In Mitsui Sumitomo Insurance Co (Europe) Ltd and Anor v The
Mayor's Office For Policing And Crime [2014] EWCA Civ 682,
the Court of Appeal has handed down a landmark decision on the
recoverability of consequential losses under s2(1) of the Riot
(Damages) Act 1886 (the "Act").
In September last year, the High Court confirmed that the Act was
not intended to cover anything other than physical damage to
property. Therefore consequential losses were not recoverable (see
our blog on this decision here).
The claimants' cross-appeal was successful on the issue of
damages as the Court of Appeal held that the judgment of the High
Court erred in its interpretation of s.2(1) of the Act and
consequential losses were recoverable by the insurers.
It was held that on the plain wording of s.2(1) of the Act, nothing
supports the proposition that the loss sustained cannot include
consequential losses caused by the injury or destruction of the
property. Looking at the historical and legal background to the
Act, Lord Justice Moore-Bick stated that historically, those who
suffered property damage as a result of riotous and tumultuous
behavior would have been able to recover damages for all their
loss. The rationale behind this approach is enshrined in previous
case law. The Court has held that losses which are a necessary or
immediate consequence of a riot are recoverable. A consequential
loss, such as damage to furniture, is not distinct from damage to
the property itself, and is therefore recoverable. This is
obviously subject to the usual common law rules of causation and
remoteness. Moore-Bick LJ saw nothing in the Act to indicate that
Parliament intended to change the law so as to deprive claimants of
the right to compensation for loss consequent on physical
damage.
The Court of Appeal concluded that the purpose of the Act was
remedial so it deserves a liberal interpretation. Moore-Bick LJ
acknowledged that this decision may seem unfair and unwarranted yet
it was for Parliament, and not the courts, to amend or remove the
Act.
This judgment provides insurers the opportunity to recover business
interruption and other consequential losses that resulted from the
August 2011 riots.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
