New Riot Bill may leave claimants 'out of pocket'

The Home Office has published a draft Bill to address issues raised by the UK riots of 2011, despite concerns from insurers and lawyers that it could leave claimants out of pocket.

The government hopes the Riot Compensation Bill will replace the outdated Riot (Damages) Act 1886, and would modernise the way in which the public can claim compensation for loss caused by civil unrest.

Among the proposals are plans to cap the claim limit for damages caused by riots at £1m per claim. The limit proposal marks a move away from a previously proposed £2m turnover cap.

Policing minister Mike Penning remarked: 'The draft Riot Compensation Bill will replace an Act which is no longer fit for the 21st Century with a system that is practical, flexible and will meet the needs of any future compensation claims.

'Small and medium-sized businesses are at the heart of their communities and it is right that the government supports them when they suffer unexpected loss or damages. This draft Bill will provide a safety net for businesses and individuals should the worst occur while also protecting the public from picking up the bill for very large compensation claims.'

Mark Shepherd, manager of general insurance at the Association of British Insurers, welcomed the move but expressed concern over some aspects of the proposals.

'The draft Bill does not appear to cover loss of trade for businesses, loss of rent for landlords, or alternative accommodation costs as a result of a riot,' he said. 'This could have a serious impact on businesses or residents that have had to cease trading or move out of their homes because of damage to their property.'

He continued: 'The draft Bill outlines that Police and Crime Commissioners will decide if a disturbance constitutes a riot, however given PCCs are essentially liable for the cost of damage this appears to create a conflict of interest. A more independent determination of when a disturbance is a riot may avoid this.'

Also commenting on the proposals was Catherine Percy, a partner at RPC, who said: 'The new compensation cap and the proposed exclusion of consequential loss claims in the draft Bill could still leave some claimants out of pocket. This applies to both insurers and policyholders looking to recover their losses, but also uninsured individuals and businesses.'

She added: 'The new draft bill ensures that it remains the responsibility of the police to provide compensation for riot damage, rather than leaving businesses and their insurers to cover the cost - a proposal made in the aftermath of the riots that could have led to higher premiums and the exclusion of riot from insurance cover in some areas.'

Yet Percy says the introduction of a compensation cap, limiting the amount of damages a claimant can claim from police authorities could leave some businesses and insurers exposed.

'The new draft Bill scraps a proposal to limit claimants to businesses with a turnover of less than £2m, a change which will be warmly welcomed. However, those with riot claims in excess of £1m will not now receive compensation over this sum,' she continued.

The proposed legislation also clarifies that businesses and insurers will not now receive compensation from police authorities for consequential losses.

'The [Bill] has put to bed any confusion over whether consequential losses, for example business interruption or loss of rent, caused as a result of rioting will be recoverable from the police, from the date the new Bill is enacted,' added Percy.

'While the clarity is helpful, the fact that claims for consequential loss will not be covered and will be expressly excluded may potentially leave businesses and their insurers without redress, if riots occur on the same level as the riots in August 2011.'

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John van der Luit-Drummond is legal reporter for Solicitors Journal