Failure to mitigate losses in a compensation claim
It is often said that an injured person who makes a claim for compensation is required to take all reasonable steps to mitigate his or her loss. However, strictly speaking, that is inaccurate. An injured person is entitled not to do anything by way of treatment, rehabilitation or the like. There is no ‘duty’ to mitigate if the word ‘duty’ is understood to mean a legal obligation that one party owes to another party. The relevant legal rule, rather, is that an injured person who unreasonably fails reduce their loss cannot charge the amount of the loss that could have been avoided by taking reasonable care to the defendant (or, in reality, to the defendant’s insurer). In other words, the injured person, in order to recover damages in respect of loss that could have been avoided by taking reasonable steps, must take those steps. If he or she does not, the quantum of the claim will be reduced by the amount of the loss that could have been avoided.
Insurers from time to time appeal to this rule regarding mitigation. For example, an insurer may assert that an injured person acted unreasonably in refusing to undergo surgery that was recommended by their doctors, in failing to undergo psychiatric consultations, or in failing to take to take anti-depressant medication. The onus of proving that an injured claimant has failed to take reasonable steps in mitigation of his or her loss is on the insurance company (under section 136 of the Motor Accidents Compensation Act 1999).
As a practical matter, insurers rarely succeed in an allegation of a failure to mitigate. The onus that insurers carry in this regard is a heavy one. This is especially so, it appears, where the steps that the insurer says should have been taken are fairly drastic. I know of no case where an insurance company has been able to convince a court that a failure by the injured person to, for example, undergo spinal surgery was unreasonable and therefore amounts to a failure to mitigate. Spinal surgery, as we all know, is extremely serious and risky. Those matters are taken into account in deciding what the claimant reasonably should have done. Similar remarks can be made about mediation that has unwanted and unpleasant side-effects.
Of course each case depends on its own facts. If an insurance company can show that some reasonably straightforward and safe treatment would be effective in reducing the injured person’s suffering, an allegation of failure to mitigate loss may be made out. However, it is unlikely to be made out if the insurer itself has refused to fund such treatment.
The reasonableness of an injured person’s refusal to undergo treatment depends on the injured person’s knowledge of the benefits and risks of treatment at the time of refusing it. If, for example, an injured person does not know that a given treatment might have been available, it is difficult to see how the injured person could be said to have acted unreasonably in failing to avail him or herself of it. At the very least, the insurer, if it is to succeed in a plea of failure to mitigate, will need to adduce evidence that the injured person’s doctors explained to the injured person the benefits and risks of the surgery.
When advising an injured person about his or her legal rights, it is generally prudent to emphasise the need for the injured person to do all he or she can to mitigate loss, either by returning to work if the person is physically and psychologically able to do so, or to receive recommended medical treatment, therapy, counselling, if the injured person is satisfied that any such treatment is likely to be beneficial. The worst advice a lawyer can give to an injured client is to refuse to return to work or to undertake medical treatment with a view to maximising the quantum of the claim. Not only is doing so unethical but it will also give rise to the risk that the insurer will be able successfully to argue that the injured person’s compensation should be reduced on account of the person’s failure to take reasonable steps to mitigate the loss.
One other incident of the rule regarding mitigation is if an injured person does take steps to mitigate his or her loss, the costs reasonable incurred in doing so are chargeable to the insurer. For example, if the claimant pays for physiotherapy treatment with a view to reducing pain, the insurer will need to reimburse the claimant for that cost, provided that the sums spent were reasonable in all of the circumstances, and provided, of course, liability for the accident can be established. The claimant is permitted to recover expenses incurred regardless of whether or not the treatment was successful, although if the treatment was unsuccessful, that fact may tend to suggest that the money concerned was not reasonably incurred.
If you or somebody you care about has been involved in an accident, you may be entitled to compensation. For more information, and to arrange a free, no obligation assessment of your claim, please call Stacks Goudkamp on 1800 25 1800, or alternatively make an online enquiry.
Written by Tom Goudkamp.