Supervillains and Insurance: Who’s Gonna Pay for That?

Breaking News! Superman is fighting an unidentified person in downtown Metropolis!

…again.

Didn’t this happen last week? And isn’t this all getting a bit expensive?

Most of the time when property is damaged, the property owner has insurance that will pay to restore their property to approximately the state it was in before the loss occurred. But when Doomsday goes on a rampage of destruction across at least three states or the Joker blows up half of downtown Gotham, insurer’s aren’t actually going to want to pay for that, and there is reason to believe that under the terms of standard insurance contracts, they wouldn’t have to. The reason has to do with the way insurance policies are written, which is a matter of contract as much at it is a matter of law.

So the focus of this post is not whether supervillains can get insurance, but whether standard insurance policies will pay for damage that they cause.

I. Insurance Policies and the DICE Method

First of all, insurance policies are only written for insurable risks. Generally speaking, an insurable risk is one where both the probability and magnitude of a particular kind of loss are measurable, where the occurrence of that loss is truly random, and where it is possible to transfer that risk to an insurer for an economically-feasible premium. A common example of an insurable risk is one’s house burning down. We know how often houses in a particular zip code burn down (this is what actuaries do for a living; some fun, huh?), we know what a particular house is worth, houses don’t burn down at any predictable frequency, and as it turns out, it’s possible to insure against the risk of fire for a premium which is both acceptable to the insured and profitable for the insurer. Flood is an example of an uninsurable risk. Floods do occur at random, and we know basically how often, but the magnitude of losses caused by flood are such that it is impossible to offer flood insurance at any price a homeowner can afford (more on this particular exposure later). Floods are considered “catastrophic” losses, because they cause both a high amount of damage to individual properties but also a high amount of damage to entire regions, making it impossible to adequately spread the cost to other property owners. The same is true of war, terrorism, civil unrest, revolution, etc., which is why all of those are considered uninsurable risks. Discharge of nuclear weapons, intentional or accidental, is also uninsurable. Uninsurable risks are generally excluded from insurance policies.*

When a loss occurs, the claims adjuster is going to walk through the DICE method: Declarations, Insuring agreement, Conditions, Exclusions. First, look to see if there is coverage for this kind of loss on the declarations page, i.e. coverage scheduled for this particular policy. Then, check the insuring agreement to see if the loss results from a covered peril. Then, check to see if there are any relevant conditions in the policy which are applicable. Finally, see if there are any relevant exclusions.

Take the Doomsday example again, and let’s assume that he has just leveled a private residence insured by ABC P&C by throwing Superman through it. ABC’s adjuster is first going to look at the declarations page for the insured’s homeowner’s policy. The house is insured for $100,000. So far so good. Then, he’s going to look at the insuring agreement to see if there is anything of interest there. This policy is a special perils form, which covers everything not specifically excluded, so again, so far so good. Then he’ll check conditions. The homeowner is current on his premium, gave timely notice of the claim, and is cooperating with the adjuster, so again, probably okay there.

But what’s this? Terrorism is excluded? And you didn’t buy the terrorism endorsement? Hmm. That’s going to be a problem.

It’s going to be pretty easy to argue that Doomsday is a terrorist, but even if he isn’t, it isn’t going to be difficult to fit this into either the war or civil unrest exclusions, both of which are part of every insurance policy. Any insurance defense attorney worth his salt would certainly make that argument, and it’s hard to see why it wouldn’t win. Heck, if Superman is a state actor, it might be excluded under the “civil authority” exclusion.

So sorry, Mr. Homeowner, your insurance policy isn’t going to pay for this.

