Hurricanes and Act of God Defenses
Following a major hurricane or other extreme weather event, vessel owners and operators may face liability for failure to perform their agreed contracts or for liability arising from an allision or collision. When such major hurricanes strike, to escape liability, vessel owners and operators may take advantage of two doctrines: (1) force majeure; and (2) the inevitable accident/ Act of God defense. Below we explain those doctrines and the burden of proof for each.
A. Contractual Defenses – Force Majeure Clauses
Maritime contracts for services generally include clauses for performance, demurrage, deviation, termination and suspension. In addition, most contracts include a force majeure clause designed to excuse one or all of the parties from liabilities or obligations under a contract when there has been an occurrence of an extraordinary and unforeseeable event beyond the control of the parties. These are known as force majeure clauses—which roughly translates to a “superior force.” A typical force majeure clause reads as follows:
Except for the duty to make payments hereunder when due, and the indemnification provisions under this Agreement, neither Company nor Contractor shall be responsible to the other for any delay, damage or failure caused by or occasioned by a Force Majeure Event as used in this Agreement. “Force Majeure Event” includes: acts of God, action of the elements, warlike action, insurrection, revolution or civil strife, piracy, civil war or hostile action, strikes, differences with workers, acts of public enemies, federal or state laws, rules and regulations of any governmental authorities having jurisdiction in the premises or of any other group, organization or informal association (whether or not formally recognized as a government); inability to procure material, equipment or necessary labor in the open market acute and unusual labor or material or equipment shortages, or any other causes (except financial) beyond the control of either Party. Delays due to the above causes, or any of them, shall not be deemed to be a breach of or failure to perform under this Agreement.
Moreover, force majeure clauses, especially in contracts performed in the Gulf of Mexico, typically include hurricanes in the exhaustive list of potential force majeure events. If “hurricanes” are not specifically contemplated, such weather events may also qualify under “Act of God,” as discussed below.
When such a force majeure event occurs, the party seeking to invoke the clause bears the burden of proof in showing its application. Generally speaking, the party would need to present evidence proving: (1) that the alleged event constitutes a force majeure event; (2) that the event had adversely affected the party’s ability to perform; (3) that the party’s inability to perform is beyond its control; and (4) there existed no reasonable steps the party could have taken to avoid the event or its consequences. In the aftermath of a major hurricane such as Hurricane Katrina or Hurricane Ida, the parties should face little to no difficulty in proving that the hurricane qualified as a force majeure event and that their performance has been affected.
Even if a maritime contract does not contain a force majeure provision, parties may still look to common law principles to escape liability for nonperformance. For example, under the doctrine of “impossibility of performance,” a party can be relieved of its contractual obligations when the object of performance has become impossible or commercially impracticable. See Transatlantic Financing Corp. v. United States, 363 F.2d 312 (D.C. 1966).
All in all, following a major disaster, parties should first look to the language of the contract to determine the viability of such defenses. The contract will control and will dictate the parties’ next steps. Jones Walker routinely advises clients with respect to such matters.
B. Defenses to Tort Liability – Act of God
The maritime doctrine of “Act of God” or “inevitable accident” serves as a defense to nonperformance of contractual obligations, as discussed above, and to liability for a maritime accident, such as a collision or allision. The doctrine serves as an affirmative defense to the element of causation. In other words, the loss was caused not by any action of the vessel owner or any human intervention, but was caused by an unpredictable and inevitable Act of God, which could not have been prevented. The U.S. Supreme Court has defined an “Act of God” as “a loss happening in spite of all human effort and sagacity.” The Majestic, 166 U.S. 375 (1897). This defense has also been widely defined as “any accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains, or care, reasonably to have been expected could have been prevented;” and/or “a disturbance . . . of such unanticipated force and severity as would fairly preclude charging . . . [defendant] with responsibility for damage occasioned by the [defendant’s] failure to guard against it in the protection of property committed to its custody.” See 1A C.J.S. Act of God at 757 (1985); Ompania De Vapores INSCO S.A. v. Missouri Pacific R.R. Co., 232 F.2d 657, 660 (5th Cir. 1956), cert. denied, 352 U.S. 880 (1956). See also Skandia Ins. Co., Ltd. V. Star Shipping, AS, 173 F. Supp. 2d 1228 (S.D. Ala. 2001) (defining “Act of God” as a natural event that is overwhelming and cannot be forestalled nor controlled with respect to a Hurricane Georges cargo claim). With respect to major weather events such as hurricanes, the doctrine acts as a defense to tort liability for breakaways resulting in collision and allisions. See Petition of U.S., Heide Shipping & Trading v. S.S. Joseph Lykes, 425 F.2d 991 (5th Cir. 1970) (vessel breakaway in Hurricane Betsy). That said, such hurricanes must be “so extraordinary that the history of climatic variations and other conditions in the particular locality affords no reasonable warning of them.” Warrior & Gulf Navigation Co. v. United States, 864 F.2d 1550, 1553 (11th Cir. 1989) (other internal citations omitted).
