A multimillion dollar battle between a UK drugs company and two iconic Bermuda reinsurers could go to Britain’s Supreme Court.

Lawyers for AstraZeneca (AZ) have not ruled out taking the case to the highest UK court after the Commercial Court and Court of Appeal ruled in favour of XL and Ace in a long-running dispute over the two reinsurers’ refusal to stump up $850 million in fees and settlements over an antipsychotic drug.

Alex Denslow, a partner at legal firm CMS London, said: “Given the fundamental importance of the principle that is in dispute, I don’t think that one could rule out an appeal to the Supreme Court.”

The dispute involving AstraZeneca’s captive insurer AZICO and XL and Ace centred around AZICO’s provision of liability cover under a “Bermuda form” policy for the pharmaceutical group.

AZICO settled a substantial number of personal injury cases relating to the antipsychotic drug Seroquel, said to be worth up to $200 million.

But the Bermuda form policy had been written under English law, rather than New York state law — the usual style for Bermuda form policies.

In the AstraZeneca case, however, the companies changed that to give English and UK law jurisdiction.

Under New York law, the insured firm does not have to prove actual liability, with alleged liability sufficient for a payout. The provision for arbitration was also waived.

And XL and Ace refused indemnity to AstraZeneca, arguing that there was no finding of actual liability in accordance with the terms of the underlying policy.

The English Commercial court last year backed the Bermuda firms — a decision that was later upheld by the English Court of Appeal.

Mr Denslow said: “This judgement reaffirms the precedent set by the Commercial Court’s construction of the Bermuda form liability policy that it will and can be construed in line with English law only when explicitly specified.

“The decision imposes an onus on insureds and reinsured, particularly captives, which may be difficult to meet. The outcome is therefore favourable to to market insurers and reinsurers.

“The court’s ruling on AZ’s appeal emphasises the care that an insurer should take before accepting liability for a claim that has not been litigated to a conclusion.

“Insurers under English law Bermuda form policies will be entitled to satisfy themselves as to the insured’s actual liability before agreeing to indemnify the insured.”

Seroquel, which was used to treat schizophrenia and bipolar disorder, was made and sold in the US and Canada from 1997 — but plaintiffs in several actions since have claimed that the drug caused personal injury, was defective and that AZ failed to provide adequate warning.

AstraZeneca was seeking around $786 million in legal costs and $63.7 million in settlement payments.

Mr Denslow said: “Going forward, insureds under the Bermuda form may be reluctant to agree a modification to apply English law, although given the tail on liability claims this decision may be applicable to a significant number of high value policies already placed on behalf of major corporations.”