When is an insurance event classified as an act of God?
In November 2013, hailstorms in the north of South Africa resulted in claims worth more than R2 billion. More recently, the devastating Knysna fires, fanned by winds in excess of 50km/h, caused major damage in the Garden Route region. More than 26 fires broke out in at least 12 suburbs in the area. 10 000 people were evacuated from their homes and at least 500 homes were destroyed in the inferno. These fires are being called an act of God. In this blog, we take a look at what this term means along with the associated implications.
What does it mean?
An act of God is an accident or natural disaster caused by nature. It is totally beyond human control or influence, and takes place without human intervention. It could not have been foreseen or prevented by humans. Examples of such natural catastrophes include floods, earthquakes, hurricanes, tornadoes, hail, storm, wind, snow, lightning, meteorite strikes, etc.
Even though damage resulting from a natural disaster will be classified as an act of God, the onus remains on the insured to take reasonable care with regards to their insured property and belongings. The insured party cannot use an act of God as an excuse for their own negligence. Even when an insurance event is classified as an act of God, the insured could still be held liable if it is found that they did not take reasonable care in the run-up to the event, such as maintaining the building structure.
For example, if a building was structurally neglected or dilapidated and it collapses during an earthquake it may seem that it collapsed due to the natural disaster – an act of God. However, upon investigation the insurance company may find that other buildings of similar structure and size were able to withstand the earthquake. The insurer could then find that the building in question collapsed due to neglect and poor maintenance, and the claim would be rejected.
Most insurers will provide cover for loss or damage caused by an act of God. However, this will largely depend on the insurer, the type of policy and whether the policy has specific exclusions or ratifications.
There are extreme cases where insurers may exclude cover for act of God disasters due to the frequency of such an event in certain areas.
To ensure that the structure and contents of your home are insured comprehensively, you will need to have insurance for both categories, as the one does not normally include the other. Your home should also be insured for its updated replacement cost - not its market value. This should include rebuilding costs you may not have thought of, like the cost of an architect, demolition and the cost of removing the rubble. An annual review of your home’s replacement value will ensure that your home is not underinsured in the event of a disaster. If your home is constructed largely of wood or you have a thatched roof, you must make sure your insurer is aware of this as these pose a much higher fire risk. The insurer will probably impose a number of special conditions in such cases for the insurance to remain in place.
It is the responsibility of the policy holder to confirm what kind of damages are included - and excluded - under the definition of an act of God in their policy. Sometimes a policy extension can be added to secure additional cover for natural disasters.
The bottom line is: Make sure you read and understand your policy as well as all exclusions and default positions on occurrences like acts of God. When a natural disaster strikes, comprehensive insurance will make the difference between a long and short recovery period. Talk to your Garrun broker about the specifics of your policy.