DAC Beachcroft Reacts To Landmark Court of Appeal Ruling on Consequential Losses in Riots Damages Case
Published 20 May 2014
(1) Mitsui Sumitomo Insurance Co (Europe) Ltd (2) Tokio Marine Europe Insurance Ltd (3) Royal & Sun Alliance Insurance Plc and Others v The Mayor’s Office for Policing and Crime
In a landmark ruling, the Court of Appeal today overturned the first instance decision that section 2 of the Riot (Damages) Act 1886 does not allow recovery for consequential losses. This is the first case to address the meaning of the Act in these terms.
The appeal arises out of claims against the Police for recovery of material damage and consequential losses following the arson attack on the Sony DADC Distribution Centre in Enfield during the 2011 London riots. The fire burned for around ten days and was one of Europe's largest arson attacks, resulting in the total destruction of the Centre.
The Court of Appeal determined a number of issues in this important test case, including whether consequential losses were, in principle, recoverable under the Act. The Court held that, as a matter of ordinary language and unless specifically excluded, the Act entitles owners (or, by substitution, their insurers) to compensation in respect of the loss suffered following damage to their property. This includes consequential loss, loss of rent and loss of profit.
The Court reasoned that that there was no specific exclusion in the Act and recovery for this head of loss is not too remote. The principle that the community have a strict liability for the consequences of riotous behaviour by stepping into the shoes of the trespasser has been enshrined in statute since 1714 and should be widely interpreted.
"This decision may have far reaching implications for the insurance industry, the Police and the public," comments Chris Wilkes, partner at DAC Beachcroft LLP, who acted on behalf of the insurers for Sony.
"It is possible that the overall cost to the Police may soar. Insurers may in turn find that more claims are disputed and that the Police become even more stringent in their adjusting of quantum, utilising arguments such as whether it is "just" and contributory negligence.
"It is also conceivable that this will be the final nail in the coffin for the Act in its current form. Indeed, the Court commented that, although the principles underlying the Act may seem surprising, there is a need to strike a fair balance between the interests of the property owner and the community – and that only Parliament can change the law."