II. Uninsurable Risks and Residual Pools

So what’s to be done? If we’re talking about a universe where superheros and supervillains exist and unstoppable monsters do level significant sections of town every other Tuesday, it seems probable that the legal system and/or insurance industry would take this into account. But because the magnitude of losses caused by superhero battles are so great, it seems likely that the states would have to resort to residual market mechanisms. This is how flood insurance is currently offered on a national level: the FEMA National Flood Insurance Program NFIP is pretty much the only way to buy flood insurance anymore. States have set up residual markets for both high risk drivers and properties with significant windstorm (Mississippi, South Carolina, Texas, etc.) and earthquake exposures (California) too. Basically, state legislatures have decided that even though certain kinds of risk are impossible to insure against on the open market, we want people to take those risks anyway, for a host of possible reasons. We want high-risk drivers to be insured both for their protection and for others, and denying someone permission to drive because they cannot buy mandatory insurance seems unjust. People really want to live in earthquake- and hurricane-prone areas, and those people vote, so we’re going to find some way of making that work, no matter how silly it is.

Residual markets can work in one of a number of ways. One is “assigned risk,” an approach frequently used to ensure that high risk drivers have access to at least the state minimum liability limits for personal auto insurance. Basically, every insurer that participates in the market is required to take their fair share of high risk drivers–for a high premium–as a cost of doing business in the state. They can then spread this cost to their other insureds, keeping the companies profitable. But it seems more likely that the states would create their own “Supervillain Pool” similar to the windstorm pools active in Gulf and coastal states. The way these work is that every insurance policy is charged a tax based on the premium which goes into the residual pool. The pool then reimburses property owners for damages caused by supervillain rampages, etc. Property owners would need to buy “Superhero/Supervillain Insurance” from the pool, and that premium would help too, but because this truly is an uninsurable risk, the pool will probably need to be supported by taxpayer revenue. The idea is that all but the biggest losses will be at least mostly absorbed by the pool but that the government will step in if things get really out of hand. The pool can theoretically up its rates in the years following a big loss to ensure that the government gets its money back, but this rarely happens.

Of course, while we’re modifying the law to account for superheros, it would probably also be the case that insurance companies would include some kind of “superhero/supernatural/paranormal” exclusion, shifting that exposure more directly to the residual pool, as has been done with flood, earthquake, and windstorm exposures.

III. Conclusion

A world with recognized and regular supervillain rampages would probably develop a way to insure against that sort of thing, but traditional property insurance would probably exclude such losses. States would need to create residual pools, much like the way they have for earthquake and hurricane losses.

*”Speculative risks,” i.e. risks where there is a possibility of gain and a possibility of loss–investments, basically–are also uninsurable, because the cost of insuring them would more than erase the potential gain from the transaction. These aren’t excluded by insurance policies because they wouldn’t have been covered anyway; insurers simply don’t write policies for those kinds of risks.

Commentary by James Daily:

I agree with my co-author that comic book worlds have likely developed a way to insure against attacks by supervillains and collateral damage from the response by superheroes.  However, even if the cost is evenly distributed among the risk pool, the question of net social cost remains.  In other words, are superpowers a net social good or a net social cost?  I think that, on balance, superpowers are either neutral or slightly positive.

Empirically, it seems that most versions of the DC and Marvel universes are broadly similar to our own in terms of the standard of living and technology level.  If superpowers were a net social cost we would expect one or both to be lower relative to the real world.  Indeed, if anything the technology level is sometimes higher in comic books, although advanced technology is often confined to superhero and supervillain labs.  Whatever the reason (superheroes fighting regular crime, inventions from Batman, Tony Stark, and Reed Richards), superpowers do not seem to be a net social cost.  This fact supports the civil rights claims of superpowered individuals.

32 Responses to Supervillains and Insurance: Who’s Gonna Pay for That?

  1. Pingback: DYSPEPSIA GENERATION » Blog Archive » Supervillains and Insurance: Who’s Gonna Pay for That?

  2. Interesting analysis, as always.
    I have a Marvel comic where, after someone in a fight goes through a window/wall, the owner of the property, unfazed, says to his friend
    “Not to worry. Superhero insurance! In the Big Apple, you can’t live without it!”
    You might also want to consider that the majority of superhero activity tends to be concentrated in certain large cities, as well as the possibility that superheroes would use their powers to help rebuild after disasters.
    That would be boring to put in a comic, of course, but Superman and J’onn J’onzz have been described as being able to rebuild the Watchtower in a day, Dr. Strange / Dr. Fate has cast spells that “revert” entire buildings, there’s that Avengers minor villain who can reconstruct objects from any particle of them and let’s not even get started on Green Lantern or the Flash.

