Prime minister confirms compensation can be sought ‘even if uninsured’

The ABI is in talks with the Home Office and Treasury to decide exactly which riot claims insurers can get refunded under the Riot (Damages) Act 1886.

The talks aim to clear up confusion over refunding in areas such as business interruption and motor. They should also clarify how insurers can go about making a claim.

An ABI spokesman said the government’s priority was to help uninsured riot victims before giving any guidance on insurer refunds, but added: “We have held productive and ongoing discussions with government representatives.

“The next step will be to agree with the government the scope of the police compensation schemes in terms of what is covered and how insurers can make a claim from them,” added the spokesman.

Under the act, insurers can be refunded for all legitimate claims relating to a riot from the relevant police authority, as can individuals.

Speaking in the House of Commons, prime minister David Cameron said: “On repairing the damages, I can confirm that any individual, homeowner or business that has suffered damage to, or loss of, their buildings or property as a result of rioting can seek compensation under the Riot (Damages) Act, even if uninsured.”

According to the act, authorities will pay out for damage caused by at least 12 people “riotously and tumultuously assembled”.

Some believe the act also covers business interruption, although the legislation does not mention this.

A Crawford spokesman said: “Although many commentators have suggested that compensation under the act is limited to the cost or repair, reinstatement or replacement of damaged, destroyed or lost/stolen property, it is arguable that claims can be made for wider ‘loss’ consequent on physical damage.

“Policyholders and insurers will, no doubt, want to ensure that their initial claims include business interruption as well as physical loss and damage.”

Opinion is also split over whether motor policies can be refunded under the act.

Allianz chief executive Andrew Torrance said: “Motor claims, unless the car is in a garage, are not covered by the act, simply because when the act was drawn up nobody envisaged motor vehicles.”

Cameron, however, has suggested that insurers can be refunded for claims from motorists with third-party fire and theft insurance.

There’s further confusion over where the funding will come from.

Cameron said the police authorities would get all the money they need to meet the cost of legitimate claims. However, a government official said: “Discussions are ongoing between the Home Office and the Treasury as to how this will be funded. There is no estimate yet for the total cost.”

The ABI has estimated that the total cost of riot claims will be more than £200m.

Market views

Adrian Brown, RSA UK chief executive on the government’s commitment to help under the Riot Act:

“We welcome the government’s package of measures. This public-private partnership will ensure that communities are rebuilt and businesses and homeowners put back on their feet as quickly as possible. We are doing everything we can to help our customers.”

AXA commercial claims and underwriting director David Williams on reacting quickly:

“We always like to be proactive on claims, even more so when you’re talking about this sort of claim. We are plotting every exposure that we have, we are contacting our policyholders and brokers in the area, and we’re sending out loss adjusters. We’re doing as much as we can.”

Stuart Randall, chief executive of Ataraxia, says the riots are a wake-up call for firms that want to cut cover:

“As times get hard, businesses look to cut covers. This is a good example of why people should not cut covers. Brokers should be able to use this as a wake-up call to warn them that this could happen. In times of relative calm, people get complacent.”