DEFINITION of 'Act Of God'

An event that is outside of human control, and which is not directly caused by human activity. An act of God can be an accident or a natural disaster, such as a flood or an earthquake. Insurance policies may cover accidents and damage caused by acts of God. For example, a homeowner in a coastal town may purchase flood insurance to cover the risk associated with his or her house being damaged by a flood.

BREAKING DOWN 'Act Of God'

Insurance policies have long contained exclusions for damages caused by an act of God. Policyholders should check the text of their contracts to see what types of damages caused by acts of God will or will not be covered. In the case of damage to a home, a homeowner policy may cover damage done to the home itself but not to other buildings or structures owned by the policyholder.

The occurrence of an act of God does not mean that no parties will be held liable for at least part of the damages. While a natural disaster may not be foreseeable, the insured cannot use the event as an excuse for damages that could have been mitigated if reasonable care was taken to protect against damage. For example, the owner of a dilapidated warehouse that falls over during an earthquake and injures bystanders may not be able to claim that an act of God caused the building to fall. This is because the owner could have taken reasonable care to make sure that building was structurally sound.

While natural phenomenon are difficult to plan for and thus prevent, humans can have an impact on the likelihood of a disaster occurring. For example, a state could construct the building of a dam in order to control flooding along a major river, as well as to power local homes through the development of a hydroelectric power plant. While the dam may reduce the risk of a flood it could increase the risk associated with other natural disasters, such as earthquakes. 

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