    Astro City probably comes closest to addressing issues like these.

  3. After any length of time having their super battles, superheroes would probably go out of their way to back just such a government scheme for compensating victims of super losses – as long as the scheme held some kind of workmen’s-comp -esque (or 9/11-victim’s-fund-esque) provision that meant those seeking compensation from the fund would waive their tort claims against those truly responsible.

    I see now. This government-run insurance fund explains why most multiverses don’t disintegrate into situations like we saw in The Incredibles, with superheroes being subject to tort liability for negligent or reckless world-saving – rather than face the difficulty of taking a superhero to court, they simply collect a guaranteed amount of money and sign a waiver agreeing not to sue the supers involved in their property loss.

  4. And, of course, the drawback to someone with deep coffers like the government funding it, you get a much higher risk of conspired intentional fraud like Damage Control in the Marvel Universe who were found to have rigged several disasters to secure the rebuilding contracts. When managed by a private company, the life of such a scheme would be limited because after one or two cases, the insurance companies would simply label it as uninsurable and move on.Witness the recorded situations involving PMCs stirring up unrest or working with arms dealers to ensure that business is good.

  5. Thanks for another fascinating analysis. I’d wondered this myself as I’ve re-approached superhero comics as a post-law-school adult. Maybe I don’t understand how insurance works well enough, but wouldn’t insurers facing superhero-related losses seek recovery from such deep pockets as, say, Professor X (where does his money come from anyway?), Dr. Richards, or Stark Industries? Would insurance companies hopeful of such recovery lobby against liability caps, government compensation funds, and other policy-oriented subsidies for superhero behavior? I guess if we’re going to suspend our disbelief at the door to the Multiverse, we might as well believe that public support for superheroes (notwithstanding a world that “hates and fears them”?) would beat insurance industry lobbyists in the halls of legislatures.

    And on a related note, wouldn’t repeated demolition of the X-Mansion render insurers unwilling to cover Professor X after a while?

    I’m sorry to be such a nudnik, but your blog has already opened the door… :)

    • Actually I agree. This exposure would establish a very real incentive to conceal a superhero’s identity. The sheer scale of loss inherent in the activities of superheroes/supervillains would also strongly discourage a formal union or hierarchy of superheroes in order to avoid the resulting liabilities. An individual superhero whose personal identity remains anonymous can’t really be subject to loss claims; and even if he or she were served, they likely have few registered assets for collateral (except for heroes with gadgets or vehicles). However, an established institution such as the Xavier School, Stark Industries, or the Justice League headquarters that presumably leases property or pays a mortgage, maintains a public presence and has plenty of material assets to lose in a claim. Villains, on the other hand, are already outside of the law and have little interest in operating within its limits. Collectivization would remain an incentive for supervillains, while superheroes would have greater risk exposures and less incentive to create institutions.

  6. Superhero Disaster Insurance, the Marvel kind sounds about right. There would have to be special kinds to cover criminal, terrorist, acts of war on home soil, and attacks by NON RESIDENT aliens, such as when Braniac or some Green Lantern villain would abduct an entire city, or when Doomsday arrives.

    A consideration we haven’t addressed is whether the populace would see the major attacks as being caused by actors who select the meta-heroes, and attack them in their home turf. Such as by attacking Metropolis, Gotham City or Ocean City, or NYC, depending. In which case, S/B/GL would be an attractive nuisance. If however they are seen as protectors against random NRAlien attack, then they would be highly valued.
    I think it is likely that the heroes would be attractive nuisances as regards their regular villains who search them out. Usually the heroes don’t go where the villains are, except for Batman and his entourage, and Daredevil. Typically the heroes are reactive, not proactive. That reactivity attracts the villains, which brings insurance claims in their wake.

