Does It Exist?
Yes of course. And in fact, its application is becoming more and more widespread by Uruguayan courts. In short, it means that we must adopt a proactive behavior in order to try to mitigate the extent of the damage that the other or others may suffer by virtue of our inertia. If we fail to do so, the damage resulting from our inaction should not be compensated to us.
It is within this framework that the judgment we are commenting on today is inscribed. A well-known Chinese international shipping and logistics services company was named beneficiary of an insurance contract concluded with a local insurance company. Under that contract, a soybean crop of 300 hectares was secured.
Once the insured risk – drought – was verified, the beneficiary of the policy notified the insurer. The insurer remained silent and chose not to make any payments. These are circumstances in which the beneficiary of the insurance demanded payment from the insurer corresponding to the coverage. In its defense, the insurer argued, among other things, that it should pay nothing to the plaintiffs, or at most a part of it: because in the face of the knowledge that the policyholder did not have sufficient resources to harvest the total insured area, the beneficiary did nothing to help him or to mitigate the impact of that shortfall.
The Court of Appeal upheld the argument and held that there was a breach (by the policyholder) of the duty to mitigate the damage. According to the Court, the beneficiary of the insurance had a duty to do what was reasonably within her power so as not to aggravate the damage, and to take all reasonable precautions to prevent the harmful situation from continuing.
Failing to do so, the Court ordered the insurer to pay only 50% of the coverage contracted, on the grounds that this was the proportion of the damage attributable to the beneficiary’s omission.
If you have any questions regarding this material, please contact Sebastián González ([email protected]) and/or Leonardo Melos ([email protected]).
