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Reading of the Riot Act limits Sony claims in U.K.

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Reading of the Riot Act limits Sony claims in U.K.

Property owners and their insurers cannot claim compensation for consequential loss under the U.K.'s Riot Act, according to a recent court ruling.

A decision by the Supreme Court, the United Kingdom's highest court, last week overturned a landmark appeal court decision that allowed Sony DADC, a Salzburg, Austria-based unit of Sony Corp., and its insurers to recover compensation from the police for consequential losses after a Sony distribution center was damaged during riots in London in 2011.

In the case of The Mayor's Office for Policing and Crime v. Mitsui Sumitomo Insurance Co. (Europe) Ltd. & others, the Supreme Court ruled that consequential losses — such as loss of profit and loss of rental income — suffered by Sony, the freehold owner of a warehouse, and customers whose stock was destroyed are not covered by the U.K. Riot (Damages) Act 1886.

The case concerns an incident on Aug. 8, 2011, amid a spate of riots that swept London and other areas of the United Kingdom after a controversial police shooting.

A gang of youths broke into the Sony distribution center in Enfield, London, and stole goods and started a fire which destroyed a warehouse, stock and equipment.

In May 2014, the Court of Appeal in London ruled that Sony's insurers could recover consequential losses from the police under the act.

In the wake of that decision, and the large number of claims received after the 2011 riots, the government drafted an updated version of the act, the Riot Compensation Bill, which currently is being considered by Parliament.

In its decision published Wednesday, the Supreme Court said it did not believe the Riot (Damages) Act 1886 was intended to extend compensation beyond physical damage to property.

Chris Owen, head of disputes at Bristol, England-based law firm TLT L.L.P., which represented The Mayor's Office for Policing and Crime — the Metropolitan Police — said that many claims for consequential loss were dependant on the outcome of the case.

“The law was unclear in this area and largely written for a different era,” he said in a statement.

“The Supreme Court ruling (…) has clarified that the compensation payable by the Metropolitan Police is limited to the costs of repairing the damage done to property during the 2011 London riots,” he said.

“The Supreme Court judgment delivered by Lord Hodge in this case means that MSIEu will not be entitled to recover our outlay in respect of the consequential loss claim,” said a spokesman for Mitsui Sumitomo Insurance Europe.

“While disappointing, given the broader context of the substantial recovery already made regarding the material damage, overall this has been a successful outcome for MSIEu,” he added.

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