    • I think the question of whether the populace sees the superheroes as an attractive nuisance has been addressed a couple of times, It seems to have been a factor (if not the chief one) in the developments of Watchmen and the plot lines in both DC and Marvel universes regarding legislation to discourage or outlaw masked vigilantes. There was also an episode of the Cartoon Network version of Batman in which the supervillains testified in a kangaroo court that they had arisen in response to Batman — that his existence called them into action in a sort of natural law, the equal and opposite reaction to his action. (The final verdict, if I remember correctly, was that like Edmund in Lear, they would have been what they were “had the maidenliest star in the firmament smiled” on their birth.)

  7. On the matter of net social cost.

    Here are a few observations on the perceived statistics of DC and Marvel universes. (We are obviously unable to collect true statistics and trying to collate reported data would be an expensive project due to the massive volume of comic literature over the century, so bear in mind this is just a guess. I’m no lawyer, just a sociologist.)

    According to the Spiderman movies (and presumably, the comics they were based on, if such an incident is not a movie novelty) Spiderman temporarily stopping his activity resulted in a 75% rise of crime rates in NY. Depictions of such changes are by no means limited to Spiderman, though that is the only one that actually lists a number that I remember. Assuming there is no reality-bending of some kind going on next to superpowered individuals, (which could actually be the case, but let’s put that possibility aside for now) observing their daily life out of costume as presented through comics, we can estimate in general a much higher rates of violent crime in large cities than our reality has ever seen. A large city appears to have more well-organised large scale bank robberies going on every year than an entire industrial nation of our world, many of them committed by non-superpowered criminals. Batman goes on patrol more or less every night, and refers to Gotham being quiet as a rarity rather than a common event, and Wayne Enterprises is a frequent target for corporate espionage, break-ins and other harm, to say nothing of other major companies of the DC universe.

    At the same time, standards of living and common usage technology levels appear to be generally the same as ours, and often, slightly exceeding those, so we have to postulate that all the above and the added risks of collateral damage somehow even out.

    The obvious way it could happen is when police presence around the comic universe(s) is much lower than in our reality, so low, that it is not an effective deterrent, and superheroes emerge naturally to pick up the slack. The decreased costs of police protection might allow governments to create complicated insurance systems and otherwise improve the standard of living back to “normal”. However, that hardly seems sufficient to actually cause the perceived rise in crime rates itself.

    What would serve to explain it is the curious fact that numerous comic book villains, both superpowered and regular criminals, (Batman villains in particular are very notable for this, but that phenomenon is not limited to Gotham at all) do not just escape imprisonment regularly, but also get released, both from mental health institutions under the pretext of being cured and, what sounds much more surprising, from regular prison sentences, which would mean that either prison sentences are much shorter, or the ways to reduce the sentences already issued and/or get released on parole are more numerous. Releasing non-superpowered criminals out in the society after much shorter periods than in our reality would serve to accumulate a large population of people who can find no gainful employment due to prejudice against convicts, and have to resort to crime again, buffing the crime rates up to the levels seen.

    Here I have to defer to the specialists for the answer on how and if this aberration in the judicial system is possible, and those specialists would be you. :)

    • A large city appears to have more well-organised large scale bank robberies going on every year than an entire industrial nation of our world, many of them committed by non-superpowered criminals.

      I don’t think we can really assume this.

      Comic books work on “comic book time” where the characters don’t age much but a lot of events happen. And even just considering things like bank robberies that are excessively frequent without having to consider comic book time, it’s pretty much a genre convention that there are lots of crimes. Trying to realistically analyze those is like claiming that superheroes are constantly in danger of putting the villains into comas because knocking someone out is likely to give them a concussion–there’s really no way to justify it and if you try to treat it realistically you end up with consequences whose implications swamp the dozens of other things in comic book worlds that you can analyze realistically.

