Property insurance and riot damage
In January, we looked at the issue of riot damage compensation, when we reported the findings of the High Court in the case of Mitsui Sumitomo Insurance Co (Europe) Ltd & Ors v The Mayor’s Office for Policing and Crime  and how they applied the Riot (Damages) Act 1886. The Mitsui case then went to appeal and the Court of Appeal’s decision has now been released under the citation reference  EWCA Civ 682.
The lower court had decided that the Mayor’s Office for Policing and Crime was liable to pay compensation for riot damage because the property insured by the claimants was injured while people were “riotously and tumultuously assembled together.” The Mayor’s Office appealed this liability decision, on the basis that they were not alert to the likelihood of the riot and they could not have prevented the damage.
The lower court also held that compensation was only payable for the physical damage caused, not for consequential or future, anticipated losses; the insurance companies cross-appealed, on the basis that their policyholders should also be compensated for consequential losses.
The appeal by the Mayor’s Office was dismissed. The Court of Appeal stated that the liability of the Mayor’s Office was strict and not fault-based, and there should be no considerations of fault.
The insurance companies’ cross-appeal was successful: the Court of Appeal held that the compensation they were entitled to was forall heads of loss that were proximate to the physical damage. The Court of Appeal further found that there was nothing in the wording of the act that prevented the recovery of consequential losses. The court also commented that, contrary to the opinion of the previous judge, the regulations issued under the act could not be relied upon to interpret it.
This outcome means that anyone who sustained any consequential losses, such as business interruption, as a result of the London riots can claim compensation from the Mayor’s Office for Policing and Crime. Due to the potential costs to the police and the public purse, the government is now considering introducing some changes to the act in order to address this issue.
For more information on any of the issue raised in this article or on property insurance litigation matters in general, contact our Property Insurance Litigation team or tel: 0117 904 6000.
Posted on Jun 17th, 2014 by Lyons Davidson