Claims for compensation under the Riot (Damages) Act 1886

The Riot (Damages) Act 1886 is designed to compensate people and businesses which suffer losses following riots. It also enables insurance companies which have paid out claims under policies to recover the cost of such claims from the relevant police authority in charge at the place of the riots.
The thinking behind the Act appears to be that it is right and proper that where, as a society we put in place a system to protect us from riots (ie, the police), and that system, for whatever reason, fails to do so, then it is appropriate that that system compensates us, the public.

There has been much debate in the press, as well as within the insurance and legal industries, as to whether businesses can claim compensation under the Act for consequential losses, ie for losses other than damage to property, such as loss of profits. The government has, perhaps unsurprisingly, stated that only damage to property can be compensated under the Act. If consequential losses were to be allowed then the cost of the riots to the police and, by extension, the taxpayer would rise exponentially.

However, having reviewed the Act and the relevant Regulations, it is unclear on what basis consequential losses would be excluded.

The Act states:

Where a house, shop, or building in a police area has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as hereinafter mentioned shall be paid out of the police fund of the area to any person who has sustained loss by such injury, stealing, or destruction…

Claims for compensation under this Act shall be made to the compensation authority of the police area in which the injury, stealing or destruction took place, and such compensation authority shall inquire into the truth thereof, and shall, if satisfied, fix such compensation as appears to them just

It is in our view arguable that loss arising from the destruction of property can properly be said to include consequential loss. Further, the only restriction on the calculation of the loss is limited to what appears “just”, albeit what is “just” is to be determined by the compensation authority itself leading, perhaps, to a conflict of interests.

In any event, until the issue is decided, businesses may wish to include consequential losses in claims for compensation made to the body set up by the government in Glasgow for the purpose of handling the claims but ensure that they do so within the 42 day time limit from the date of the damage to property during the riot.