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London riots ruling opens way to new insurance claims

Police forces may face claims in the millions of pounds from insurance companies as a result of property damaged in London rioting

22 May 2014

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Police forces may face claims in the millions of pounds from insurance companies as a result of property damaged in London rioting

The London Mayor's Office for Policing and Crime (MOPAC) is responsible for paying consequential damages as a result of the Sony warehouse fire during the London riots of 2011, the Court of Appeal ruled on Tuesday.

Mitsui Sumitomo Insurance Co (Europe) Ltd, Royal and Sun Alliance Insurance Plc and Ors v The Mayor's Office for Policing and Crime (MOPAC) clarifies the principle that compensation payable under the Riot (Damages) Act 1886 is not limited to physical damage.

Sony's distribution warehouse in Enfield was looted and set on fire on the night of Monday 8 August 2011, during the rioting that took place in London following the fatal shooting of Mark Duggan. The attack was carried out by youths who broke into and looted the warehouse before throwing petrol bombs inside.

MOPAC declined to compensate the claimants under the 1886 Act for property damage and business interruption losses. An action was commenced to recover almost £60m of indemnified losses by insurers with an interest in the warehouse, as well as £4m of uninsured losses suffered by the owners of the stock inside.

Mr Justice Flaux decided at first instance that the attack fell within the scope of the 1886 Act so that insurers could, in principle, recover in respect of physical damage. He held that consequential loss was not compensable under the legislation.

However, the Court of Appeal dismissed MOPAC's appeal on the first issue and allowed the insurers' cross-appeal on the second.

Kennedys partner David Wilkinson, who acted on behalf Sony's insurer, RSA, said: "For the first time in over 100 years there is clarification that the compensation payable under the Act is not limited to physical damage.

"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. However, whether each and every claim will be ultimately paid remains to be seen, as police authorities are still entitled to 'fix' an amount of compensation if they think it 'just' and take into account all the circumstances including the 'conduct' of claimants as well as any 'precautions' taken by them.

"We will be watching with interest to see if this also prompts the government to initiate legislative changes, seeking to limit the types of losses that are recoverable."

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