Blog - 16/06/2014
Edwin Coe Insurance Blog – Riotous Behaviour and Consequential Losses
In the recent ruling of Mitsui Sumitomo Insurance Co (Europe) and others v Mayor’s Office for Policing and Crime  EWCA Civ 682, the Court of Appeal held that the Riot (Damages) Act 1886 (the “Act”) entitles property owners, or their relevant insurers, to claim compensation from the local police authority for property damage as well as other consequential losses caused by riotous and tumultuous behaviour.
The case concerned the August 2011 riots, during which a group of people attacked, looted and firebombed the Sony Distribution Centre in Enfield; the largest arson in Europe to date. In light of the significant damage caused, Sony and its landlord claimed on their respective insurance policies, and insurers subsequently sought to make a claim under the Act.
Although the High Court had initially awarded compensation for damage to the building and contents, they had refused to allow compensation for business interruption and loss of rent. The Court of Appeal reversed this ruling in respect of these excluded heads of loss.
It was noted that, although physical damage to a building was a prerequisite for a claim under the Act, Parliament had not expressly excluded other types of loss and therefore the Act should not be construed restrictively. It was held that the Act conferred a right to compensation for all heads of loss which are proximately caused by physical damage to property, not just the physical damage itself.
Although plans to reform the compensation arrangements under the Act were seemingly abandoned in 2013, the Court has again recognised the oddity that the taxpayer should be under strict liability to pay compensation for the consequence of riotous behaviour. The Court, however, highlighted that this has been the law since 1714 and only Parliament can change it; perhaps Parliament will now have a revised incentive to do so.
In the meantime, insurers and insureds alike may welcome this decision as an invitation to claim for business interruption losses (including loss of profit) as a result of the 2011 riots. It remains to be seen whether such claims will now be successful in light of this decision, and it should be noted that the police remain entitled to “fix” the amount of compensation which seems “just” in all the circumstances, thus providing scope for heightened arguments on quantum. In terms of the insurance market generally, the impact of this decision may also be reflected in the price at which riot cover may now be obtained.
If you would like further information please do not hesitate to contact the Edwin Coe Insurance Litigation team.
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