In August 2011, four days of rioting affected several of England’s cities. The Association of British Insurers put the cost of damage at “well over £100m” and the claims that followed highlighted the importance of, and shortcomings in, a 130-year old statute, the Riot (Damages) Act 1886.
The 1886 Act provides that, in the event of a riot, the police authority for the area concerned shall pay compensation to any person whose house, shop or property is damaged or destroyed. Where such a person has received payment from an insurer, the compensation is payable to the insurer, and claimants do not have to prove that the police were at fault when making a claim.
The issue that arose in Mitsui Sumitomo Insurance Co (Europe) Ltd v Mayor’s Office for Policing and Crime [2016] UKSC 18; [2016] PLSCS 116 was whether claimants are entitled to compensation not just for physical damage caused to property during a riot, but also for any consequential losses of profit and rent as well. The damage in question was caused by a gang of youths who broke into a distribution warehouse in a business park in Enfield. The youths stole goods and threw petrol bombs, which caused a fire that destroyed the warehouse and the stock, plant and equipment within it. The insurers who paid out under the insurance policies relating to the property and the uninsured owners of stock in the warehouse claimed compensation under section 2 of the 1886 Act.
The Court of Appeal upheld the claim and ruled that the Mayor’s Office for Policing and Crime in London must pay out for consequential losses, as well as for the physical damage caused. However, the Supreme Court has now overturned the decision. Linguistic analysis of the relevant provisions of the 1886 Act by itself did not provide a clear-cut answer – but the historical background did.
Section 2(1) speaks of compensation for “loss by” the injury or destruction of a building or the injury, stealing or destruction of property within the building. However, preceding legislation had made it clear that statutory compensation was confined to physical loss and the Supreme Court decided that nothing in the 1886 Act had removed that limitation. As in the case of its predecessors, the statute sets out a self-contained statutory compensation scheme, which provides only partial compensation for damage caused by rioters and does not include cover for consequential losses.
The decision postdates the enactment of the Riot Compensation Act 2016, which received Royal Assent on 23 March 2016 and will repeal the 1886 Act when it is brought into force. The legislation overhauls the law on compensating claimants after a riot and makes welcome reforms to the claims process.
However, there will be no change in the philosophy on consequential losses, which are specifically excluded by the 2016 Act (although, where a claimant’s home is rendered uninhabitable, the amount of compensation may reflect costs incurred as a result of needing alternative accommodation). Furthermore, potential claimants should be aware that there will be a £1 million cap on the compensation that can be paid out on any single claim, once the statute is in force.
Allyson Colby is a property law consultant