  8. I am pretty sure that disaster relief is considerably quicker with superheroes assisting. For instance, they’re still clearing rubble in Haiti. It probably would take a matter of days in the Marvel universe.

    Also, I doubt relatively slow-developing natural calamities would actually get far enough along to do serious damage if major superhero teams were available. Earthquakes and tornadoes yes, hurricanes maybe, floods/wildfires/droughts no.

    If Storm were willing to deflect all hurricanes from the US, that’s worth, what, hundreds of billions of dollars a year?

  9. I am new to the site, so forgive me if I rehash old issues regarding tort law. I’m hoping someone will respond or refer me to case law and scholarship on the following question.
    1. There is a line of “eggshell skull cases” that helped establish the principle that a plaintiff who commits a minor “touching tort” can be held accountable even for entirely unforeseen damages. You lightly tap a fellow student on the head with the eraser end of a pencil, unaware that he was born with an unusually fragile “eggshell” skull. The student’s head shatters, leading irreversible brain damage. Plaintiff might have been a reasonable person, and a reasonable person would not have anticipated such a catastrophe. But the “reasonable person” defense does not apply once plaintiff commits a touching tort that is the proximate cause of the damage.
    My question is whether this standard of liability would apply in the following case. Mr. Jones, an amateur geologist, invites the Kents over for Sunday lunch. He gives Superbaby a shiny green stone to play with, tapping it lightly against the infant’s belly, hoping to draw a smile. Instead, the baby dies from this first exposure to Kryptonite. No one on earth,not even Ma and Pa Kent, could have been expected to know that the substance was toxic and potentially deadly to beings like Superbaby born on the planet Krypton.
    Could the Kents win a wrongfully death suit against Jones? Suppose Jones had known
    baby was apparently indestructible. Could the Kents have won a wrongful death suit against him? Were the comic book artists who introduced Kryptonite to the Superman series liable? They did not intend to contribute to the infant’s death. Indeed, their livelihood depended upon his survival. They had introduced Kryptonite merely to provide the possibility that the super being could be weakened, defeated, killed. On the other hand, could the comic artists have a against Jones, citing eggshell skull precedents? Against the Kents for allowing Jones to tap their adopted child’s belly.

    • Corrections: in second paragraph, substitute “defendant” for plaintiff. Duh. In third paragraph cut sentence that follows “planet Kryptlon.”

    • I suspect the Kents would not be likely to win a wrongful death suit. In order for the eggshell rule to apply, a tort must be committed, and consent is a defense against most torts. The geologist likely had at least implied and quite possibly explicit permission to play with superbaby and that could reasonably involving touch him lightly with inert material.

      The other problem with the wrongful death suit is that they would have to prove that the stone or more specifically touching with the stone caused the death. If superbaby is dead and no other kryptonians are around for biological testing and the stone is harmless to all other forms of life, the only evidence you have the the stone killed him is the fact the death came after touching with the stone. While this does provide some evidence, leaping to the conclusion it killed him by itself would be committing the “Post hoc ergo propter hoc” logical fallacy. It would be equally possible that he died of an unknown illness that just happened to display symptoms at the same time as the touching or any number of other possible environmental causes. Without knowledge of Kryptonian biology it would be nearly impossible to prove it by a preponderance of the evidence.

      Now, if superbaby were injured but survived and you could use repeated (carefully controlled) tests to show superbaby was vulnerable to that stone then you can at least establish the cause and effect and you could talk about lesser torts, but again you would have to overcome the consent and for any tort requiring negligence you would have a hard time showing negligence.

  10. For an in-comic perspective on the problem and their solution to it:

    http://marvel.com/universe/Damage_Control

  11. Superhero insurance was mentioned in the early issues of Wally West’s Flash comic, in 1987. Wally won the lottery and moved to a mansion in the Hamptons, or somewhere on LI. I’m not remembering all the details right , but he got in several arguments with the mayor of that town, who at first was happy to have a high-profile celebrity living there, partially as a way to prevent against supervillian attacks, but later realized that the battles the Flash participated in were destroying the town, and that they didn’t have insurance to cover it. Property values were being driven down as well.

