This Labor Day weekend, you probably had family parties and barbecues and weren’t thinking about insurance claims issues and insurance policies. Rightfully so as it is a time to rest and reflect on all the hard work we do to contribute to the success and prosperity of our nation. I don’t profess to be a theologian by any means, but I recently came across some interesting cases discussing "act of nature"/"act of God" exclusionary language found in insurance policies. It would also be interesting to hear from other insurance claims practitioners who have come across these phrases in policies and claims they have handled.
According to Black’s Law Dictionary, an “act of God” is:
An overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado.
Also termed "act of nature," the definition has been statutorily broadened to include all natural phenomena that are exceptional, inevitable, and irresistible, the effects of which could not be prevented or avoided by the exercise of due care or foresight.1
In contract law, an “act of God" may be a defense under the rule of impossibility of performance. If so, the promise is discharged because of unforeseen occurrences, which were unavoidable and would result in insurmountable delay, expense, or other material breach. In insurance contracts, an “act of God” may be no excuse, and in fact may be the central risk assumed by the insurer—e.g., flood insurance or hurricane insurance.
So what does it mean if a first-party property insurance policy contains limiting language attempting to limit the insurance carrier’s responsibility for damages sustained because of a plumbing leak due to an act of nature? Exactly what scenario would such language imagine as excluded? Of course only a court interpreting the language could stand as the final word, but it would seem to me to be contemplating those events outside of human control that are natural disasters. Such a policy exclusion would not seem to apply to the situation where the cast iron drain pipes break (due to age) resulting in water damage to the property necessitating repair as well as replacement of the drain lines of the property.
Is it fair for exclusions in first-party property insurance policies to attempt to limit damages from “acts of God” or “acts of nature”? Is that not the heart of the bargain between the parties for which the insurance coverage is obtained in most situations? Should you find yourselves in situations where claims are denied because of “act of God” or “act of nature” exclusions, consult experienced first-party insurance claims professionals to review the facts and details of the situation.
1 42 USCA § 9601(1).