THE DUTY TO MITIGATE
Nearly every insurance policy has a duty to mitigate clause. An insured property owner is obligated to mitigate damage before it becomes worse. It is important to understand the principle behind the duty to mitigate and its scope when facing an insured loss.
The duty to mitigate clause is found in insurance policies in part because it is long-standing contract law. No party to a contract can watch damages unfold, grow, do nothing about it, and then sue to recover what could have been prevented. In the abstract it is a perfectly sensible requirement. Yet taken to an extreme the duty to mitigate can defeat the point of insurance.
If a property owner had to pay large sums of money to mitigate damage without knowing whether an insurer would reimburse the point of insurance is lost. Insurance is meant to relieve people of a large, one-time expense, and they do so though paying smaller monthly premiums. If an insurer refuses to pay mitigation costs after they are incurred something fundamental about insurance is lost.
Fortunately, most insured damage occurs and concludes so suddenly that these extreme scenarios rarely unfold. Insured property owners have little opportunity to act during a wind or hailstorm or prevent damage thereafter. Yet for losses like a fire, property owners need to close that part of the home that is open to the elements to prevent more damage. That is the duty to mitigate in action.
Fortunately, insurance policies often include coverages for this expense. One such clause reads:
Reasonable Repairs.
We will pay the reasonable cost incurred by you for the necessary measures taken solely to protect covered property that is damaged by a Peril Insured Against from further damage.
If the measures taken involve repair to other damaged property, we will only pay if that property is covered under this coverage party and the damage is caused by a Peril Insured Against
I have often seen a dispute arise about the scope of insurer reimbursement of mitigation costs in the context of water claims. Water from a broken supply line or other mechanical failure spreads quickly throughout a home. Steps must be taken to quickly eliminate the water source, remove the water, and dry the property. In warm temperatures a humid home is subject to rapid deterioration, including mold growth. Property owners and their remediation contractors need to act fast, yet acting fast costs money. Insurers will argue costs incurred could have been handled cheaper with a different scope of repair or pricing from a favored contractor.
My view is that in emergency situations property owners have neither the time or expertise to shop around for the lowest price remediation contractor, and more important, assess a proper scope of the effort to mitigate. It is unfair to impose on property owner the burden of calling around to get different expertise, quotes, and scope when water is flowing through a building. The more repaid the decision to be made the more differential the insurer, and law, ought to be in terms of the expense incurred.
If you have any questions regarding the duty mitigate do not hesitate to contact me if you have questions about the duty to mitigate in your policy.
Ed