Bedfordshire Police Authority v Constable

A public liability policy covering sums which an insured becomes legally liable to pay as damages can extend to statutory compensation. The decisive question is the legal nature and foundation of the liability, rather than the statutory label attached to the payment.

Compensation under the Riot (Damages) Act 1886 is damages because it reflects the police authority’s notional responsibility for preserving law and order. Strict liability may therefore constitute liability in damages. Where the insured’s business includes preventing riot damage and discharging statutory liabilities, the relevant liability also arises out of that business.

Following a major disturbance at Yarl’s Wood Immigration Detention Centre, its operator and subcontractor claimed compensation from Bedfordshire Police Authority under the Riot (Damages) Act 1886. Their claims had been rejected by the authority and by Beatson J in separate proceedings.

The authority sought a determination that any liability under the 1886 Act was covered by its public liability insurance. Walker J held that the statutory obligation was a liability to pay damages and that the damage and resulting liability arose out of the authority’s business. The excess insurers appealed.

The central questions were whether statutory riot compensation constituted sums legally payable as damages and whether the insured liability arose out of the police authority’s business.

1. Appeal dismissed. The statutory compensation payable by a police authority under the Riot (Damages) Act 1886 fell within the policy’s indemnity for sums which the authority became legally liable to pay as damages. The liability also arose out of the authority’s business.

2. A technical contractual expression must be interpreted in its technical legal sense. Once “legally liable to pay as damages” was accepted as such an expression, its meaning was not restricted by asking what legal or historical background would reasonably have been known to an insurer or insurance broker.

3. The statutory use of the word “compensation” was not decisive. Compensation can include damages, and the true question was the legal nature and foundation of the payment. The relevant distinction was between a payment founded on responsibility for damage and a debt or expense imposed without any corresponding responsibility.

4. Compensation under the 1886 Act was founded on the police authority’s notional responsibility for preserving law and order in its area. Although liability was strict and did not depend on proof of an actual failure by the police, it arose from that responsibility. It was therefore analogous to other strict liabilities sounding in damages, rather than liabilities such as workmen’s compensation or the cost of repairing a pilot boat for which the payer bore no responsibility.

5. The statutory procedure did not alter the nature of the liability. The requirement that a claimant first apply to the compensation authority, followed by an action if compensation was refused or insufficient, did not prevent the ultimate sum from being damages.

6. The words “arising out of the business” referred in context to the authority’s liability, rather than requiring the rioters’ physical damage itself to arise from police activity. The defined business included preventing or diminishing riot damage and discharging liabilities imposed on the authority by Parliament.

Longmore LJ delivered the judgment. Hooper LJ and Sir Peter Gibson agreed.

1. Court of Appeal (Civil Division): The excess insurers’ appeal was dismissed. The court upheld Walker J’s ruling that liability under the Riot (Damages) Act 1886 was covered by the public liability policy.
2. High Court, Commercial Court: Walker J held that statutory riot compensation was a liability to pay damages and that the damage and resulting liability arose out of the police authority’s business. No citation is stated in the judgment.