  12. Read about this blog in the Times. Love it!

    Now, is Doomsday a terrorist for purposes of excluding insurance coverage? I don’t believe it is that easy to argue he/it is a terrorist. What definition of “terrorist” is to be used? Is it the common usage of “terrorist”? Is it the United Nations definition? My understanding is that both usages (out of the dozens available) require either a political or practical objective that the terror is in furtherance of, e.g. Northern Ireland expelling the English. Wasn’t Doomsday simply a creature of destruction with no objective end save complete obliteration? Or did I miss a few issues of Superman?

  13. Strictly considering a universe wherein superhero and supervillain related calamities and catastrophes occur often (if not regularly), wouldn’t it make sense to adjust our idea and measure of the “probability and magnitude of a particular kind of loss” (in this case, property destruction and personal harm caused by supervillainy and it’s prevention)?

  14. Wouldn’t any tort actions have to be directed at the super-villain, not the super-hero, government actor or not? Super-heroes do not create the damage, they demonstrably minimize it – the villains are the ones at fault, and difficulties in collecting from them – considering the value of high-tech hide-outs or super-weapons and such – might be easier than it first appears. For example a court could award you the patent rights on Captain Cold’s cold-gun. Those could be worth a LOT.

    • You are correct that supervillains would be liable for a great deal, but superheroes would still be responsible for any collateral damage they caused. While private necessity might justify a superhero trespassing onto another’s property during a fight or picking up a car to use as a shield, the superhero would likely still be responsible for any resulting damage that would not have occurred but for the superhero’s actions.

      If the superhero were acting at the direction of the government, then the doctrine of public necessity might or might not require the government (and indirectly, in this case, the superhero) to compensate the injured party for damage to the property, depending on the jurisdiction’s view of public necessity. It is not clear to me that if the government was not liable that the supervillain would be. It could be that some parts of the damage would simply go uncompensated.

  15. You left out one thing. Any damage done by Thor or Darkseid would not be covered by any insurance. Look it up. Insurance does not cover “Acts of god”.

  16. I think I just found my new favorite blawg. Since I specialized in entertainment and IP, I’m not going into the nuances of insurance law already masterfully covered above, but if you’ll let me be a gushing fan boy for a minute here, I will say this is one of the first blog posts about insurance law that I read every word of. Looking forward to following the blog and thanks for writing it.

  17. Pingback: SUPERPOWERS AND STATUTES - Population Statistic

  18. Pingback: Getting Honest: A Really Simple Business Plan — My Media Labs

  19. Ooo hey awesome site. Definately going on the follow list.

    I’m gonna let one of my characters from a randomly updated superhero setting I have field my response. Max, if you would.

    “Thank you. *glances through article* Ah…heh. Yes so that’s why grandad encouraged me to not break somebody’s face through a phone pole. Also why I tend to get property damage bills. Well I get them through proxy but I still have to write the check. Hey anything on the books for monetary compensation for this kinda stuff on my end?”

  20. Actually, the Marvel Who’s Who takes this up in the entry on Damage Control (the contractor who cleans up after the super-fights.) This claims that New York has been declared a permanent federal Disaster Area, allowing FEMA or some such agency to pick up the bills.

  21. Just for your information, I’ve been watching and reading “Trigun” and two of the characters are insurance claims adjusters that follow Vash the Stampede (the main character) around because of claims brought on by the public from alleged destruction he caused. Because of the level of destruction he caused in two cities, the insurance company have declared him an “act of God”. So it makes me wonder what other paranormals would fall into this category.

  22. Pingback: New on Blogroll: Law and Multiverse blog- Legal Issues and Superheroes

  23. Pingback: The Avengers: Who’s Gonna Pay for That? | Law and the Multiverse

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