The Riot Compensation Act 2016 takes full effect on Thursday 6th April 2017, a move that is positive for insurers according to international law firm Clyde & Co.
Repealing the Riot (Damages) Act 1886, the Act creates a new scheme that allows compensation to be claimed from local police authorities for property that is damaged, destroyed or stolen in the course of a riot.
But the firm warned that the main area of interest will be the detailed regulations accompanying the statue.
The new Act was introduced in response to the London riots of 2011, which brought the little known and used 1886 Act into the spotlight. During the course of processing claims it became apparent that the 1886 Act was no longer fit for purpose.
As a result of the experience from 2011, the Riot Compensation Act creates a new scheme for property damaged, destroyed or stolen during a riot. It allows compensation to be claimed for uninsured or inadequately insured property, and to be reclaimed by an insurer. The Act abolishes the right to consequential damages and introduces a ‘compensation cap’ of £1m per claim.
Neil Beresford, partner, said: “The Act is good news for insurers. It tidies up the scope of the compensation rules and brings an old and obscure Victorian statute up to date. It’s primary value for insurers is as a clarifying measure although there are some useful additions, such as the extension of the compensation scheme to motor vehicle damage.”
Regarding the regulations, which were published in part in March, Beresford said: “The regulations will have the greatest significance for insurers. The statue sets out the general principle; the regulations dictate how it will work.
"The regulations set out a new streamlined claims process, addressing the problems that came to light following the 2011 riots whereby claimants faced a confusing and long drawn out claims process.
“A key issue will remain how to identify when a riot has occurred. This was one of the major problems in the 2011 London riots. In parts of London, rioting was definitely taking place, but many incidents were no more than opportunist and isolated acts of damage and theft. One cannot say that London in its entirety was subject to riot.
“The language in the Act has been simplified, with the definition of ‘riot’ now according with the criminal law as set out in section 1 of the Public Order Act 1986."
Some of the practicalities of the adjustment process have also been tidied up. Beresford said: “After the London riots, many of the mainstream loss adjusters became busy or conflicted, and police authorities encountered difficulties in finding enough advisors to validate claims. The regulations contemplate the formation of a riot claims bureau – to be the subject of further regulation when required – to improve the adjustment process. Many issues will remain to be ironed out at that stage.