The High Court of England and Wales has confirmed that consequential losses claimed as a free standing head of claim are not recoverable under s2(1) of the Riot (damages) Act 1886 (the “1886 Act”).

In Mitsui Sumitomo Insurance Co (Europe) Ltd and Anor v The Mayor’s Office For Policing And Crime [2013] EWHC 2734 (Comm), the Court ruled that s2 of the 1886 Act, which is designed to compensate victims of rioters for damage caused to property and/or the contents of the property, is restricted to providing compensation in respect of physical damage.

During the civil unrest in the summer of 2011, Sony’s UK distribution centre was looted and destroyed by a group of 25 youths. As a result, Sony’s insurers, Mitsui Sumitomo Insurance Co (Europe Ltd) and Tokio Marine Europe Insurance Ltd, indemnified Sony for its losses including losses arising out of business interruption (“BI”).

Sony’s insurers subsequently brought an action under the 1886 Act, seeking compensation. The insurers argued that consequential losses fell within the scope of s2(1) and/or s2(2) of the Act on the basis that the Mayor’s Office For Policing And Crime were strictly liable in tort to pay damages to the victims of rioters.

Mr Justice Flaux, who delivered the court’s judgment, ruled that the 25 youths responsible for the damage were ‘persons riotously and tumultuously assembled together’ within the purposes of the 1886 Act. As such, the insurers were able to claim compensation for the physical damage caused.

However, Flaux J, in turning to the issue of consequential losses, ruled that the 1886 Act was not intended to cover anything other than physical damage to the property, such that BI losses were not recoverable.

The judgment highlights that insurers will not be able to recover BI losses arising from civil unrest under the 1886 Act.