As national news and social media reports continue to paint a fast-evolving picture of the civil unrest sweeping the UK, questions abound about the damages being incurred by commercial and public infrastructure alike – and its implications for the insurance industry.
Offering insight into what’s happening, Sedgwick UK COO Peter Farrelly (pictured) noted that the peril being discussed – riot – is the only insured peril in the insurance contract defined by The Public Order Act of 1986. Examining the nature of the risk itself, he highlighted that it runs the gamut of deliberate fire-raising, to theft and looting, to small-scale malicious damage, as seen from coverage by both the mainstream media and social media.
“People have been seen damaging shop fronts, offices and some hotels, and it’s across a wide range of risks,” he said. “We’re seeing claims in retail, hospitality, commercial offices, educational establishments and other public sector buildings. At the extreme end, those claims are for fire, looting and theft, and malicious damage. We’re seeing claims of that description from relatively low value to the hundreds of thousands in the last few days.”
The situation is still unfolding and, as such, is “extremely fluid” - and Farrelly noted that he’s receiving claims from friends who are being advised to work from home amid concerns that similar demonstrations could lead to further rioting. He’s also receiving requests from insurance brokers looking to provide up-to-date advice to give clients on next steps. “One particular client I’ve looked after for many years runs a national restaurant chain and he’s seeking advice on what to do given that demonstrations are planned for Newcastle at the weekend.”
Farrelly’s advice is the same to everyone – put in place normal housekeeping around risk mitigation. This includes:
“It might seem to be stating the obvious but it’s worthwhile doing all these things now,” he said. “It’s the usual principles of risk management, on risk mitigation – to understand what you need to do to protect your premises and to remain constantly vigilant. That includes keeping an eye on the media and on social media, to see what is planned.”
Farrelly advised that anyone concerned by the unrest keep up-to-date with the latest guidelines being issued by the police around how people should approach potentially dangerous situations. Those security measures include standard procedures around making sure your staff and colleagues are safe, he said, and some businesses have a tough call to make in that regard. He noted that he’s being asked for advice on whether clients should pre-emptively close down their businesses – a decision he can’t make for them.
“Working in conjunction with the insurers and the owners of the premises themselves, you get that inevitable question – if we decide to close voluntarily, will the insurance policy cover us? And normally, it’s only the action of the police authority – or another competent authority – which forces a closure where the loss of sales will be recoverable.”
An information bulletin issued by Fenchurch Law to brokers and clients impacted by the riots highlighted The Riot Compensation Act 2016 (RCA) which outlines that in the event that a claim is declined, for example, due to a riot exclusion or a vehicle only being insured for third-party losses, the RCA may provide an alternative route for compensation.
For insured properties, the RCA requires an affected person first to claim via their insurers. However, If the claim is declined in full or part, the affected person can seek further remedy under the RCA. The Fenchurch Law bulletin outlined what the RCA will cover, noting that:
However, the RCA will not cover:
Farrelly emphasised that given the changing nature of the risk environment, the correct course of action is for those at risk to put robust plans of action in place, to allow them to respond quickly to events, to take the right precautions and to mitigate the risks they face.
“In terms of the insurance industry, the peculiar thing about riot claims is that compensation claims can be sought from the policy authority through the RCA 2016, where insurers can seek a subrogated recovery of up to £1 million for damage arising during a riot,” he said. “Riot is one of the few insured perils which is defined by legislation and the criteria is for it to involve 12 or more people acting with common purpose.”
As a result, he said, insurers and loss adjusters acting for insurers will need to demonstrate and provide evidence of the fact that a riot had occurred. It is this gathering of evidence that will allow insurers and uninsured parties to recover up to £1 million in losses from the government – for material damage losses, as consequential losses are not recoverable.
“So the insurance industry can and should provide advice on the gathering of evidence,” he said. “And we can do the gathering of evidence through CCTV coverage, through media coverage – both social media and mainstream – to provide evidence to demonstrate that a riot as indeed within the defined criteria occurred, and the right to recovery exists.”
As outlined by Fenchurch Law, below are the deadlines for applying for compensation via the RCA 2016.
How to claim via the RCA:
