Insureds' obligation to mitigate loss: how much do you have to suffer?

An insured has a duty to mitigate its loss – but how far does it have to go? Does it have to subordinate its own commercial interests to the insurer's? Does it have to convert its insured loss into an uninsured loss? The Victorian Supreme Court has given useful guidance on mitigation of loss in insurance in Orica Australia Pty Ltd v Limit (No 2) Ltd [2011] VSC 65 (Clayton Utz acted for Orica).

The Orica decision also helps clarify the meaning of "includes" in insurance policies.

A nautical mishap

Orica Australia Pty Ltd chartered a boat, the M.V. Poolgracht, to carry ammonium nitrate from Canada to Australia. As the cargo had been improperly stowed, it shifted in bad weather. As a result, the vessel listed and had to make port of refuge in Rhode Island to re-stow the cargo. All of this cost money (US$2.4 million), which the owner claimed from Orica. Could Orica claim from its insurer?