But consequential losses are not covered by Riot Damages Act
The High Court has paved the way for insurers to recover money from the police, following a ruling that the damage to the Sony warehouse in London in 2011 was caused by rioting.
Tokyo Marine and Mitsui Sumitomo, Sony’s insurers, brought a £49.5m claim for property, stock and business interruption under the Riot (Damages) Act 1886 against the Mayor’s Office for Policing and Crime (MOPAC), the body responsible for the Metropolitan Police.
RSA claimed £9.35m for the payout to warehouse owner Cresta Estates for property damage and loss of rent.
The case hinged on whether the fire was caused by rioting and was covered by the Riot Act.
Three-minute attack
A group of 25 youths smashed into the warehouse on 8 August 2011, using a variety of makeshift weapons. They looted the building and two of them threw petrol bombs into the building. The incident took just three minutes. But the fire took hold and burned for 10 days, resulting in the total destruction of the warehouse, equipment and stock.
The damage led to the largest single claim for the £200m damages caused by the riots.
Sitting in the Commercial Court, Mr Justice Flaux said: “The behaviour of the group … can properly and objectively be described as the behaviour of an agitated, excited and volatile group, not the behaviour of a gang of professional thieves.”
Consequential losses ruling
However, the judge ruled that only physical damage and not consequential losses were recoverable under the act. It is the first time a court has ever answered whether consequential losses are recoverable.
“The majority of the loss was physical damages and therefore the judgement as a whole is a success for insurers,” said Ben Aram, a solicitor at Kennedys, which acted for RSA.
But he warned that the ruling that consequential losses were not covered by the act could lead to premium increase.
“It is of wider significance to the wider insurance community, because it will inform insurers’ decision on how to write riot insurance in future and whether to insure at all premises that is more likely to generate business interruption losses if affected by a riot,” he said
Both sides have 21 days to appeal the ruling and the Mayor’s office has confirmed it will be doing so.
A spokesperson for MOPAC said: “While we are pleased that the court has recognised MOPAC is not responsible for covering consequential losses, it is immensely disappointing that they have ruled this was a riotous act.
“There is an important point of principle and public money at stake here and we have sought leave to appeal.”
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