Last week’s UK riots resulted in widespread theft and damage to stores, but what does retail insurance cover and who will ultimately foot the bill?

Why are we talking about it now?

Last week saw unprecedented attacks against retail shops during nationwide riots, leading to colossal damages for some of the high street’s biggest names. The Association of British Insurers estimates that claims made to insurers as a result will be in excess of £200m.

What can businesses claim for?

As well as damage to stores, retailers can claim for loss of trade due to denial of access if the police blocked the direct access route to stores. Businesses can also claim for loss of profits when fixing damage to the store. However, retailers cannot claim for loss of trade if they have chosen to shut their stores.

What’s the likelihood of retailers getting their money back?

Insured retailers are very likely to have their claims successfully processed. However, Paul Eccles, head of commercial insurance at law firm Shoosmiths, says policies should be read carefully.

Do not just look at ‘riot’, he advises, but “all relevant perils”, including fire, theft, riot and damage caused by malicious persons.

At the time of writing, the Home Office had not yet declared the mass disturbances as a riot under the terms of the Riot Damage Act 1886 – which is defined as 12 or more people who are present together using or threatening violence severe enough to cause people at the scene to fear for their safety.

However, retailers will be covered anyway, as most insurance policies also cover civil commotion.

What about retailers without insurance?

Smaller retailers may not have insurance, but they can still claim under the Riot Damage Act 1886 against the police. Store groups must notify their local Compensation Police Authority and complete a claims form. This usually has to be done within 14 days of an incident, although to help take the pressure off businesses, Prime Minister David Cameron said last week that the Government will extend this deadline to 42 days.

Who will pay out ultimately?

Although insurance firms will pick up the bill initially, in the case of a riot they can claim back from the police authorities, which mean the taxpayer will lose out, not the insurance firms. This is because local police authorities are legally obliged to reimburse those who sustain property damage as the result of a riot. 

David Cameron said last week: “The Government will ensure the police have the funds to meet the cost of any legitimate claims.”