Mitigation of loss: a guide for landlords and homeowners

If you have home insurance or landlord insurance, you may have come across the phrases ‘reasonable precaution’ and ‘mitigation of loss’ in your policy wording. If you’re not quite sure what the concepts mean, it’s worth taking a few minutes to get familiar with it both to help prevent further damage and ensure you don’t risk lessening or voiding your insurance cover.

• What is mitigation of loss in insurance?
• How can homeowners take reasonable precautions and mitigate loss?
• What precautions can landlords take?
• How do you comply with your duty to mitigate?
• Is there anything you shouldn’t do?
• What are the consequences if you didn’t mitigate loss?
• How can you get further assistance if you’re not sure what steps to take?

What is mitigation of loss in insurance?

Most home insurance policies will have a general condition that states that the policyholder will maintain the property and take reasonable precautions to prevent damage. This includes routine maintenance and fixing issues before they develop into a bigger problem or cause damage to the property, a neighbours’ property, or a member of the public. This condition also means that the policyholder has a duty to mitigate loss to prevent further damage that could’ve been avoided had the policyholder acted to avert it.

When you take out insurance, your insurer agrees to cover you for a certain level of damages caused by an insurable event. They do not agree to cover you for additional damages that could have been avoided with reasonable care.

For example, there’s a storm in your area which damages your roof and leaves it with a large hole where tiles once were. Your home or landlord insurance policy will normally cover the cost of repairing the roof, providing you have kept it well maintained. However, if you do nothing about the hole in the roof and it then rains heavily, causing significant water damage to the belongings and insulation in your loft, your insurer is likely to argue that the water damage could’ve been avoided if you had found a local tradesmen to make a temporary repair, for example by fixing a tarpaulin over the hole. As a result, they are likely to refuse to pay out for the additional damage.

How can homeowners take reasonable precautions and mitigate loss?

There are many ways homeowners can take reasonable precautions to prevent damage to their property. Taking precautions would evidence that you kept the property in a good state of repair, and took action to mitigate loss, if you needed to make a claim.

These are few examples:

• Regular checks of guttering. Blocked gutters are a common cause of water ingress into homes. Making regular checks not only reduces the likelihood of damage from a blocked gutter, but if you document these checks, it can help prove you’ve taken steps to mitigate the risk.
• Get repairs done as soon as possible. For example, if a pipe starts leaking, get it repaired quickly. If you don’t and the poorly maintained pipe then fails and causes water damage, your insurer is likely to argue that you didn’t mitigate the risk. Homeowners and landlords also have a responsibility to mitigate their liability to others – for example by fixing a leaking pipe before it damages a neighbour’s property, or securing a loose tile before it damages a passing vehicle or injures a pedestrian.
• Take necessary steps to prevent further damage. If you can reasonably take temporary measures to prevent further damage, you should do so. Putting a tarpaulin over a hole in the roof is one example. Turning off the water mains in the event of a leak is another.
• Always ‘make safe’ in an emergency. If necessary, call in a professional such as a gas engineer or plumber to make your property safe. The cost of this may be covered by your home insurance policy, or, depending on your policy cover, your insurer may have a helpline you can call to arrange an emergency call-out.

What precautions can landlords take?

Preventing damage to property is a little different for landlords simply because they don’t live in the insured property.

A good first step is to ensure that tenants understand how they can mitigate loss in the event of an emergency. For example, make sure they know how to turn the water off at the mains and that emergency contact details are readily available.

The other main way landlords can ensure their property is well maintained is to ensure that their rental properties are regularly inspected. They, or their managing agents, should conduct and complete routine inspections to pick up on any maintenance issues, making necessary repairs as soon as possible.

How do you comply with your duty to mitigate?

It’s essential to gather evidence to prove that you have taken reasonable steps to mitigate loss. This is particularly important if the damage is expensive to put right – loss adjusters may need to see proof of the actions you have taken.

Take photos of damage, both before and after any temporary repairs. If you need to call in someone to ‘make safe’ in an emergency, be sure to keep the receipt or invoice.

If you are a landlord, keep all correspondence with your tenants and managing agents that evidence the steps taken to mitigate loss. This should include keeping copies of relevant emails, text messages, WhatsApp messages, and similar.

Most importantly, speak to your insurer or broker as soon as possible. Even if you haven’t decided whether to make a claim they can still note when an issue first began.

Is there anything you shouldn’t do?

When mitigating a loss, you must be careful not to do anything that could reduce or invalidate your insurance cover.

Perhaps most importantly, don’t commit to expensive repairs before you obtain approval from your insurer. For example, if you spent several thousands of pounds getting your roof repaired without your insurer’s prior permission, they could pay out less or even decline your claim. Insurers will often have preferred tradesmen that they will allocate to complete repairs.

Finally, remember to gather evidence needed for your claim. Typically, this will mean taking photos of the issue, even before making a temporary repair. Remember only to make emergency repairs that are safe to do, if you’re unsure it is best to call a professional or seek advice from your insurer first.

What are the consequences if you didn’t mitigate loss?

Fail to mitigate loss and your insurer will either pay out less than expected or refuse to settle your claim at all. Similarly, if you take steps to permanently repair a problem without your insurer’s permission, you could also end up out of pocket. This is why it’s essential to speak to your insurer if you are in any doubt.

How can you get further assistance if you’re not sure what steps to take?

First of all, make sure that you are familiar with the terms of your insurance policy before you need to make any claim. As mentioned, all insurance policies will require that the property is well maintained and that you take reasonable precautions to prevent loss, and if you have a flat roof there will normally be extra conditions to comply with.

It’s also a good idea to familiarise yourself with your insurer’s claims process. Finally, always speak to your insurer or broker as soon as possible. They will be able to advise you on how to handle any given issue without jeopardising your insurance cover.