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Insurers Use Victorian Law to Claim $310 Million in Riot Damages

Insurers Use Victorian Law to Claim $310 Million in Riot Damages
The Peckham peace wall has been preserved outside the library remembering the riots a year ago on July 11, 2012 in London, England. Photograph: Peter Macdiarmid via Getty Images

U.K. insurers including RSA Insurance Group Plc are using a 19th century law to claim back as much as 200 million pounds ($310 million) of losses incurred in last year’s riots from the taxpayer.

The Riot Damages Act of 1886 entitles anyone who has suffered losses from rioting to recoup the cost from the police. Insurers have paid out on 95 percent of customer claims linked to the riots and are seeking reimbursement under the law, said the Association of British Insurers, an industry lobby group.

“The police are legally liable under the act for compensation for riot damage,” said Stuart White, a partner at Reynolds Porter Chamberlain LLP specializing in property and liability claims. “Insurers benefit from this as do people who haven’t got insurance or are underinsured.”

Any payout to insurers from the taxpayer would coincide with the government’s biggest austerity drive since World War II. Aviva Plc, RSA and Allianz SE, the three biggest commercial property insurers in the U.K., say they plan to use the act to win compensation for claims they’ve met. In all, the industry has paid 200 million pounds to policyholders, according the ABI.

“If an insurance policy doesn’t specifically exclude riot cover, then the insurance company should pay -- that’s the end of it,” said Mike Weatherley, a Conservative lawmaker and chairman of the all-party parliamentary group on retail and business crime. “If it does exclude riot cover, then fair enough, they should get that back from the government.”

Police Claims

Zurich, which insured the Carpetright Plc store in Tottenham, north London set ablaze in last August’s riots, said it has settled 89 percent of claims with customers and is pursuing the police for compensation.

“We’ve submitted all the claims forms for those claims to the police authorities in the agreed 42-day period and we’re confident we will recover our costs under the Riot Act,” RSA’s Chief Executive Officer Simon Lee told reporters on a conference call yesterday as the insurer reported first-half earnings.

Allianz expects to be reimbursed in full for the riot damage, spokeswoman Amanda Biles said by e-mail. Aviva is also seeking money.

“Where we have settled claims, we have submitted all the documentation to the relevant authorities and we have received our costs for the majority of these,” the London-based company said in a statement. “Works and repairs are still in progress for some of the larger, more complex claims and so these have yet to be submitted.”

Business Interruption

More than 50 percent of the claims submitted by insurers to police forces have been declined, Aiden Kerr, head of property at the ABI said in a statement Aug. 1. Insurers are contesting those cases, ABI spokeswoman Sarah Bailey said.

They may have been declined because they were for business interruption costs, according to White. While the Riot Damages Act specifies that the police should pay compensation for damage to property, the courts are yet to rule if they should meet the costs of business interruption, he said.

“There needs to be a definitive court decision,” White said.

The government will “ensure victims are fully compensated” through local police forces, according to a statement from the Home Office. To date, the government has paid out 96 million pounds and has settled most claims, it said.

“We are also in the process of reviewing the Riot Damages Act to ensure it protects the most vulnerable and provides value for money for the taxpayer,” the Home Office said.

More than 1,500 people were arrested following the worst civil disorder since the 1980s in London, when rioters broke into shops, looted goods and set cars and property on fire.

Tottenham Unrest

The unrest began Aug. 6 in Tottenham after a local black man, Mark Duggan, was shot and killed by police who had stopped his car intending to make an arrest. The violence later spread to other U.K. cities including Manchester, Birmingham, Bristol and Leeds.

“This hasn’t been the finest moment for the insurance industry dealing with what is a deprived constituency,” said David Lammy, the Labour lawmaker who represents Tottenham. Retailers “expected an easy and quick payout and that did not happen in many, many cases.”

Insurers have since raised their premiums for retailers in Tottenham by between 20 percent and 25 percent, he said in a telephone interview.

“The government needs to look at that very carefully in assessing what their contribution should be” to subsidizing insurance costs, he added.

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