Court of appeal rules business interruption and other consequential losses can now be recovered from the police after London riots.
The Riot (Damages) Act 1886 has always allowed claims for physical damage. However, following the London riots there have been further attempts by local businesses and their insurers to claim consequential losses such as loss of profit and loss of rent following the damage or destruction to local businesses.
In September 2013 the High Court held that parties could only claim direct losses from the police (such as claims for physical damage to property) and could not recover any consequential losses.
This week the Court of Appeal overturned the High Court decision (a link to that judgment can be found here). As a result, property owners and insurers can now recover compensation for losses such as loss of profit and loss of rent that were caused in the London riots.
What does this mean for insurers?
This decision will undoubtedly be welcomed by those affected by the riots as well as their insurers. The decision may prompt insurers to revisit previously rejected claims. However, insurers will undoubtedly find that the police will begin to take a harder line on loss adjusting, liability investigations and contributory negligence to minimise their future exposure.
In addition, it must be remembered the police are entitled to fix the compensation amount to that which they consider 'just' taking into account the actions of the business including whether the businesses took appropriate precautions. As such the police are likely to carry out far more in-depth investigations as to the behaviour of the businesses themselves and use this to try to "fix" the compensation and reduce the amounts they pay out.
Watch this space..
The Court was very critical of the current law and it is expected that Parliament may look to change this moving forwards. In addition it remains possible that police will seek to appeal the decision given the significant financial implications.
However, unless this decision is successfully appealed local businesses and their insurers will now be able to claim consequential losses caused by the London riots from the police force.