How far does the obligation for mitigation of damages extend? Curia decision on the obligation for mitigation of damages in respect of compulsory motor vehicle liablity insurance contracts

For legal practitioners one of the biggest challenges in the field of mitigation of damages is determining the scope of the relevant duty to compensate.

The injured party has an obligation to mitigate damages under the Civil Code § 6:525 (1). In the field of mitigation of damages the injured party - in accordance with the Civil Code § 1:4 (1) - is obliged to act as is generally expected in the given situation. But what does this mean in practice?

According to Resolution 44 of the Civil Law College of the Supreme Court, dealing with the principles of the choice of compensation methods, "the method of compensation that ensures the practical application of the principle of full reparation with the least harm and in the most effective way should be applied."

It can be generally inferred from the Resolution that in determining the method of compensation, the injured party must endeavour to ensure that no party to the tort relationship suffers disproportionate harm. This means that if the injured party decides to repair the object and claim the costs of repair, he must endeavour to choose the most favourable method of repair, but with the proviso that the injured party's obligation for mitigation of damages is not unlimited. The Curia examined these limits in its decision 20.099/2020/11. 

The facts

In the underlying case, the liability insurer (the Insurer) has entered into agreements with certain dealers who were distributing car parts. On the basis of these agreements, the dealers distributed to the dealerships entrusted by the Insurer's clients with the repair of their damaged vehicles the factory parts necessary for the repair of the vehicles at a 10% lower commercial price than the price of the original parts. The Insurer informed its repair partners about the agreements by letter. The reduced commercial price was available to the repairers without restriction. In view of the agreements, the Insurer reimbursed only 90% of the factory price of the parts indicated on the invoice.

The question under consideration

The Curia examined whether the injured party violates the requirement to act as is generally expected in the given situation. if he does not take his damaged vehicle to a repair shop that obtains the necessary factory parts for the repair from a source designated by the insurer, with a 10% price difference. (that is the injured party does not choose the most favourable repair method).

The decision of the Curia

In its decision, the Curia states that the failure to act in a way that "results in a burden for the injured party that exceeds the expected extent" cannot be considered a breach of the obligation to mitigate damages. Requiring injured parties to have their vehicles repaired by a repairer who obtains the parts from a dealer designated by the insurer may entail "additional obligations and burdens (and in many cases additional costs) which the injured parties cannot be expected to bear."

The proper process

The Curia's decision does not mean that efforts should no longer be made to optimise the cost of compensation. On the tortfeasor's side, it remains a reasonable endeavour to reduce costs, including steps to this end by compulsory motor vehicle liability insurers who are obliged to pay compensation on behalf of the tortfeasor. 

However, careful consideration should be given to the circumstances of the measure taken to optimise costs, so that it does not impose an additional obligation on the injured party or, at most, does that only in a minimum amount that does not exceed what can reasonably be expected.