Practical Law

Michael Conroy Harris, senior legal manager (pictured) and Jeremy Irving, partner:

The current riots and disturbances in cities across England raise a number of issues relating to construction sites. These include fundamental health and safety issues but also important considerations in relation to any damage or delay caused to the works.

Expecting the unexpected?

Everyone intends and hopes that their construction contracts cover all eventualities that arise. However, that intention and belief sometimes only gets tested when something truly unexpected happens. Thankfully, such unexpected events occur comparatively rarely, but the current disturbances fall into that category.

It is clear that losses may have occurred in relation to construction sites affected by the disturbances but who is responsible for (or takes the risk of) the damage?

Will insurance foot the bill?

Before liability is determined, it is quite usual for anyone suffering a loss (particularly relating to property damage) to look to their insurance policy to recover that loss.

In most cases, there will be insurance in place to cover damage to construction projects. The insurance policy, however, will need to be reviewed to establish whether riot damage is covered.

The terms and conditions of the policy, including specific claims notification provisions, must be complied with to avoid insurers refusing cover. Insureds should be aware that the claims notification provisions commonly provide for immediate notification of a claim. However, even if the insurance does respond, there will still be amounts that are not covered by that insurance, namely the deductible or where the insurance cover is inadequate.

So where else can people look to recover the cost of damages?

Is there really a Riot Act?

Surprising as it may seem, the Riot (Damages) Act 1886 is still on the statute books and this provides that:

“where a house, shop, or building in a police area has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, … compensation … shall be paid out of the police fund of the area to any person who has sustained loss by such injury, stealing, or destruction” (section 2(1)).

Note that this compensation will not be available for the costs associated with any delay caused by the riots.

But what constitutes a riot?

For the purposes of deciding if an offence has been committed, the Public Order Act 1986 defines riot as:

“where 12 or more persons who are present together use or threaten unlawful violence for a common purpose and the conduct of them (taken together) is such as would cause a person of reasonable firmness present at the scene to fear for his personal safety, each of the persons using unlawful violence for the common purpose is guilty of riot” (section 1(1)).

A lot turns on whether the current disturbances are declared a riot by the police, allowing claims to be made under the Act. (The ABI has issued guidance on this.)

How easy is it to lodge a claim?

If claims can be made under the Riot (Damages) Act, you have 14 days to submit your claim to the police authority (although David Cameron has confirmed this will be extended to 42 days).

No insurance, no Riot (Damages) Act damages, no chance of recovery?

If insurance and compensation are ruled out, it becomes a case of looking at the contract to see who, between the owner and the contractor, takes responsibility. This will turn on who takes responsibility for unexpected events.

Many contracts deal with this by the use of force majeure clauses. These can be drawn up in a number of ways:

• At their widest, force majeure clauses may refer to any event outside the control of the parties, which is likely to capture the current riots. If this is the case, the contractor’s obligations under the contract are suspended and the contractor is not liable for the effects of the riots. An example of this is suspension of the works while the riots are occurring.
• At the other end of the scale, force majeure clauses may be drafted in much narrower terms and list only those events that comprise force majeure events. Force majeure clauses will need close inspection because riot and civil commotion is sometimes on this list but on other occasions it is specifically excluded. In those circumstances, the contractor will certainly be liable for the effects of any delay caused. Additionally, as the contractor will not be able to suspend performance of its obligations, there is a risk that it will be liable for damage to the works to the extent it has not protected the works in the manner required by the contract.

So can you predict a riot?

Probably not, you should therefore make sure you:

• Understand the implications of a riot.
• Agree contracts that are clear about what happens in the event of a riot.
• Check that your insurance covers the effects of a riot.
• Act quickly if a riot occurs:
  • in terms of the health and safety implications; and
  • lodge any potential compensation claims under the Riot (Damages) Act within the 14 day claim period.