Mitigation of loss is the expectation that you take reasonable steps to stop further loss, damage, or liability once an incident happens.
Most Australian policies include this as a claims condition. Some also offer a “mitigation of loss” extension that covers reasonable costs to prevent a bigger insured loss.
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Where it appears in insurance policies
Mitigation obligations typically appear in three parts of a policy:
- Claims conditions, which require you to take reasonable steps to prevent or reduce further loss or damage.
- Exclusions or condition-based reductions, where failing to act reasonably can reduce what is paid.
- Policy extensions, which cover reasonable and necessary mitigation costs up to a sub-limit when the wording allows it.
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What is considered Mitigation?
Mitigation usually includes:
- Taking reasonable steps to reduce further loss or damage after the event.
- Securing or protecting property if it is safe and practical.
- Keeping evidence of the loss so the insurer can assess the claim.
- Incurring reasonable mitigation costs when the policy includes that cover.
- Allowing the insurer to inspect damage or take over parts of the response once notified.
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Mitigation does not include:
- Unsafe or unreasonable actions.
- Expectation that all costs will be reimbursed automatically.
- Costs outside the policy wording or above any sub-limit.
- Expanding the insurer’s indemnity beyond what the policy covers.
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When a claim may be reduced
An insurer may reduce what they pay if:
- Reasonable steps were not taken and the loss became worse.
- Property was not secured after the event when it was safe to do so.
- Costs exceeded the sub-limit or did not meet policy conditions.
- Evidence of the loss was not preserved.
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Any reduction applies only to the part of the loss that increased because reasonable steps were not taken.
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How mitigation applies to policy triggers
Mitigation obligations apply as soon as you know about the loss:
- In claims-made policies, mitigation applies from the moment you become aware of the issue.
- In occurrence-based policies, it applies straight after the event that caused the damage.
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The obligation sits separately from the trigger and is active whenever further loss is possible.
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Key Takeaways
- Mitigation of loss requires reasonable steps to limit further loss or damage after an incident.
- Most policies treat it as a condition, and some offer it as a cover with a sub-limit.
- Mitigation costs are only covered when the wording allows it or when the insurer authorises them.
- Failure to mitigate can reduce the amount paid, but only to the extent the extra loss came from not acting reasonably.
