Act of God Clause: Everything You Need to Know
An Act of God clause when included in an insurance contract covers events that would be outside human control.3 min read
What is an Act of God?
An Act of God, which is also commonly referred to as a force majeure event, is a natural force that causes some type of damage. Common examples of acts of God include:
- Climate events such as tornadoes
- Labor strikes
In general, a health condition, such as cancer, would not be considered an Act of God. That said, sudden cancer diagnoses are similar to force majeure events in that they are unpredictable and uncontrollable. While some contracts do include an Act of God clause, they are uncommon in other contracts, such as a wedding agreement.
Acts of Gods are typically events that human actions cannot influence. Natural disasters, such as earthquakes and tornadoes, are the most common examples of Acts of God. If insurance policies cover Acts of God, they will usually list certain events. No specific religious belief system is associated with the ‘Act of God' phrase.
A common misunderstanding related to Acts of God is that no one can be held responsible for the damage that results. While it's true that natural disasters are hard to predict and almost impossible to prevent, the person covered by an insurance policy cannot use this unpredictability to avoid taking precautions to avoid damage from these events.
Act of God Exclusions
It's common for insurance policies to exclude coverage for damages that result from an Act of God. Anyone that holds an insurance policy should carefully review their policy to determine which Acts of God are and are not covered. If you find that a specific type of damage is not covered by your policy, you could invest in an additional policy to increase your protections.
For instance, many insurance policies exclude Acts of God related to flooding. If you live in a flood prone area, you may need to purchase a separate flood insurance policy. Other insurance policies do cover damage to a home caused by an Act of God, but do not cover damage to surrounding buildings. So, your home might have coverage for flood damage, but your free-standing garage might not.
The advantage of an Act of God clause is that it can protect the interests of both parties after a specified event. In particular, these clauses limit the liability of one or both parties when a force majeure event interferes with their ability to fulfill their contractual obligations.
How to Write an Act of God Clause
When writing an Act of God clause, there are four issues that you need to clearly define:
- What events will activate the clause.
- How and when the party affected by the Act of God will contact the other party.
- What actions each party needs to take related to their contractual obligations.
- A statement that the contract can be fully terminated if the Act of God prevents one party from fulfilling a fundamental obligation.
Examples of an Act of God Event
To better understand Act of God events, it's best to examine a few examples. Imagine, for instance, that there are two islands. On Island One, there is a drought that covers the entire island, and the drought also covers large portions of Island Two. Legally, severe droughts can be considered Acts of God. Force majeure events cannot be controlled by a contracted party, and this lack of control means the party will be unable to comply with their contractual obligations.
Droughts, as forces of nature, are usually understood to be force majeure events. Government actions, including war, can also be considered force majeure events in many cases. You should understand, however, that force majeure events are not restricted to these categories. In fact, many contracts specifically outline what constitutes one of these events.
In a contract, you can usually find Act of God clauses at the end of the contract. Unfortunately, because Act of God clauses are included with other standard clauses, there is usually little discussion about what effect the clause will have on the parties. Although this may not result in any problems depending on the nature of your contract, you should consider how unexpected natural events may impact your ability to uphold your obligations.
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