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U.K. riot damage giving rise to complex claims


LONDON—Risk managers are sharing lessons learned from rioting and looting in many parts of England while single-event vs. multiple-event insurance coverage concerns have begun to arise.

The London-based Assn. of Insurance & Risk Managers set up an online resource for risk managers to gather information as a result of violence early this month that began in London and spread to several other cities, including Birmingham and Manchester (see box).

In addition, AIRMIC's retail special interest group has been particularly active in helping retailers exchange information in the wake of the attacks.

Many shops were damaged and ransacked as violence began Aug. 6 in Tottenham in north London after a peaceful protest about the fatal shooting of a local man by police spread to other parts of the country and then turned violent.

The London-based Assn. of British Insurers said the total cost to the industry likely will exceed £200 million ($325.6 million).

More than 1,000 people were charged as a result of the violence.

“Retailers certainly were the focus of the attacks and we all suffered to some extent,” said John Windsor, chairman of AIRMIC's retail group.

“We've all learned that it has been crucial to have a business continuity plan and you need to get people around the table as quickly as possible” after an event has taken place, he said.

In addition, a useful lesson learned was assigning deputies to team leaders of various areas of the business continuity plan, which Mr. Windsor said ensured that team leaders did not become too exhausted.

Most retailers that suffered losses intend to pursue a claim with their insurers or against the police under the Riot (Damages) Act 1886, which enables insurers to subrogate losses to the police and also allows uninsured businesses or individuals to claim compensation from the police in the case of riots, he said.

Reacting to the riots and damage, U.K. Prime Minister David Cameron extended the time limit for filing claims under the law to 42 days from 14.

While many insurance policies have a seven-day notification clause, Zurich Financial Services Group Ltd. last week said it extended the deadline for its policyholders to file claims to 30 days from seven.

“The government is to be applauded for extending the time frame” for filing claims, but even 42 days is a tight deadline to file a complex claim, Mr. Windsor said.

He said that the sheer volume of claims likely to be filed as a result of the riots may result in a delay in processing them.

The insurance industry has responded well to policyholders' concerns about losses from the unrest, according to AIRMIC CEO John Hurrell.

One area still under discussion is whether the riots will be counted as one event or several events, he said.

If the riots are treated as different events, policyholder retentions would be greater than if they were classed as one event, he said. It appears as though insurers are addressing this issue on a case-by-case basis, he said.

It is important in such cases for policyholders to study their wordings carefully, said Caroline Woolley, London-based head of property for the Europe, Middle East and Africa region for Marsh Inc.

Some business interruption and property policies contain a 72-hour clause that likely would mean that losses occurring within that period would be treated as a single event, she said. Also, some policies have wording concerning protection and preservation of property.

For example, policyholders could be covered under business interruption insurance for any increased cost of protecting their business against damage if they had information that a threat was imminent, even if no damage occurred, she said. Policyholders that have such coverage need to demonstrate to their insurer that the damage threat was imminent, Ms. Woolley said.

“This is where information is key,” she said.

For example, a separate accounting code for expenses connected with protecting a property makes it easier to prove the costs to an insurer, she said.

Another key area in some policies will be a “claims assistance” clause, which Ms. Woolley said covers the policyholder for the cost involved in engaging outside help to prepare a claim.

The use of claims assistance clauses is becoming more widespread, she said.

Many insurers last week were unable to estimate the extent of their exposure to riot-related losses, principally because of uncertainty surrounding business interruption claims.

A spokeswoman for the U.K. commercial lines unit of AXA S.A. said about 200 claims already had been filed.

In a statement, London-based Aviva P.L.C. said the majority of claims it had received were from commercial lines policyholders.

A spokesman for London-based RSA Insurance Group P.L.C. said it was too early for the insurer to estimate total claims.

RSA underwrote coverage for the Sony Corp. distribution center in Enfield, north London, which was destroyed by fire during the riots, sources said.