Partner, Head of Financial Services
Out-Law Guide 2 min. read
19 Feb 2009, 5:29 pm
Bedfordshire Police Authority v David Constable and others
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.
The High Court held that the claim was covered. The obligation of the police to pay compensation under the Act was the sort of liability which the parties would have expected to be covered by a public liability policy.
Even if this commercial approach 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, although strict, arose from that breach of duty and was "akin" to a liability in tort. Insurers appealed.
The Court of Appeal agreed with the judge.
The question whether the compensation payable under the Act was a sum which the police authority was "liable to pay as damages" depended on the true nature of the liability as a matter of law.
Marine case law has long held "damages" to mean a sum payable as a result of some breach of duty or obligation, whether imposed by contract, the general law or by legislation. The Court of Appeal considered this principle to be universally applicable.
The key lay in the concept of responsibility. Liability to pay compensation under the Act arose from the fact that the police authority was inherently responsible for preserving law and order in its area and was notionally in breach of that responsibility. The compensation payable was, therefore, a sum the police authority was "liable to pay as damages".
The Court of Appeal's decision confirms that the difference between sums for which the insured is liable "as damages" and those for which he is not lies in the concept of responsibility. Responsibility can exist even where liability for breach is strict and does not depend on proof of fault, as in this case under the 1886 Act.
Other public liability insurance cases have followed similar reasoning in deciding what are not "damages".
Costs incurred by a landowner for work on his own land to prevent a further escape of water were held not to be sums payable "as damages". A landowner cannot be responsible to himself (Yorkshire Water v Sun Alliance ).
And clean-up costs following a pollution incident payable by the insured under a statutory scheme to protect the environment were not "damages" payable to third parties as a result of a breach of duty (Bartoline v RSA ).
Partner, Head of Financial Services