Responsibility of the state for wrongful information
Responsibility of a construction company
Comment
On February 27 2010 a devastating earthquake and a number of resultant tsunamis affected several regions of Chile, causing damages that exposed the insurance industry and reinsurers to more than $7 billion in claims. One of the most affected areas was the Concepcion region; following the catastrophe, in September 2011 Concepcion's Third Civil Court issued two first instance decisions that may be of significance for insurers.
Responsibility of the state for wrongful information
In the first decision, the state of Chile was ordered to pay Ps10 million for the death of a man caused by the tsunami. Under the facts established by the court, Luis Soto left his home and headed to Talcahuano to look for his family after hearing on the radio that the head of the Concepcion Regional Authority had said that there was no risk of a tsunami. Previously, a tsunami warning had been issued by the authorities. On entering the roads that link the ports, the victim was caught by a tsunami and swept away by a wave, which resulted in his death.
This decision is the first in which a court has determined that the state "failed to provide service" during the catastrophe. In its decision, the court posed the question:
"whether it would not have been more convenient that the authority had kept silent in face of the uncertainty of the information gathered at that time, rather than acting against the instinctive evaluation that people on the shore had made themselves."
The court ruled that the state bodies in charge of adopting decisions in the face of the earthquake had failed to provide service. The court noted that the authority, "without [availing itself] of truthful information, adequate communications, or qualified technical professionals", had decided to cancel the tsunami warning.
The counsel for the state has appealed this decision on the basis that the authorities delivered the information available to them in the circumstances and that the victim himself had acted imprudently.
Plaintiff's arguments
The plaintiff contended that the state was liable for non-intentional homicide, arguing that it had failed to provide due service in light of its duties to care for the common good and safeguard and respect constitutional rights. The plaintiff added that under the Law of State Administration, the state is liable for any damages caused by its organs in the exercise of their functions, which also applies in cases of a failure to provide service. Furthermore, the plaintiff contended that:
- this failure constituted strict liability of the state; and
- the causal relationship between the damage and the failure was evident due to the fact that a potential tsunami was a foreseeable event following an earthquake.
The lawsuit was based mainly on Article 38 of the Constitution and the Law of State Administration, which entitles any person to pursue civil liability from an organ of the state for damages caused as a consequence of failure to provide service. These constitute direct sources of the state's liability and are applicable whenever the organs or agents of the state do not act when their action is required, or whenever their action is late or defective, and cause damage to the users of public services.
Defendant's arguments
The defendant indicated that the magnitude of the catastrophe affected the general reaction system of the state organs, and in such circumstances no failure to provide service existed. The state relied on advice from:
- the Seismological Service of the University of Chile, an academic entity that informed the authority about earthquakes, their epicentres and magnitudes; and
- the Hydrographic and Oceanographic Service of the Army (SHOA), whose purpose was to deliver information to the authorities in respect of the magnitude and estimated time of arrival of a tsunami on the coast.
Information on tsunamis is usually obtained from the Pacific Tsunami Warning Centre (PTWC) or from the US Geological Survey, with an average nine to 15 minutes' delay. In addition, the Seismological Service of the University of Chile does not operate during weekends or beyond normal working hours, and the earthquake and resultant tsunami took place before sunrise.
The defendant further argued that the state organism in charge of emergencies is responsible for surveying the different scenarios involving risk, both within the country and abroad, in order to gather, evaluate and broadcast all available information about a potential or actual occurrence of any destructive event that qualifies as either an emergency with a social impact or a disaster. The defendant added that in this context, a SHOA officer, following the analysis of information received from the PTWC, decided to release a tsunami warning. The warning was initially communicated to the state body in charge of the emergency and then sent to various entities. However, most of these entities did not receive the message due to communications problems. The defendant indicated that the warning was cancelled by the state body in charge of the emergency based on technical considerations and analysis of the situation.
Decision
The court established that the Concepcion Regional Authority had communicated through a radio station that no tsunami risk existed and called people to go back to their homes. It added that, despite the self-security measures that people had instinctively taken, the tsunami warning had been cancelled by the state body in charge and communicated by the regional authority. A tsunami later occurred, by which time communications with the naval zone had been cut.
Even though earthquakes and tsunami events are unexpected and qualify as force majeure, the court concluded that the decision of the authority to deliver information that the tsunami was "non-existent" and to call on the people who were sheltered on the hills to go back to their homes could not be categorised as a force majeure event. Instead, the court ruled that such decision involved a degree of negligence and a failure to provide service, as the authority was not in a position to assure people that a tsunami risk did not exist, despite any error of the analysts and communications deficiencies.
The court ruled that it would have been more appropriate for the authority to keep silent in the face of uncertainty regarding the information gathered and the admitted lack in communications.
Under these concrete parameters, the court estimated that the state organ in charge of adopting decisions during a state of catastrophe had failed to provide service. According to Chilean case law, a state's 'failure to provide service' occurs whenever the state fails to provide a service which it is legally bound to provide, the service provided does not comply with the required standards, or it is provided late, thus causing damages and originating a direct liability for the damages regardless of any potential negligence on the part of any state's officer.
Responsibility of a construction company
In a second related decision, the same court established that a construction company must pay out for earthquake damage to a building during the February 2010 catastrophe. The court established that the building's apartments had been seriously damaged as a result of poor planning and construction.
In the court's view, the single occurrence of an earthquake, even one as intense the quake affecting Concepcion, did not by itself constitute an exemption of liability, much less when considering that collapse or structural damages only affected some buildings in the city.
The court further found that the evidence produced and the analysis made demonstrated that the building had serious defects - for example, the 17-storey building was built on the basis of engineering calculations for a 16-storey building, and the soil and terrain mechanics calculations used were made for a 15-storey building.
The court concluded that these facts explained the deformation of steel bars in the underground walls and collapse of the whole building structure. The court argued that this conclusion is reaffirmed by the fact that a 20-storey building on the other side of the street survived without significant damages.
The judge ordered that the amount of compensation will be determined once the decision is enforceable - namely, once the Court of Appeals and the Supreme Court have heard any potential appeals to this decision.
These decisions could be considered by insurers for cases where the wrongful behaviour of any entity may have caused or aggravated the loss, since on the basis of payment of the loss insurers automatically become subrogated in action against those who may be responsible.
For further information on this topic please contact Emilio J Sahurie at Estudio Carvallo by telephone (+56 2676 9333), fax (+56 2234 4167) or email ([email protected]).