incorrect information to a customer in relation to their policy, we will always look to put it right.”