What is the duty to mitigate damages?
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The duty to mitigate damages is the duty, or obligation, on the part of a person who has suffered physical injury, property damage, or financial loss, to take action to minimize further damage, injury or loss. A person is not allowed to stand idly by and watch further harm come to his or her property, or to otherwise passively allow additional costs or losses to occur. Everyone must use reasonable care and diligence to minimize damages by preventing additional damage, loss, or costs. In law, “damages” means the money another party owes you due to some wrongful act on their part. The duty to mitigate damages is the duty to minimize the amount owed to you if you are capable of doing so.
What Does a Person Have To Do To Mitigate Damages?
An injured party must make a reasonable effort or expend reasonable costs to prevent the amount of loss or harm from increasing. For example, if constant rain is raising the level of a lake next to your home, you have the responsibility to take steps to prevent damage from the flood which is about to occur, such as moving belongings or vehicles to higher ground or putting out sand bags to prevent water from entering your home. The acts required by a person to mitigate damages are determined by the facts of the particular case and must be "reasonable" under the circumstances.
Whether certain acts are “reasonable” (or not) is judged by two related standards:
- Subjective standard: You should do what the hypothetical reasonable average person would do under similar circumstances;
- Cost benefit standard: If you can spend $X to save $2X, $3X, or more, that would be a reasonable thing to do because your investment offers you a positive return. It is reasonable to spend money to save even more money.
What Happens if a Person Fails to Mitigate Damages?
If a person fails to mitigate damages, then their damages – what they can get as compensation in a lawsuit – are reduced accordingly. The reason that the aggrieved party is penalized in this way – by giving up or losing money to which they would otherwise be entitled – is to encourage people to do what they can to avoid additional costs.
How Do You Prove a Person Failed to Mitigate Damages?
The defendant (the person being sued) has the burden of proving that the plaintiff (the person who filed the lawsuit) failed to mitigate damages. In other words, the defendant must prove that the plaintiff failed to avoid additional costs. This is not necessarily a difficult burden. In the typical civil case, the standard of proof is by a “preponderance of the evidence,” or “more likely than not.” Put another way, the defendant must prove that it is more likely than not that the plaintiff failed to reduce costs or losses when he or she reasonably could have.
Mitigation of Damages Examples
Car Accident: Alex sues Bob for negligence (or carelessness) for the property damage to Alex’s car resulting from an auto accident in which Bob was at fault. While Alex’s car is being repaired, Alex decides to rent a Rolls Royce and tries to recover the cost of the Rolls rental from Bob. Alex has failed to mitigate damages because a cheaper car could have been rented. Alex will likely be limited to recovering what a reasonable alternative car would have cost to rent.
Landlord-Tenant: A tenant has a one-year lease, but moves out after six months and stops paying rent when there is nothing wrong with the rental. The landlord can sue the tenant for the rent due under the lease, but the landlord has a duty to mitigate damages by making reasonable efforts to find another tenant. The landlord may not simply leave the rental unit empty while counting on suing his former tenant for the money. Reasonable measures would include actions that other landlords in the vicinity take to attract tenants, such as advertising the property online or in the newspaper, posting a sign on the property, or retaining a rental agent. When a new tenant rents the property, the former tenant’s obligation to pay rent ends, even though there are remaining months on the original lease.
If the landlord does nothing, the landlord has failed to mitigate damages and cannot claim damages based on the rent that would be due for the remainder of the lease. The landlord would only get rent for an amount of time equal to what the court concludes is the reasonable length of time it typically takes to find a new tenant for a unit similar to that in the rental marketplace. For example, let’s say there are six months left on the lease, but an apartment like this one can typically be rented out in three months in that geographic area. In such a case, the landlord might only get three months of rent from his former tenant.
Home Improvement Contract: Denise entered into a contract to have her roof repaired and, unfortunately, the contractor she hired starts the work but never completes it. Denise sues the contractor for breach of contract. Her damages include the costs to complete the work, but she hires the most expensive contractor she can find to do the work. Denise has failed to mitigate damages because she could have hired a contractor whose costs are reasonable and comparable to what the original contractor charged. She will likely only receive as compensation the cost she should have incurred, not the unnecessarily inflated cost she did incur.
And, in this case, she would also be expected to take reasonable steps to get any gaps or holes in the roof closed to prevent the elements from getting in and causing damage to her home. If she fails to take reasonable steps to protect her property – even something as basic as putting tarps over exposed areas – she may not be able to recover compensation for any rain damage to the interior of her home.
Unemployment Compensation: Gary has lost his job and is receiving unemployment compensation. The Employment Development Department in Gary’s state tells him that he needs to submit evidence that he has applied for at least three jobs every week. Gary ignores that and instead of looking for work, he takes a European vacation. Gary has failed to mitigate damages because applying for jobs may have resulted in employment which would have ended his need for unemployment compensation. Therefore, the Department might cut short Gary’s unemployment benefits, or at least not let him receive benefits for the time he was on that European vacation, because he was not doing what he reasonably could to reduce his losses.
As is evident from these examples, mitigation of damages means taking reasonable steps to minimize damages. Failure to do so may reduce the compensation to which you’d otherwise be entitled.
If you are seeking recovery for property damage from an insurance company, you should seek the advice of an experienced insurance lawyer. If the property damage was due to a car accident, see a car accident lawyer right away.