Bedfordshire Police Authority v Constable & Ors

A public liability policy covering sums legally payable as damages may extend to statutory compensation which is imposed on a public authority for an actionable wrong or liability akin to tort. Strict liability, absence of fault, limited recoverable loss and statutory procedures do not, without more, take the liability outside the cover.

Construction focuses on the meaning conveyed to a reasonable person with the relevant background knowledge. Where standard policy wording has been assembled without careful attention to the particular statutory exposure, commercial purpose may carry substantial weight. A statutory liability under the Riot (Damages) Act 1886 was therefore covered, including the authority’s defence costs.

The claimant police authority and the defendant Lloyd’s syndicate disputed whether an excess public liability policy covered the authority’s potential liability to property owners under the Riot (Damages) Act 1886.

The underlying policy indemnified the assured for sums legally liable to be paid as damages for accidental property damage arising out of the business. The dispute concerned whether statutory compensation under the 1886 Act was damages and whether the damage arose out of the authority’s usual activities as a police authority. The court also considered the proper construction of the policy in its commercial context.

1. Declaration granted. The claimant was entitled to indemnity under the excess policy for any liability to pay compensation under the Riot (Damages) Act 1886, together with defence costs and expenses, subject to the policy limit and available policy defences.

2. The policy had to be construed by asking what it conveyed to a reasonable person possessing the background knowledge reasonably available to the parties at the time of contracting. The policy was a collection of standard-form provisions and had not been carefully drafted to distinguish liability under the 1886 Act from other public liabilities. Its commercial purpose was protection of the police fund against third-party claims for personal injury or property damage.

3. The expression legally liable to pay as damages did not exclude compensation under the 1886 Act. Even on a legalistic analysis, the Act imposed a civil liability which was tortious or at least akin to tort. Its strict character was not inconsistent with liability for an actionable wrong involving breach of duty. A duty could be express, partly implied or wholly implied.

4. The authorities concerning the meaning of damages did not establish an applicable contractual meaning under the Hooley Hill Rubber principle. The statutory history and the use of damages and compensation in the 1886 Act supported treating the remedies as equivalent in principle.

5. The liability also arose out of the business. Maintaining an efficient and effective police force was a statutory duty and a usual activity of the claimant as a police authority. Liability under the 1886 Act directly flowed from that activity when a riotous and tumultuous assembly caused the specified damage. It was unnecessary to decide the alternative question of how the words arising out of the business attached syntactically to the indemnity clause.