The Nickel Report

The stakes are high for anyone facing environmental liability in the wake of superstorms like Hurricanes Katrina, Sandy, Harvey, Irma, and Maria. If you are among the parties potentially liable for the costs to clean up a release of oil or hazardous substances caused by a major storm event, you may be thinking about a possible “act of God” defense.  You may want to think again. In practice, the availability of this defense has proved elusive.  It is still a good idea, however,  to minimize risk in planning for the next “big one.”  Ultimately, advance actions taken to avoid or mitigate the impacts of natural disasters may be the difference between being excused from or being saddled with cleanup liability.

What is the Act of God Defense?

The act of God defense is an affirmative defense to liability to perform cleanup and/or pay damages and/or incur penalties that result from an extreme natural event. It is recognized under common law in contract and tort actions, and it is also codified in many state and federal laws.  Its definition has many variations, but three common themes generally emerge.  First, the “act” must be so unusual or extraordinary that it was not foreseeable.  Second, the “act” must be the sole cause of the injury, with no human intervention.  And third, the defendant’s exercise of reasonable care would not have prevented the injury.  The defendant carries the burden of proof on all three elements.

In the context of federal environmental laws, three statutes recognize an act of God as a complete defense to liability arising from a discharge or release of oil or a hazardous substance.

1. The Clean Water Act (“CWA”) shields an owner or operator of a vessel, onshore facility or offshore facility from liability for cleanup costs if the discharge of oil or a hazardous substance was caused by an act of God, defined as “an act occasioned by an unanticipated grave natural disaster.”
2. Congress expanded upon the CWA’s definition in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), otherwise known as the Superfund law. Under CERCLA, an otherwise responsible party is not liable for hazardous substance cleanup costs if that party can prove, by a preponderance of the evidence, that the release and the resulting damages were caused solely by an act of God. CERCLA defines an act of God as 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.
3. Congress adopted this same definition verbatim into the Oil Pollution Act (OPA) of 1990. Under the OPA, a responsible party is not liable for the discharge of oil and any resulting damages or cleanup costs if the sole cause was an act of God.

An Exercise in Futility?

Remarkably, there are no reported cases in which a defendant has successfully asserted an act of God defense to environmental liability under these federal statutes, even after Hurricanes Katrina and Sandy – hurricanes that were unprecedented and exceeded worst case expectations. This notable lack of success is due, in large part, to the considerable difficulty of proving that the natural event was the sole cause of the damages.  Many court decisions denying this defense have rested on a finding that the defendant’s negligence contributed in some measure to the release or the resulting harm.

Although Congress recognized this defense as available in theory, the courts’ continued rejection of this defense in practice raises a question of whether an act of God can ever be a viable defense in the real world.

The first element – whether the natural event is unanticipated – strikes at the heart of this question. In an era when meteorologists are able to predict the path and intensity of hurricanes with increasing specificity, the actual landfall of a hurricane is not likely to come as a surprise.  It is also entirely foreseeable that hurricanes will continue to form in the Gulf of Mexico or Atlantic and threaten the coastal states.  Indeed, virtually all natural disasters are foreseeable to some degree; they just have different levels of probability.  While it may be harder to predict the precise occurrence of an earthquake or tornado, people who live in known earthquake and tornado zones would reasonably expect to experience an earthquake or tornado in their lifetimes.

Several courts have rejected the act of God defense on the basis that the natural event was foreseeable. And at least one federal district court hinted that the amount of media coverage leading up to the natural event influenced foreseeability.  Therefore, because severe weather events are now widely covered in the media, the ability to demonstrate that such an event was unanticipated becomes increasingly more difficult.

At the same time, the greater the foreseeability of the natural event, the greater the amount of time is available to implement precautions to mitigate or prevent the effects of a hurricane, earthquake, tornado, or other disaster. It would certainly be untenable for a defendant to take every conceivable precaution to guard against a release. Nonetheless, courts consider the significance of a defendant’s preparations leading up to the event;  if no action reasonably could have been taken to mitigate or prevent the damage, then a court would be more likely to find that the act of God defense applies. However, if a defendant did not take reasonable precautions under the circumstances, such as securing storage facilities or electrical systems against the effects of the anticipated event, a court is likely to find that the defendant causally contributed to the damage and deny the defense on that basis. In other words, if any damage could be attributed to a defendant’s negligence, then it would be difficult to negate liability.

Still Worth Asserting

Notwithstanding the poor track record for the act of God defense, good faith efforts to reduce future risk may still materially mitigate potential liability for a release caused by a severe weather event or other natural disaster. Such efforts may include incorporating resiliency measures into operations, designing capital projects to withstand extreme natural forces, properly maintaining equipment, and generally following good preventative practices.  Proof of taking enhanced protective actions before the next storm hits may be the ticket to prevailing on an act of God defense.  Even if these precautions are not sufficient to prevent a release from an extreme natural event, they may reduce the magnitude of the resulting environmental harm and/or mitigate penalties that may accompany cleanup liability.