Cases arising from the damage done by rioters during the 2011 riots are now beginning to come to court.
Recently, one such case was decided concerning the extent of the losses covered by the Riot (Damages) Act 1886. The Act provides that compensation will be due where there is damage to a building or its contents by ‘persons riotously and tumultuously assembled together’. In such cases, compensation is paid by the Government.
It was straightforward for the insurers (who otherwise stood to pick up the bill for their policyholders’ claims) to show that the damage was the result of a group of youths which met the definition, as the rioters had looted and burned the property concerned. A claim for more than £49 million was made.
However, the more contentious issue for the claimant insurance companies related to the extent to which they could claim compensation for the policyholders’ loss of profits and rent subsequent to the loss and damage caused directly. Nearly another £4 million was at stake.
The High Court ruled that the companies’ claims were limited to the physical damage to the premises and the property in it. The statute did not cover consequential losses of profit or rent.
Whether this will lead to a hardening of commercial insurance policy rates or wider exclusion clauses remains to be seen, but it is yet another good reason to make sure you fully understand all the clauses in your insurance policies and take advice as needed.