COGSA “Act of God” Defense Successful for Hurricane Sandy Damage

In Lord & Taylor LLC v. Zim Integrated Shipping Servs., Ltd., the United States District Court for the Southern District of New York ruled in favor of Zim Integrated Shipping Services, Ltd. (“Zim”) as carrier, in a COGSA recovery for damaged goods suit. The damages occurred when Hurricane Sandy made landfall on October 29, 2012 and flooded a container terminal (Zim’s subcontractor) on Staten Island. The plaintiff, Lord & Taylor, had several containers full of their women’s clothing at the terminal and the flooding that resulted ruined most of the contents. Lord & Taylor brought suit to recover under COGSA for the lost goods.  Zim defended based on the Act of God exception in COGSA.  The Court agreed with Zim that the Act of God defense was applicable. For an Act of God defense, the carrier must prove that the damage was caused by an unexpected natural event and that the damage could not have been prevented with the exercise of reasonable care. The Court noted that while not all hurricanes are legally Acts of God, because they can be common in the waters at a given time of year, ones that cause “unexpected and unforeseeable devastation” are classic Acts of God. The key, then, is determining the foreseeability of the hurricane and the reasonableness of the actions the defendant took in response to that information.

The Court found that pre-storm predictions lacked sufficient reliability to have required additional actions by Zim and the terminal to save the cargo. There were wildly varying reports of where and when Sandy would make landfall, how strong it would be, and what sort of storm surge could be expected. Lord & Taylor argued that there were a number of actions the terminal should have taken to protect the cargo, asserting that the damage was foreseeable because some of the reports were using terms like “historic.” The Court disagreed, saying such descriptions were far too vague and did not provide the sort of specific information actually needed to protect the cargo from the damage sustained. Ultimately, there simply was insufficient time between when the weather services could provide high-confidence predictions and when Sandy hit  the terminal to actually move the cargo to safety.  Zim successfully demonstrated that Sandy ended up being much worse than even worst-case-scenario predictions.  Based on the weather predictions, most of the pre-storm preparations by the terminal had focused on securing the cargo from wind damage  The storm surge, which ended up causing most of the damage, was not predicted to pass the bulkhead at the terminal. As such, it was not considered a danger requiring the type of measures and precautions that Lord & Taylor asserted after the fact. Based on the unprecedented severity of Hurricane Sandy and the reasonableness of the precautions the terminal did take based on the best information available, the District Court found Zim and the terminal were entitled to the Act of God defense, not negligent and not liable for the cargo damage.

To read a copy of the District Court’s decision, click here.

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