Court of Appeal rules consequential losses can be recovered under Riot Act

The Court of Appeal has overturned a ruling that consequential losses could not be recovered from the police after a riot.

The appeal was brought by the insurers of the Sony Distribution Centre in Enfield, which was destroyed in an arson attack during the 2011 London riots.

The High Court had previously ruled that damages for property, stock and business interruption could be reclaimed from the police under the Riot (Damages) Act 1886, but ruled out consequential loss.

However the Court of Appeal today held that the Act entitles property owners and their insurers to compensation for the loss suffered following damage to their property.  

The ruling is the first time a court has ruled that compensation payable under the Act is not limited to physical damage.

Kennedys’ partner David Wilkinson, who acted on behalf of RSA, said: “This is a landmark decision.

“Insurers, and uninsured claimants, will now be able to recover business interruption losses suffered as a result of the London riots. This is no doubt welcome news to the insurance industry as a whole, but may in turn have a significant impact on the way in which riot insurance is priced, or made available, in Britain.

“The judgment may see insurers renew their efforts to pursue previously rejected claims under the 1886 Act.”

He warned, however, that police remained entitled to “fix” an amount of compensation if they think it “just” and take into account the behaviour and precautions taken by the affected businesses.

DAC Beachcroft partner Chris Wilkes, who acted on behalf of insurers Mitsui Sumitomo and Tokio Marine, said the decision could have “far reaching implications for the insurance industry, the police and the public.”

“It is possible that the overall cost to the police may soar. Insurers may in turn find that more claims are disputed and that the police become even more stringent in their adjusting of quantum, using arguments such as whether it is ‘just’ and contributory negligence.

“It is also conceivable that this will be the final nail in the coffin for the Act in its current form. Indeed, the court commented that, although the principles underlying the Act may seem surprising, there is a need to strike a fair balance between the interests of the property owner and the community – and that only parliament can change the law.”