Businesses that suffered consequential losses in the London riots in 2011 (and their insurers) will welcome the Court of Appeal's decision that where loss is due to riot, the amount of compensation that can be claimed under the Riot (Damages) Act 1886 includes consequential losses as well as physical damage.

In the original hearing in the High Court, the judge ruled that compensation under the Act for damages to a warehouse that was destroyed in the riots was limited to the value of the building itself, not the £4 million worth of stock it had inside it.

The net effect of the decision is that, in most cases, the responsible police authority, which in this case was the Mayor's Office for Policing and Crime (MOPAC), will pick up the additional costs incurred, rather than the insurers.

If this decision stands, it may well have the knock-on effect of driving up business rates to compensate for the additional commercial risk which will be borne by the Government. Alternatively, the Act could be amended specifically to exclude claims for consequential loss.

However, an appeal to the Supreme Court is said to be under consideration by MOPAC.