A barge service installs and removes boat lifts for their clients. When installing a lift, the wind shifted directions and pushed the barge into another dock, causing $6,000 in property damage. 

The adjustor is denying coverage, stating that the boat moved because of the wind, which is an act of God. The company said it is not legally liable for acts of God. 

Q: Is the wind an act of God and therefore excluded on a commercial general liability policy? 

Response 1: Is the adjuster denying coverage or denying liability by defending your insured? There is a distinction between liability insurance coverage and legal liability.

Liability insurance coverage, which is provided in a CGL, provides protection for property damage caused by an accident such as the one described here. The carrier is obligated to pay resulting damages that are the legal obligation of their insured and to defend the insured against those seeking damages. None of the information provided offers a reason for the carrier to deny coverage.

Legal liability is different. In complying with its obligation to defend the insured against this claim, the carrier may assert a defense that the incident and resulting damages were caused by an act of God beyond the control of the insured. (As an aside, don't we have an obligation to tie up our boats so that the wind doesn't blow them into the property of others?) That questionable assertion would be a denial of the insured's legal liability, not a denial of the insurance protection that the insured paid for and the carrier has promised to provide.

If the insurer is denying that your client has coverage for vessel liability, that is a coverage question. If the adjuster has not put their coverage denial in writing, you should request that. 

Response 2: Is there an actual “act of God" exclusion in the policy? Typically, liability policies state as follows:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result.

A few questions need to be answered, such as:

• How did the adjustor determine that there was no legal liability on the part of the barge service? 
• What does the service contract state between the parties as to liability for any damage that might arise? 
• Did the barge service contractually assume liability or was the customer required to insure its property for any potential damage arising out of the operations? 
• Was there potential negligence on the part of the barge company for not properly securing the operations or for not stopping the operations when the wind shifted?

The owner of the other dock could make a claim to its own insurer and then let that insurer subrogate against your client, letting the claim adjusters fight it out.

Response 3: Under an unendorsed CGL policy, I do not see an exclusion for acts of God. To determine if the insured is legally liable, the insured must have a duty owed to the claimant, breach that duty—the breach is the proximate cause of the loss, and the breach created damages. I believe the adjuster is saying wind is the intervening incident—that is, wind is the proximate cause of the loss, not the insured installing a lift. And an insured cannot be legally liable for wind.

The Institutes Associate in Claims designation materials point out, “Courts have for the most part held that for this rule to apply (force of nature/Act of God), the defendant (insured) must not have acted or failed to act in a way that contributed to the disastrous result." This means that if the insured knew there was a wind advisory for the date of loss, and did the work regardless, then there'd be no coverage—there may be liability, but there'd be no coverage. The adjuster can easily check the historical weather forecast for this information. 

However, additional information is needed to come to a full conclusion. If the insured was installing a lift, why was there a barge just floating around which could strike the dock? That is what it sounds like happened from your description. Are you saying that the barge was already in the lift, then wind came along and pushed the lift, causing the lift and the barge to hit the dock? Because then you may have other exclusions. 

Additionally, it's ambiguous as to whether the damage was to the dock or the barge. This would make a difference since moving the barge would be part of the insured's "work" and the dock not.

Response 4: Was a duty owed? Was that duty breached? Was there injury or damage? Was there an unbroken chain of events leading to the injury or damage? If the answer to all four is “yes," then the CGL is triggered.

I find the adjuster's reason for denying a claim to be unreasonable. Is there a policy condition requiring that no operations be conducted if there is any wind? I'm guessing not. Are they arguing that because a wind shift is an act of God, the insured could not have been negligent in any way? Could the insured be found negligent for being out on the water at the outset, or for not properly navigating in the conditions that arose?

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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