Blog Question – Act of God

I received this question  from an insurance broker:

Good morning Allan,

My question has to do with the following link to a New Zealand matter which appeared in Insurance Business online and read:

New Zealand man who had his car crushed when a hotel’s window blew out and fell on his vehicle has been informed by the hotel’s insurance broker there is no compensation due to an “Act of God”

Wellington-based Hayden Nelson had his car left ruined after a hotel’s window was dislodged by high winds and damaged the car, according to reports in New Zealand.

The 23-year-old teacher was reassured by hotel staff that the hotel’s insurance would cover the damage, however the hotel’s insurance brokers has since discovered that the accident is considered an act of God, and no damages need to be paid.

“I was a little bit dumbfounded, to be honest,” Nelson told stuff.co.nz. “Because on the day the manager said: ‘Our insurance will cover this, don’t worry we’ll clean your car up for you’.”

An email to Nelson from Aon Insurance Brokers said the hotel was not considered liable for the damage.

“This occurred due to a storm event, our client has not been negligent in any way nor have they done anything to cause the damage, unfortunately this has occurred in extremely high winds that are beyond our client’s control. Unfortunately this is classified as ‘an act of God’ for which our client is not responsible.”

After he questioned that decision further, the broker agreed to review the matter with the provider, Chartis Insurance. An outcome from that is still pending.

Was this the Broker or the insurer who advised this response? If it was the Insurer, the Broker should be arguing the matter with the insurer.  If it was the Broker, then why pre-empt the insurer?

Being agnostic, I hate hearing the term “Acts of God” ever being used and I thought that excuse was limited to old Marine policies. If I was the Broker, I would have definitely have taken the insurer to task on this.

Talk soon.

Regards

Robert [surname and email provided]

My reading of this is that it was the Insurer who advised that they did not believe the hotel was liable for the damage to the car.

My  first response to this issue is that most policies of insurance contain a condition that the Insured is not to admit liability. Most laymen do not know all the intricacies of the law and may for a range of reasons say that their insurer will meet a claim when in fact there is no legal liability. When someone does admit liability when they should not have done so,  it can create just the sort of messy situation that has arisen here. This is something the broker ought to educate their clients on so that a) their brand is not damaged by such poor publicity that this is creating and b) that it does not provide the insurer with a genuine reason to avoid the claim.

The hotel would only be able to claim under their public liability policy and they would have to be found legally liable for the damage. For the hotel to be found legally liable, the third party owner of the vehicle would need to show that the window was dangerous and that the hotel knew or ought to have known of the danger and that they did nothing about it.  If it was simply a severe gust of wind that blew out the window then the hotel is an innocent party to this as is the owner of the car.

I agree that the term “Act of God” is not technically correct but some people use it to describe an accident where no person is at fault.

Anyone with any valuable asset needs to consider taking out property insurance on that asset. In the case of a motor vehicle, it is motor insurance.  If the car was insured under a comprehensive policy, this loss would certainly be covered.

Without seeing the condition of the window and or knowing the strength of the wind at the time, I am not in a position to give an opinion on whether the insurer is correct in its decision. At the end of the day the case will be decided on the facts. There is also the question as to whether there were any disclaimers that the hotel can rely upon. I am not sure if it was a paid car park or a free one and if there were any conditions of parking which may offer some protection to the hotel. Finally we do not know if a policy exclusion due to faulty workmanship, design, or materials applies.

I appreciate that a broker has a duty to its client, but remember the broker’s client here is the hotel, not the car owner.

With the hotel claim, their loss is the damage to the building/window.  Depending on the severity and relevance of any faulty design, faulty workmanship, faulty materials exclusion, in the property section of the policy, then I would expect the claim to be met as a storm loss.

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