What Is an Act Of God?
An act of God describes an event outside of human control or activity. It's usually a natural disaster, such as a flood or an earthquake. Insurance policies usually specify which particular acts of God they cover.
In business, the phrase “act of God” is not associated with any particular religion or belief system. Contractual language referring to acts of God are known as force majeure clauses, which are often used by insurance companies. These clauses typically limit or remove liability for injuries, damages, and losses caused by acts of God.
- An act of God is an uncontrollable event, such as tornadoes, not caused nor controlled by humans.
- Insurance companies often limit or exclude coverage for acts of God.
- Acts of God do not absolve people from a duty to exercise reasonable care.
- Policyholders should review their policy for coverages and exclusions pertaining to acts of God.
Understanding Acts Of God
An act of God clause in a contract does not imply that no one is liable for damages. A natural disaster, such as a flood or an earthquake, usually isn't foreseeable or preventable. However, the insured cannot use the event as an excuse for not taking reasonable care to try to prevent or protect against damages.
Say a dilapidated warehouse collapses during an earthquake and injures bystanders. The owner claims an act of God caused the building to fall. However, the insurer will likely deny the claim, and there may be no recourse in court because the owner did not take reasonable care to maintain the structural integrity of the building.
Likewise, governments also need to take reasonable care to prevent disasters. Say a state failed to maintain a dam that burst and caused major damage to a community. This is not an act of God. Intense rains may have caused bodies of water to swell, but the flooding was a direct result of the government's lack of action to maintain water retention systems.
A judge ruled the flooding in New Orleans caused by Hurricane Katrina (an act of God) as an act of negligence, citing the US Army Corps did not properly maintain flood defenses.
Insurance policies often have long lists of exclusions for damages caused by acts of God. Policyholders should thoroughly review their policies to see what types of damages caused by acts of God are covered. Then, they can make informed decisions as to whether to purchase additional insurance to protect themselves and their property from certain risks.
For example, a typical homeowner’s insurance policy excludes most acts of God, especially hurricanes. For this reason, coastal homeowners typically purchase separate flood insurance to add additional protection. In the US, flood insurance is offered by the National Flood Insurance Program, managed by the Federal Emergency Management Agency (FEMA).
Of note, some homeowner insurance policies cover damage to the home itself related to specific acts of God but not to other buildings or structures owned by the policyholder.