Facts
Under the Riot (Damages) Act 1886, every police authority is
liable to pay compensation to third parties for damage to or theft
of certain types of property in its area caused by "any persons
riotously and tumultuously assembled together". Liability is
strict, arising whether or not the riot could or should have been
prevented.
Bedfordshire Police Authority faced several claims under the
1886 Act from property owners after riots broke out at Yarls Wood
Detention Centre in February 2002. The authority claimed under its
public liability insurance, but insurers denied the claim.
The policy covered all sums which the insured "may become
legally liable to pay as damages" for accidental damage to property
occurring within the geographical limits during the policy period
"arising out of the business". Business was defined to mean the
usual activities of the insured as a police authority.
Insurers' main argument was that compensation payable under the
1886 Act was not "damages" within the meaning of the policy. The
term "damages" required there to have been an actionable wrong
arising from a breach of duty. Compensation payable under the Act
was not the same as damages, because liability was independent of
any conduct or misconduct of the police.
Judgment
The court held the claim was covered.
The policy wording was a collection of standard provisions
which, in the judge's view, had not been the subject of any great
degree of thought. Consequently, a detailed analysis of particular
words and phrases was of limited use.
His approach, therefore, was to establish a meaning consistent
with the ordinary commercial purpose of the insurance. That purpose
was to protect the police fund against claims by third parties for
personal injury or damage to property. Liability under the 1886 Act
was the sort of liability one would generally expect to fall within
that cover.
The judge found there was no established meaning for the term
"damages" and there was nothing to suggest the word had been
carefully chosen to limit protection under the policy and exclude
compensation payable under the Act.
Even if that were wrong, the judge was satisfied that
"legally liable to pay as damages" included liability under the
Act.
The Act imposed a duty on the police to ensure that riotous and
tumultuous assemblies did not cause damage. Liability under the
Act, although strict, arose from that breach of duty and was "akin"
to a liability in tort.
Commentary
There have been a few cases recently exploring what is meant by
"liability for damages" or "legally liable to pay as damages" in
public liability policies.
The court here took a broad, commercial approach to the problem,
based on what a reasonable person in the position of the parties
would have expected the policy to cover.
The more technical argument is that the term "damages" only
applies to legal liability for loss or damage arising from a breach
of duty, whether that breach arises in contract, general law or
under legislation.
This was the approach taken in Bartoline
v RSA [2007], which drew a distinction between liability for
clean-up costs under a statutory scheme to protect the environment
and liability to pay damages to third parties for losses sustained
as a result of a breach of duty or unlawful interference with
private rights and interests.
More recently, Tesco v Constable
[2008] held that a typical public liability wording covering
liability at law for damages did not cover a contractual liability
for pure economic loss where there could be no corresponding
liability in tort.