Before even considering the “Act of God” defense however, three important maritime presumptions come into play: (1) the Pennsylvania Rule; (2) the Louisiana Rule; and (3) the Oregon Rule —named after the respective cases in which they arose. Under the Pennsylvania Rule, a party who violates a safety regulation, such as the COLREGS, will be presumed at fault for a maritime incident. The Pennsylvania Rule may be overcome but case law notes that: “a party who fails to observe a safety regulation [must meet] the burden of showing not merely that [its] fault might not have been one of the causes [of the loss], or that it probably was not, but that it could not have been.” United States v. Nassau Marine Corp., 778 F.2d 1111, 1116 (5th Cir. 1985). The Louisiana and Oregon Rules together create a presumption of fault against the vessel owner of a vessel striking another vessel or stationary object. The Louisiana and The Oregon Rules “[create] a presumption of fault that shifts the burden of production and persuasion to a moving vessel who, under her own power, allides with a stationary object.” Combo Maritime, Inc. v. U.S. United Bulk Terminal, LLC, 615 F.3d 599, 604 (5th Cir. 2010). The moving vessel may rebut the presumption by showing by a preponderance of the evidence, that (1) the collision was the fault of the stationary object (or other vessel), (2) that the moving ship acted with reasonable care, or (3) that the collision was an unavoidable accident. Bunge Corp. v. M/V Furness Bridge, 558 F.2d 790, 795 (5th Cir. 1977), cert. denied, 435 U.S. 924, 98 S. Ct. 1488, 55 L. Ed. 2d 518 (1978)).
When one of the aforementioned principles apply, the presumption shifts the burden of proof to the vessel owner — both the burden of producing evidence and the burden of persuasion — who must show that it was without fault or that the collision was the result of an inevitable accident, i.e. an Act of God. Bunge Corp. v. M/V Furness Bridge, 558 F.2d 790, 795 (5th Cir. 1997). Where a party invokes the Act of God defense and alleges that such vis major event caused the accident (ie. no fault of the vessel owner), the vessel owner bears a heavy burden to demonstrate that its “drifting was the result of an inevitable accident, or a vis major, that human skill and precaution and a proper display of nautical skill could not have prevented.” Bunge Corp., 240 F.3d at 926. In addition, a party who invokes Act of God with respect to inclement weather must prove not only that the weather was heavy, “but also that it took reasonable precautions under the circumstances as known or reasonably to be anticipated.” In re Southern Scrap Material Co., 713 F. Supp. 2d 568, 578 (E.D. La. 2010) (internal citations omitted). In other words, the party must show that it took reasonable precautions under the circumstances to prevent the breakaway, collision, or allision. Petition of U.S., 425 F.2d 991, 995 (5th Cir. 1970). If any human negligence was a contributing cause of the incident, the Act of God defense will be defeated. Crescent Towing & Salvage Co., Inc. v. M/V Chios Beauty, No. 05-4207, 2008 U.S. Dist. LEXIS 62247 (E.D. La. Aug. 14, 2008). This is because an Act of God is such a catastrophic event that the exercise of reasonable care or reasonable precautions could not have prevented the loss.
