August 15, 2011
Practice Group:
Insurance Coverage
UK Riots Insurance Coverage—Guidance
for Corporate Policyholders
After several days of rioting, looting and criminal damage, many businesses have suffered substantial
losses across the UK, and possibly further afield due to supply chain problems originating in the UK.
The Association of British Insurers (ABI) latest estimate of claims likely to be paid by the insurance
industry is in excess of £200 million. Many businesses will be concerned to secure insurance
coverage for immediate damage to (or loss of) property and merchandise, and for longer term
implications such as loss of profits due to interruption of trading activities.
Insurance Coverage for Businesses
If your business has been affected in any way by recent events, the key message is to contact your
insurance broker quickly in order to carefully check what your company is covered for. The need to
act quickly arises from the fact that most insurance policies require claims to be notified within a
certain time period, which can be short in some policies.
For many companies more than one commercial insurance policy may be in play. Larger corporates
may have purchased property terrorism insurance which covers damage to property arising from acts
of terrorism, malicious damage, strikes, rioting and civil commotion. Losses from such risks may be
excluded from the main property programme where a property terrorism policy is in place.
A standard property or property terrorism policy is also likely to include cover to protect continuity of
the business following a disruption in trading due to the occurrence of property damage, for example
to cover consequential loss of profits. Some policyholders may also benefit from contingent business
interruption cover. This protects income and revenue streams where the policyholder’s business
premises have not been damaged, but a supplier or customer is unable to trade as normal due to
interruption to its business.
Whatever the nature of insurance coverage available to your organisation, it is essential that this is
reviewed without delay with your broker, along with details of any potential loss or damage, to assess
if a notification should be made to insurers.
Riot (Damages) Act 1886
Policyholders should consider submitting statutory claims for compensation from local police
authorities, in addition to making notifications under their insurance policies.
The Riot (Damages) Act 1886 requires the relevant local police authority to compensate individuals
and organisations for loss or damage to property as a consequence of a riot. Contrary to some reports,
neither the Home Secretary nor the police have to designate an event as a "riot" in order to allow
claims to be made under the Act. The definition of a riot is found in The Public Order Act 1986:
“where 12 or more persons who are present together use or threaten unlawful violence for a common
purpose and the conduct of them (taken together) is such as would cause a person of reasonable
firmness present at the scene to fear for his personal safety, each of the persons using unlawful
violence for the common purpose is guilty of riot.”
UK Riots Insurance Coverage—Guidance for Corporate
Policyholders
The Act has attracted significant political and media attention in recent days. In a statement to
Parliament on 11 August 2011, David Cameron encouraged homeowners and businesses to submit
claims for compensation under the Act, adding that funds would be made available to meet
compensation claims arising from the events of the past week. The Prime Minister also confirmed
that the period to lodge such claims had been extended from the normal 12 days from the occurrence
of damage, to 42 days.
Compensation is not available under this statutory scheme in respect of consequential losses; only
claims for theft or property damage may be accepted. Even if a policyholder has insurance coverage
for theft or property damage, it would be advisable to submit a claim for compensation from the
relevant police authority, in addition to notifying a claim under their insurance. This is because
insurers are also entitled to compensation under the Act in respect of amounts paid under insurance
policies on account of property damage. Moreover, the Act expressly provides (section 2(2)) that,
where an insurer has paid under the policy and then recovers from the police authority, the “policy of
insurance … shall continue in force as if the [insurer] had made no such payment” and thus the claims
record of policyholders should be unaffected. To preserve the ability of insurers to claim
compensation under the scheme in relation to amounts paid under insurance policies, it is important
that the policyholder has submitted a claim under the Act in the first place.
In response to the recent events, the Association of Police Authorities has published guidance on
making a claim under the Act. This guidance can be found at
www.direct.gov.uk/en/Nl1/Newsroom/DG_198958, as can a downloadable claim form. The claim
form should be submitted to the relevant local police authority—for details, please refer to
www.apa.police.uk/your-police-authority/contact-information. For businesses affected at multiple
locations, we suggest that separate claim forms are submitted to each police authority in relation to
premises which fall within the boundary of that authority.
Authors:
Frank Thompson
frank.thompson@klgates.com
+44.(0)20.7360.8183
Hussain S. Khan
hussain.khan@klgates.com
+ +44.(0)20.7360.8181
Additional Contact:
Jane Harte-Lovelace
jane.harte-lovelace@klgates.com
+44.(0)20.7360.8172
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UK Riots Insurance Coverage—Guidance for Corporate
Policyholders
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