Reading the Riot Act

Wednesday 9 July 2014

The Riot (Damages) Act 1886 provides a right to claim compensation where premises are damaged or destroyed by rioters from the statutory body responsible for overseeing the local police. In a landmark decision, the Court of Appeal has awarded compensation for consequential losses, such as loss of profit or loss of rent, caused as a result of rioting.

The case of Mitsui Sumitomo Insurance & others –v- The Mayor’s Office for Policing and Crime concerned damage caused to the Sony distribution warehouse in Enfield as part of the widespread disorder and rioting following the shooting of Mark Duggan by Police in August 2011. The warehouse had been looted and set on fire by a group of youths and was completely destroyed. The Mayor’s Office for Policing and Crime (MOPC) declined to compensate the Claimants under the Act for property damage and business interruption losses. Court proceedings were issued in which the Claimants sought to recover almost £60 million of indemnified losses by Insurers together with £4 million of uninsured losses suffered by owners of stock held at the warehouse.

The Commercial Court confirmed that in order for a valid compensation claim to be made under the Act there must be a “riot” within the meaning of the Public Order Act 1986; the rioters must be “tumultuously assembled”; and the rioters must engage in wanton damage to property as opposed to looting in order to steal.

In order to satisfy the requirement that the rioters are “tumultuously assembled”, it is required that the group be acting in an agitated, excited, volatile manner, usually also making a noise which, at least notionally, should put the police on notice of the riot. The Court took the view however that it was not necessary for the rioters to be making a “tremendous” noise and the real “touchstone” is that there must be some public element to the rioters’ behaviour so as to create a perceived or palpable threat. In this case, the Court considered the wider context of the riots in Enfield together with the social media content relating to it and found that a palpable threat had been created such as to make the Police notionally aware of the risk of an attack on the warehouse.

Whilst the Court was satisfied that the claim for compensation was validly made, the Court found that the wording of the Act was such that any compensation payable was limited to physical damage and did not extend to consequential losses, such as loss of profit or loss of rent. However, the Court of Appeal has now overturned this decision.

The Court of Appeal took the view that there is nothing in the Act which prevents a claim for consequential losses meaning that compensation can be sought for all losses incurred consequent on the damage to the property, to include business interruption losses.

Whilst the decision will be welcomed by those suffering losses caused by rioting and their Insurers, it is likely that the Act will be considered to be in need of reform given the extent of potential damages claims at the expense of the public purse in such situations.

In the meantime, the change in law will impact on insurance policies and not surprisingly Insurers are likely to exclude these type of losses in future policies. Caution should therefore be exercised at your next renewal and the wording ought  to be checked in detail.