In the wake of Hurricanes Harvey and Irma ravaging the southern coastal states, millions of people evacuated Texas, Louisiana and Florida to seek shelter and safety from the storms and subsequent flooding. While people (thankfully) can mobilize relatively quickly, real property and freight cargo often cannot. Many warehouses and container terminals sat in the port cities (e.g. Corpus Christi, Houston, Port Arthur, Key West, Tampa/St. Petersburg) and by the nearby bays (e.g., Corpus Christi, Galveston and Tampa Bays) that were in Harvey and Irma's paths. Hundreds, if not thousands, of warehouses and other cargo storage locations were left to literally weather these storms.
As with prior natural disasters, warehousemen and terminals should anticipate a flurry of litigation in the coming months and years from shippers looking to recoup losses sustained from the storms and subsequent flooding. Because homeowner policies often contain flood exclusions, shippers and cargo interests will undoubtedly pursue claims against those warehouses, storage owners and port operators entrusted with storing their goods, alleging negligence for failure to prepare for and/or respond to the storms. One defense in the arsenal for such situations is the "Act of God" defense.
An "Act of God," as defined by the federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), is an "unanticipated grave natural disaster or other natural phenomenon of an exceptional, inevitable and irresistible character, the effects of which could not have been prevented, or avoided by the exercise of due care or foresight." 42 U.S.C. 9601(1). As applied to motor carriers, the Carmack Amendment permits motor carriers to deny liability when the carrier can prove that the damage was caused by an uncontrollable physical phenomenon or natural disaster. 49 U.S.C. 14706.
In all cases, the application and analysis of this defense is fact-intensive, and the burden of proof rests with the motor carriers to show that there were no alternative, reasonable options available to protect the cargo from the effects of the natural disaster. Furthermore, the motor carrier must show that it did not fail to act as a reasonably prudent person would under the circumstances, and did not fail to take reasonable available means to avoid or minimize the loss resulting therefrom. In that this is a complete defense and it requires an onerous showing of proof by motor carries, courts have been reticent to invoke it.
Moreover, history has shown us that this defense is rarely successful due in large part to the "unanticipated" part of the definition. Late summer hurricanes in Texas, Louisiana and Florida are hardly "unanticipated," even if accompanied by massive flooding. There is legislative history in CERCLA suggesting that hurricanes could only be considered for the "Act of God" defense when they occur in an area and at a time where a hurricane would be unexpected. See H.R. Rep. No. 99-253 (1977). Certainly, this would not apply to the Gulf Coasts of southern states in late summer.
Similarly (and again, thankfully), technology in the meteorological field has progressed to the point where the tracking of Harvey and Irma began days before either storm hit the United States. Harvey was named on Thursday, August 17, a full eight days before the storm reached the Texas shores. Similarly, Irma was first tracked on August 30, 10 days before its landfall at the Florida Keys on September 10. While each storm vacillated between the Tropical Depression, Tropical Storm and Category 1-5 hurricane designations, both were on the radar, literally and figuratively, for days before their effects were felt on U.S. soil.
One recent storm did result in a few successful applications of the "Act of God" defense. In 2012, Super Storm Sandy wreaked havoc on the Northeast, devastating the New York and New Jersey coastlines with rain, wind and historic storm surges. In 2015, the United States District Court for the Southern District of New York found that Sandy was "legally an Act of God that absolve[d] [defendants] of liability for [p]laintiff's loss." Lord & Taylor LLC v. Zim Integrated Shipping Services, Ltd. and New York Container Terminal, Inc., 2015 U.S. Dist. LEXIS 75868 (2015). Interpreting the "Act of God" defense pursuant to the Carriage of Goods by Sea Act (COGSA)(46 U.S.C. 1300), the Court looked at the weather reports for the week preceding Sandy's landfall, and determined that Sandy's effects were not reasonably foreseeable to the defendants until a revised storm surge prediction on the day before Sandy's landfall. The Court found that there was not enough time to take actions to save the laden shipping containers.
Sandy created a unusual set of circumstances that facilitated the application of the "Act of God" defense, namely that it was not only exceedingly powerful, but more importantly, unpredictable until the very end. As such, cargo holders should not bank on using the "Act of God" defense for claims arising out of the more predictable, if no less powerful, storms of the last month. Doing so would be the legal equivalent of trying to walk on water.
For more information please contact Patrick Downey at 267.765.4126 or pdowney@wglaw.com
Disclaimer: The contents of this post are for informational purposes only, are not legal advice and do not create an attorney-client relationship.
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