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Insurers benefit from London riot legal decision

A UK appeal court last week (20 May) ruled that the insurers of a Sony warehouse destroyed in the London riots of August 2011 were not liable for some £14.3mn ($24mn) of business interruption losses stemming from the incident, reversing an earlier ruling.

The court said the "consequential losses", together with the physical damage claims, should be settled by the London Metropolitan police, as stipulated under a Victorian-era law that makes the police liable for riot-related damage on the grounds that it is their responsibility to prevent disorder.

But Stuart White, a partner at law firm RPC, said there was a "real prospect" that the London police authority would now appeal to the UK Supreme Court.

The decision will force the police to pay for losses including business interruption costs and loss of rent stemming from the 2011 arson attack, which destroyed the distribution centre.

White said there were a number of other claims pending on the decision of the appeals court, adding that the associated costs to the police were likely to lead to a change of law.

The case was brought against the Mayor's Office for Policing and Crime by three insurers: Mitsui Sumitomo, Tokio Marine Europe and RSA.

Chris Wilkes, partner at law firm DAC Beachcroft, who acted on behalf of Sony's insurers, said it was possible that the overall cost to police would "soar" as a result of the verdict.

"Insurers may in turn find that more claims are disputed and that the police become even more stringent in their adjusting of quantum, utilising arguments such as whether it is just and contributory negligence."

He said the Home Office had already commissioned an independent report that could lead to changes in the act to state that consequential losses are not covered.

A consultation paper on the changes is expected to be published imminently.

"However, that will only affect future riots," said White. "All claims following the 2011 riots are currently governed by this latest decision, and will remain so unless it is successfully appealed to the Supreme Court."

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