Business losses after a riot not covered by U.K. law

British property owners and their insurers cannot recover consequential losses suffered after a riot from the police department, the country's highest court ruled Wednesday.

The U.K. Supreme Court decision overturns a landmark appeals court ruling that allowed Sony DADC, a Salzburg, Austria-based unit of Sony Corp., and its insurers to recover compensation for consequential losses suffered after a Sony distribution center in north London was damaged during riots in the summer of 2011.

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

According to the ruling, the law was only intended to cover physical damage to property. Sony was seeking a combination of property and consequential losses totaling about £50 million ($71 million).

Sony suffered the losses during a spate of riots that swept London and other areas of the United Kingdom in August 2011 after a controversial police shooting. A gang of youths broke into a Sony distribution center, stole goods and started a fire, which destroyed a warehouse, stock and equipment.

In May 2014, the Court of Appeal in London ruled that the insurers could recover consequential losses from the police under the Riot Act.

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