Following a public consultation on reform of the Riot (Damages) Act 1886 by the Home Office, which was itself a response to the riots of 2011, the Government has published the Draft Riot Compensation Bill. The underlying purpose of the Bill is to protect people whose property is damaged in a riot and provide a mechanism for them (and their insurers) to claim compensation from the Police on account of the latter's failure to maintain law and order.
The Key Provisions
- The Bill introduces a cap of £1 million per claim.
- Consequential losses are expressly excluded.
- Claims for damage to motor vehicles on the public highway will only be covered if the vehicle is not insured for riot damage. For vehicles that are so insured, insurers will only be able to recover compensation if the vehicle is part of the insured's stock in trade.
- Damage caused as a result of rioting in certain types of secure facilities (including prisons and immigration centres) is expressly excluded.
- The definition of "riot" is modernised and accords with the definition in section 1 of the Public Order Act.
- Claims for damage to permanent or semi-permanent structures (such as caravans or houseboats) are covered.
- Subject to further regulation, expenses incurred by claimants in bringing claims (such as loss adjusters' fees) are recoverable.
- Subject to further regulation, the amount of compensation payable may be reduced to reflect the costs of administering the scheme (equivalent to an excess).
- Compensation will generally be paid on a "new for old" basis, although this will vary depending on the nature of the goods damaged.
Impact for insurers
The explanatory notes accompanying the Bill put the net financial benefit from the changes (to the public purse) of approximately £30.4 million. This is broken down as an additional liability of £11.6 million (as a consequence of replacing items "new for old") offset by a saving of £42 million as a result of introducing the £1 million cap per claim. The majority of the £30.4 million saving will be borne by insurers.
Insurers may wish to address existing wordings in the context of addressing the £1 million cap per claim and the fact that consequential losses flowing from riot damage will no longer be recoverable.
The draft Bill may need some tweaking. For example, Section 2(2) gives the impression that insurers cannot claim for building damage, whereas in Section 2 (1) individuals expressly can claim for building damage; surely it cannot be the intention that insurers are unable to claim for that particular loss? The issue does not appear to have been discussed in consultation, and the draft Bill's explanatory note 20 gives the impression claims can be made both for a building and other property, so we presume it is a drafting ambiguity. This will need to be addressed as the legislation goes through parliament.
This is a summary of the Riot Compensation Bill only and it is probable that amendments will follow debate in Parliament.