Subrogation Recovery Following a Natural Disaster

Act of God

An “Act of God” is an event caused by natural forces beyond human control, such as an earthquake, violent storm, lightning, or an unprecedented flood that cannot be reasonably anticipated or guarded against.

Subrogation recovery

It is widely accepted in U.S. and State Courts that an Act of God may serve as an affirmative defense to a negligence action, where the injury results from an Act of God. While the Act of God defense is frequently raised as an affirmative defense in negligence actions, there are circumstances under which another entity may be responsible for damages sustained during the course of a natural disaster or Act of God. If proper care and diligence on the part of a person or entity would have avoided certain damage, then the injury is not excusable as an Act of God.

Act of God defense to bar a plaintiff’s claim

In order for the Act of God defense to bar a plaintiff’s negligence claim at the summary judgment stage, there must be no evidence in the record under which a reasonable mind could conclude that a defendant acted negligently concurrently with the Act of God, proximately causing the plaintiff’s injury, or that the defendant could have reasonably anticipated, guarded against and foreseen the Act of God causing the injury.

In Lord & Taylor LLC v. Zim Integrated Shipping Servs., Ltd., the Southern District of New York concluded that a shipping contractor was not responsible for merchandise that was damaged while in its custody during Hurricane Sandy. In this matter, plaintiff Lord and Taylor brought an action seeking to recover $206,972 in damages that it suffered when 211 cartons containing Lord and Taylor apparel were ruined due to flooding at the New York Container Terminal.

Court evaluated whether the Act of God was unforeseeable

The Lord and Taylor Court evaluated whether the Act of God was unforeseeable at the given time and place that Zim had no reasonable precautions available to prevent the damage at issue. Unique to this case were the facts that in its 50-year history, the New York Container Terminal had never experienced flooding from a storm surge, Hurricane Sandy was unusually destructive, and the relevant forecasts predicting the level of destruction that Sandy caused did not arrive until later in the weekend, when nothing more could have been done to prevent damage to the cartons at New York Container Terminal.

Plaintiff’s claim of negligence and gross negligence

As this is a fact intensive inquiry, different conclusions will be reached on whether the Act of God defense will serve to bar a plaintiff’s claim for negligence. For example, the Supreme Court of Mississippi recently reached a conclusion in the context of damages resulting from Hurricane Katrina. In Borries v. Grand Casino of Miss., Inc., the Borries Construction Company asserted claims of negligence and gross negligence against the Grand Casino for property damage it suffered when the Grand Casino’s gambling barges broke loose from their moorings and collided with Schooner Pier and other surrounding structures during Hurricane Katrina. While proclaiming the popular rule, the Borries Court held that Grand Casino could not rely on the affirmative defense to avoid liability for its own conduct which may have failed to meet the applicable standard of care.

If Grand Casino failed to moor its barge to withstand foreseeable storm surges, like those which may occur in a natural disaster such as Hurricane Katrina, then Grand Casino may be a concurrent cause of Borries’ damages and liable for negligence. Under this holding, it is apparent that the Act of God defense will not be dispositive when any facts are established under which reasonable minds could conclude that a party failed to meet its duty of care to the injured party.

Potential for subrogation against a party whose human factor contributed to the damages

When property damage or other injuries occur in the context of an Act of God, an insurer should not conclude that subrogation is not possible due to the Act of God defense. Although the Act of God may be a large contributing factor to a particular injury or damage claim, there is potential for subrogation against a party whose human factor contributed to the damages sustained. In reality, subrogation in the context of an Act of God is not different from subrogation in the context of any property damage or injury claim. That is, because the insurer stands in the shoes of its insured, if the insured could have a cause of action against a party who failed to meet its duty of care in relation to the damage sustained, then it follows that the insurer, too, would have the ability to pursue the same claim in a subrogation action for negligence.

Duty to exercise reasonable care

When an Act of God occurs it is important to consider all potential sources of injury, including whether there is any person or entity that had a duty to exercise reasonable care to avoid the harm, and if that person or entity met their duty. If there is a person or entity that failed to meet their duty of taking reasonable measures and precautions against the injury, then both an injured party and/or his subrogee could maintain a negligence action against that person or entity. To learn more about the Act of God in the context of subrogation, contact one of our subrogation attorneys.