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Riot Damage - Key considerations for insurance claims and post-riot policy renewals

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    12-08-2011

    1. What insurance do you have?

    Property insurance, generally, covers damage caused by riot, civil commotion or malicious persons. However, the terms of the insurance policy must be reviewed to establish if this is the case in each instance and whether there are any specific exclusions for particular types of property (eg computers as opposed to machinery).

    2. Communicating with your insurer and others

    Insurance policies will often provide that:

    • an incident of loss of, or damage to, property must be notified to the insurers “immediately”, with details of the incident, and evidence to corroborate those details, provided within a few days (eg 7) or so;
    • if the damage or loss was caused by malicious person or thieves, the relevant Police Authority must be notified immediately; and
    • there could be different causes of loss or damage, including “riot”, “civil commotion” or “malicious persons”, which terms could be specifically defined or subject to particular interpretation depending on the policy wording as a whole, and even the terms of application or proposal forms; and
    • Failure to comply with provisions as to notification terms could well result in insurers’ refusal of claims.  You should liaise with your broker at the earliest opportunity.

    3. Trading losses

    Trading losses consequent upon the damage or losses may be recoverable under “business interruption”.  However, trading losses resulting from damage suffered by suppliers or purchasers are unlikely to be recoverable unless you have a type of cover often referred to as “contingent business interruption”.

    4. Further policy terms

    Even if damage caused by riot/civil commotion or malicious persons is covered under the policy, the policy may not respond to the claim if all terms and conditions of the policy have not been complied with.  Some policies may contain “warranties” or “conditions precedent” which, if you do not strictly comply with such provisions, can release the insurer from any liability under the policy from the date of non-compliance, regardless of whether the non-compliance related in any way to any loss or damage, or the incident giving rise to the loss.

    5. Disclosures to insurers in obtaining the insurance

    Insurers have statutory rights which protect them in the event that they have agreed to insure a risk on the basis of incomplete or inaccurate information.  As with warranties or conditions precedent, such misinformation can release the insurer from any liability under the policy, regardless of whether the misinformation related in any way to any loss or damage, or the incident giving rise to the loss.  Following a violent attack on property, an insurer may well look in particular at information it received as to, for instance, locks, shutters, security personnel and fire prevention.

    6. An alternative to insurance

    You may be able to obtain compensation under the Riot (Damages) Act 1886. However, you may not be able to claim in respect of trading losses.
    The threshold question is whether the loss or damage resulted from a “riot”.  The Public Order Act 1986 provides that “where 12 or more persons who are present together use or threaten unlawful violence for a common purpose and the conduct of them (taken together) is such as would cause a person of reasonable firmness present to fear for his personal safety each of the persons using unlawful violence for the common purpose is guilty of riot.”

    The Government has recently announced changes to the operation of the Act, including as to the funding of compensation payable under it, and raising the time limit to make a claim to 42 days from the date of damage.

    7. Renewals

    Insurers will be actively considering how they can better manage their potential exposures in respect of the recent disturbances, and may seek more extensive exclusions and restrictions for cover.  In order to renew insurance with terms of cover which are relevant and adequate for your business, you should work with your broker in assessing the experiences during, and consequences of, the disturbances.

     

    For more information contact

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