Hurricanes are generally regarded as “Acts of God.” Even though storms are not unusual for the Gulf of Mexico, courts recognize that a hurricane that causes unexpected and unforeseeable devastation with unprecedented wind velocity, storm surges, flooding, etc. is a classic case of an “Act of God.” Terre Aux Boeufs Land Co. v. J. R. Gray Barge Co., 00-2754 (La. App. 4 Cir. 11/14/01); 803 So.2d 86, 92. For example, following Hurricane Katrina, the U.S. District Court for the Eastern District of Louisiana held that a Category 4 or 5 hurricane was an Act of God sufficient to bar a claim by a marina owner against the owner of a vessel that broke away from her berth, drifted and hit another vessel. The defense of Act of God applied because, 1) the accident was due exclusively to natural events without human negligence, and (2) there was no negligent behavior. J.W. Stone Oil Dist., LLC v. Bollinger Shipyard, 2007 WL 2710809 (E.D. La. 2007). The district court held in Stone Oil that hurricanes are considered in law to be an Act of God unless there is an intervening and contributing act of individual negligence. This includes taking reasonable precautions based upon the available information. But see Borries v. Grand Casino of Miss., Inc., 187 So.3d 1042, 1050 (Miss. 2016) (holding that plaintiff presented sufficient evidence to create a factual dispute as to whether a casino vessel was properly moored ahead of Hurricane Katrina so as to preclude a summary judgment on the Act of God defense). The relevant inquiry always revolves around what reasonable precautionary steps the vessel owner took ahead of the storm (or should have taken).
In Simmons v. Lexington Ins. Co., 2010 WL 1254638 (E.D. La. 2010), aff’d., 401 Fed. Appx. 903 (5th Cir. 2010), the district court also considered whether reasonable precautions had been taken by a marina to protect a sailboat in Hurricane Katrina under both Louisiana and maritime law. The Court reviewed other Katrina cases, including Conagra Trade Group, Inc. v. AEP Memco, LLC, 2009 WL 2023174 (E.D. La. 2009), and Coex Coffee Int’l., Inc. v. Dupuy Storage & Forwarding, LLC, 2008 WL 1884041 (E.D. La. 2008). (Katrina’s unprecedented flooding and devastation was an Act of God defense.) In Conagra, supra, the district court was asked to review a contract of affreightment for a cargo of wheat aboard a barge that sunk. The defendant was found not negligent in delivering its barge of cargo several days before the weather forecast accurately predicted the landfall of Katrina. In In re S.S. Winged Arrow, 425 F.2d 991 (5th Cir. 1970), the court affirmed that the Act of God defense applied to the loss of a vessel properly moored well before it became apparent that Hurricane Betsy would strike.
Regardless of if such cases are brought in federal court or state court, the Act of God doctrine will apply. For example, following Hurricane Rita, Jones Walker successfully defended its client in a Louisiana state court by invoking the Act of God defense in response to a barge breakaway in Lake Charles that struck and destroyed a bridge. Following a trial, the jury exonerated the defendant vessel owner finding that Hurricane Rita caused the loss, not any alleged act of the barge owner.
C. Contractual Performance Clauses – Act of God
Clauses for demurrage, detention or laytime usually involve delays in the loading or unloading of cargo or the delivery of goods and materials. Laytime is the period of time allowed for loading and unloading. Demurrage and detention are sums paid to compensate for time lost related to the delivery of equipment or cargo. Demurrage begins to run after the passage of laytime or the agreed time of delivery and performance. Damages are awarded for failure to perform. Deviation is an obligation to maintain a proper course in ordinary trade and to timely arrive at the agreed destination. All deviation clauses are subject to certain liberties. Any deviation may affect insurance and hire.
Typically a contract for maritime services can be terminated for cause or for convenience. Similarly, parties may negotiate terms to suspend performance, which would suspend payment of hire and performance of services. A suspension clause is typically an off-hire clause where the contract terms remain but no hire is paid. Usually a vessel owner will be compensated and reimbursed for certain additional expenses if a contract is terminated for convenience. An Act of God clause excuses delays in performance, but in most cases serves to either suspend performance or terminate the contract for cause as between the parties.
In sum, following major hurricanes like Katrina, Laura, and now Ida, vessel owners and operators may invoke the Act of God defense (with respect to both tort liability and contractual obligations). That said, to successfully invoke the defense, the vessel owner faces a high burden in proving that human negligence did not cause the loss. Such a burden requires certain evidence, testimony, and other proof.