Earthquake, flood, fire: What ‘Act of God’ defence means and when it is rejected by courts

Delhi High Court| delhihighcourt.nic.in

New Delhi: When Paresh Rawal’s character, Kanji Lalji Mehta, in the movie ‘OMG–Oh My God!’ loses his shop to an earthquake, he is denied insurance because his policy does not cover damages caused by an ‘Act of God’. He then goes ahead and sues God.

Ever since, the defence of ‘Act of God’ has remained in public discussion. In 2020, Finance Minister Nirmala Sitharaman had also said that the economy was facing an Act-of-God-like situation due to the Covid-19 pandemic.

More recently, its defence was discussed again after the Delhi High Court delivered a judgment earlier this month, rejecting the Bank of Baroda’s argument that an “Act of God”, in the form of high-velocity winds, had caused one of its signboards to fall and gravely injure a man in May 2011. In doing so, the court ordered the bank to pay Rs 18 lakh to the family of the victim.

However, what does the defence of Act of God exactly mean? When is it accepted as a defence by courts and when is it rejected by courts? ThePrint explains.

What does Act of God mean

Act of God, or Vis Major in Latin, is defined as an “overwhelming, unpreventable event caused exclusively by forces of nature, such as an earthquake, flood, or tornado.” The defence is usually taken by any party to a case who wants to escape liability for any incident, citing a natural calamity. The defence arises out of a tort or civil law principle that a person cannot be held liable if the fault lies in an Act of God, and when the person had taken all precautions.

However, courts have explained that the defence would not help and cannot be taken in an event which is anticipated or is likely to take place from time to time. The test is not that the natural event was extraordinary, but that it could not be reasonably anticipated. In other words, to take the defence, natural events such as rain, high-velocity winds, snow or landslides should have been so unexpected that “no human foresight or skill could reasonably have anticipated the event”.

Therefore, when the Delhi high court directed compensation of Rs 18 lakh to be paid to the family of a man who died as a result of injuries after one of Bank of Baroda’s signboards fell on him, it explained  that the defence of act of God can be accepted only “where the occurrence is unprecedented and unforeseeable”.

In insurance cases, the definition of Act of God varies as per the insurer. Several insurers cover losses due to acts of God and natural disasters. However, the insurance policy usually defines what sort of natural disasters it covers.

Further, as per Reserve Bank of India’s new guidelines for the hiring of safe deposit lockers from banks, the bank will not be liable for your loss if the content of the locker is lost or damaged due to natural calamities or Acts of God like earthquakes and floods. However, banks are required to take reasonable precautions to secure their facilities from such natural disasters.

‘Avoidable incidents’

Courts have also emphasized on the need for taking preventative action and reasonable care by the party wanting to use Act of God as a defence.

In January this year, the Supreme Court set aside an Allahabad high court judgment which had ruled that the fire in the warehouse of a company was an ‘Act of God’ and exempted excise liability of the company engaged in the manufacture of liquor.

The apex court explained, “When nothing of any external natural force had been in operation in a violent or sudden manner, the event of the fire in question could be referable to anything but to an Act of God in legal parlance.”

The court also said that with appropriately laid fireproof electrical installations as also firefighting measures, “the incident was an avoidable one or at least the loss could have been minimized”.

In 2016, the Supreme Court had also ruled that if the damage has resulted from two or three causes — from an Act of God as well as a negligent act of a party — damages can be awarded to compensate only the injury that can be attributed to the negligent act of the respondents.

2001 Gujarat earthquake: When court rejected Act of God defence

Therefore, courts don’t accept the defence of Act of God in all circumstances, even when there is a natural calamity.

For instance, in December 2010, the Gujarat high court awarded compensation of Rs 3.75 lakh each to the families of 32 students who were killed inside an Ahmedabad school premises during the 2001 earthquake.

The judgment was pronounced after the four-storey building of Shree Swaminarayan School collapsed following an earthquake on 26 January 2001, leading to the death of 32 children. Parents and relatives of 26 children demanded compensation from the school authorities. They had contended that the school authorities and the construction company constructed the school building, consisting of four stories with 25 rooms, office, and giant water tank, within a period of two and half months. They had pointed out several deficiencies in the construction of the school building.

In their defence, the school authorities as well as the construction company had taken the defence of Act of God. However, the court rejected their defence, and observed, “There is no doubt about the fact that an earthquake is a natural calamity or an Act of God which is beyond the control of any human being. At the same time it cannot be lost sight of that the appellants were duty bound to construct the school building in a proper manner, taking care that the foundations were structurally strong, the nature of soil was conducive to the construction and the construction was carried out in the manner it ought to be, using good quality materials.”

The court explained that if proper and reasonable care was not taken by the school authorities, they cannot escape liability, taking the defence of Act of God. It added, “The earthquake may be a natural calamity but had proper care been taken in the construction of the school building, may be the tragedy would not have taken place.”