Andrew Wade predicts a riot law upheaval when the draft Riot Compensation Bill is passed
Key changes in the draft bill
- A wider range of property will now be eligible for compensation
- It will no longer be necessary to prove that rioters also acted “tumultuously”
- Compensation will be limited to £1m per claim and consequential losses will be irrecoverable
Riot is one of those arcane areas of the law that rarely sees the light of day – until one takes place. The most prominent recent example was, of course, the widespread disturbances in London and other towns and cities in August 2011. The property destruction and theft that ensued led to extensive compensation claims – and some difficult issues concerning liability.
What, in law, is a riot? Under Section 1 of the Public Order Act 1986, there must be 12 or more persons present together, who use or threaten unlawful violence for a common purpose, and whose conduct, taken together, is such as would cause “a person of reasonable firmness” to fear for their personal safety.
The law covering compensation, though, is worded differently. It derives from the Riot (Damages) Act 1886 (“the 1886 Act”), which refers to property damage caused by “persons riotously and tumultuously assembled together”’. The words “and tumultuously” have given rise to difficulties, as it is not entirely clear what they add.
Compensation – who pays?
Claims must be made to the compensation authority of the police area in which the loss was suffered. Assuming the compensation claim is accepted, section 2(1) of the 1886 Act provides that it is to be “paid out of the police fund of the area to any person who has sustained loss by such injury, stealing or destruction”.
Section 2(2) of the 1886 Act provides that the amount of any such claim is to be reduced by any sum received by the claimant from their insurers – who in turn can recover the amount paid out from the compensation authority.
The claimant can sue the authority for compensation if “aggrieved” by its decision.
What losses can a claimant recover?
The 1886 Act contains no specific guidelines, and the issue was tested last year in Mitsui Sumitomo Insurance Co (Europe) Ltd and another v The Mayor’s Office for Policing and Crime [2014] EWCA Civ 682. The case concerned the Sony distribution warehouse in Enfield, north London, which was looted, set on fire and destroyed by a gang of around 20-25 people, leading to losses (including consequential losses) of more than £60m.
The Court of Appeal first held that the attackers were riotously and tumultuously assembled. A riot could be committed in a private place, and although “tumultuously” connoted noise, the noise did not have to be heard externally. The court then held that the 1886 Act covered not just physical damage, but also consequential losses. This meant the police authority was liable for the full extent of the losses arising.
Following Sumitomo, the last government launched a public consultation on reforming the law of riot. It published the responses, and a draft bill, in March 2015.
Draft Riot Compensation Bill
The draft bill provides for the repeal of the 1886 Act. The Public Order Act definition will be adopted for determining whether there has been a riot – so there will be no need to prove that rioters also acted “tumultuously” in order to claim compensation.
The 1886 Act permits claims for damage to (or to property within) a house, shop or building, and appurtenant areas. The bill will permit claims for a wider range of property damage. The definition of building will now include a building in the course of construction. Property on land being used for business purposes and motor vehicles will also be covered. However, in the case of vehicles, insurers’ right of reimbursement will be limited to damage caused to motor vehicles forming part of the stock in trade of a business.
Full compensation will be available where successful claimants were uninsured or underinsured (and this generally includes where an insurance policy contains an excess or other deduction). However, claims will be capped at £1m.
In addition, the bill will prohibit claims for consequential economic loss. But this (together with the claims cap) may mean that some property owners and occupiers have to pay substantial additional premiums, or self-insure, for their non-indemnified risks.
Regulations will be made as to who is the appropriate person to make a claim (in particular where more than one person has an interest in the property) or where a single claim must be consolidated (for example, to cover freehold and leasehold interests).
Police authorities will remain responsible for determining whether a riot has taken place and for assessing claims.
However, there will be a new power for the secretary of state to take over the claims process from the police authority in the event of a major disturbance. In such circumstances, the secretary of state will have the power, on a case-by-case basis, to set up a “riot claims bureau” – which may prove to be a sensible way to handle large numbers of claims for limited amounts. The process could even be outsourced to loss adjusters.
The measures will only extend to England and Wales. The government will, however, consult with the Scottish government as to whether analogous changes are needed to the current law – the Riotous Assemblies (Scotland) Act 1822.
Will the bill become law?
Understandably, the new government will focus its attention on its key legislative priorities. However, Home Office ministers apparently remain committed to reforming riot compensation and are currently considering a range of options for introducing new measures in this session of parliament. These options include possible introduction as a private member’s bill later in the session, or connecting the measures to another related piece of legislation.
It is, therefore, likely that these provisions will find their way onto the statute book, and sooner rather than later.
Andrew Wade is a consultant at Farrer & Co LLP
