Risk prevention and loss mitigation

The Insurance Law imposes on insureds duties of maintaining the safety of the insured subject matter and mitigating the loss upon occurrence of the insured event. An insurance policy usually contains terms on these duties. This chapter discusses the statutory rules and contractual requirements with regard to the insured&s;s duties of risk prevention and loss mitigation, the consequences of failure in complying with these rules of law and contractual agreements, and the bearing of the costs for taking steps to mitigate loss when the insured event has occurred, or to prevent and mitigate losses which would be caused by an imminent risk. The Insurance Law (art. 51) entitles the insurer to demand an increase of the premium or rescission of the contract in the event of the insured&s;s failure in complying with the duty of maintaining the safety of the insured subject matter, but the insurer&s;s right of rescission is not restricted and the circumstances in which the insurer is entitled to exercise its right of rescission are not specified. Art. 57 of the Law does not provide a remedy if the insured has failed to comply with the duty of taking reasonable steps to avoid or mitigate losses. These deficiencies have been critically discussed and suggestions on how to improve the relevant provisions have been put forward.