(Note: This Guest Blog is by Corey Harris, an attorney with Merlin Law Group in the Tampa, Florida, office. This is part of a series he is writing on post-loss duties).

Think about this for a moment. A homeowner accidentally leaves something in the oven before heading off to the mall for an afternoon of shopping. Unfortunately for our hypothetical insured, that once tasty treat has caused a substantial fire which destroyed part of the house. Under almost all homeowner’s insurance policies, these damages would be covered despite the fact that the fire was caused by the insured’s negligence.

Under those same set of facts, if our wannabe Emeril Lagasse fails to properly mitigate those same fire damages, coverage could be reduced or even avoided all together by the insurer.

The general rule in insurance law is that a policyholder’s prior actions will not necessarily void coverage for a loss, even if that loss is directly caused by the negligence of the individual. After the loss, however, failing to take the appropriate measures to mitigate could lead to an increase in the amount of damages and may substantially reduce coverage or even eliminate it in some instances.

In a fire loss, for instance, the insured should make sure to remove any undamaged property if there is a question about the stability of the walls in that particular area. This was the exact situation that one court addressed in Suttir v. Indemnity Co. of America, St. Louis, Mo,. 226 Ill.App. 214, (1st dist. 1922). In this case, the Court refused to hold an insurer liable for damage to a car that occurred when the walls around it collapsed as a result of previous fire damage. The Court reasoned that the insured knew the walls of the building might collapse and had failed to properly mitigate the damages by moving the automobile to a different location. Therefore, the insurer should not be responsible for the further damages.

The exact consequences of a failure to mitigate are determined by the terms of the policy as well as the particular jurisdiction. Normally, the damages that result from the failure to mitigate the loss may not be covered, leaving the insurer responsible for only the original damages. A Louisiana court followed this partial recovery theory when a policyholder’s roof was damaged by wind and the house suffered periodic water damages over a long period of time. Higginbotham v. New Hampshire Indem. Co., 498 So.2d 1149 (La.App. 3 Cir.1986).

In Higginbotham, the Court held that although the insurer was responsible for the cost of replacing the roof, the policyholders were liable for damages sustained after the storm “where measures could have been taken to reasonably protect the premises from further deterioration.”

A similar decision was reached in Texas, when one court was asked to determine whether the duty to mitigate damages was a condition precedent to recovery, meaning that coverage was void if the appropriate steps were not taken. Fortunately for the policyholder, the Court found that “the failure to mitigate damages is an offset to recovery under the generic homeowners policy, and the district court erred and abused its discretion when it instructed the jury that mitigation was a condition precedent to recovery.” Carrizales v. State Farm Lloyds, 518 F.3d 343 (5th Cir. 2008).

There are cases in which a failure to mitigate may void coverage completely. Some courts have found that where the cooperation clause requires an insured to exercise all reasonable means to protect, safeguard, and salvage property, there is a possibility that the policyholder could void coverage altogether if this is not done. See Slay Warehousing Co., Inc. v. Reliance Ins. Co., 471 F. 2d 1364 (8th Cir. 1973).

Regardless of whether coverage is lessened or outright forfeited, these cases all have one thing in common – the problem could be avoided. Generally after loss, the first thing on an insured’s mind is not “how can I mitigate these damages, and have I done enough to comply with my obligations under the policy.” In fact, most insureds do not even know what the cooperation clause is, and who can blame them? How many people spend their lives immersed in insurance case law and treatises?

This is why it is important for homeowners to have professionals working for them as quickly as possible after the loss. Whether it is a public adjuster, attorney, or water remediation specialist, having someone there to guide you and make sure things are done properly can be priceless in the end.

  • Shaun Polunsky

    Your article on mitigating the damages is very informative. However, at the end of your article you fail to mention that an insured can call their agent or carrier direct if the coverage was bought directly from the carrier. There are many more qualified agents than not who can guide their customer on the basics of what to do. Many carriers do have qualified staff to guide policy holders as well. Granted there are those in the insurance industry who only know how to sell and not service the customer just like there are carriers who have few qualified claims staff.

    It is not always needed to call an attorney, water extractor or public adjuster straight away. I feel that people are more intelligent than they are given credit for as many can handle numerous situations better than most.

  • Corey Harris

    Shaun,

    You make a number of good points. An insured should always be able to call their agent or speak with the adjuster that the insurer sends out if they have any questions, and in the case of a smaller loss a simple phone call or conversation might be enough for the policyholder to properly mitigate their damages.

    In the event of a large loss, however, even the most intelligent or experienced among us will likely need help. My list of professionals was meant to be illustrative, and definitely not all inclusive. The point I was trying to make is that policyholders should not feel that they have to go it alone. There are many qualified professionals on both sides of the fence that can help advise the insured after a loss.

    Thanks for reading and for your comment.

  • Nick

    I disagree with the result in Suttir. I think the Court’s rule effectively imposed on the policyholder the knowledge expected from a professional fire expert or fireman. Unless it was patently obvious from looking at the wall damage, I do not see how a reasonable person would think to have the walls examined and tested for stability following a home fire. However, I was not able to find the case cited, therefore I do not know how apparent the wall damage was to the policyholder and to what extent the structure was damaged.

    Nevertheless, I thought your article was very informative and an interesting discussion of mitigation. Thank you for posting.

  • Insurance Vet

    Soundest principle to follow would be “What would I do if there was no insurance in place”? How many folks would simply watch property deteriorate if they knew it was coming out of their pockets? Nobody gets faulted for being reasonable and proactive. Problem lies in people’s attitude towards the purpose of insurance.

  • PeggLeg

    Mitigation maybe can be a grey area as to what was appropriate mitigation and what wasn’t appropriate mitigation. Surely, simply because more damages to a risk occured after a date of loss it cannot all be pinned on lack of mitigation.

    Seems to be alot of variables as to what constitutes mitigation.

    These and other important duties after a loss make having representation only a good thing.

  • Gordon

    Mitigation and Recovery are not exactly the same thing! I would think that both the insurer and the insured both can cause delays that can increase damage and loss. Especially in a loss involving business property that is critical to producing income. Obviously, the sooner the damaged property is repaired or replaced, the sooner production can be resumed. The question is what would be a “reasonable” expectation for the insured to expend personal resources to mitigate this loss of income, and what is the “reasonable” expectation that the insurer perform its claim handling process with “dispatch” and if the insurers breach their obligations to what extent are the insureds expectations increased or decreased?