In Mitsui Sumitomo Insurance Co (Europe) Ltd and Anor v The Mayor’s Office For Policing And Crime  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.