When the Burden Shifts Unfairly
After a property loss, insurers often remind policyholders of their duty to “mitigate damages” — to prevent further loss. What they rarely admit is that mitigation is not a one-sided obligation. Under the Insurance Act and FSRA’s fair conduct standards, insurers have a corresponding duty to contribute promptly once liability is reasonably clear.
When insurers delay funding but still demand mitigation, they shift the financial risk onto the insured — effectively asking the homeowner to finance the insurer’s obligation.
The Law: Prompt Payment and Shared Responsibility
Two key provisions in Ontario’s Insurance Act establish both a duty to pay promptly and a shared responsibility for mitigation.
Statutory Condition 12 — “When Loss Payable”
“The insurer shall pay the insurance money for which it is liable under the contract within sixty days after the proof of loss has been completed and delivered.”
This clause requires insurers to pay promptly once liability is established or undisputed. Courts interpret this to include partial or advance payments for undisputed portions — even if the total claim is still being adjusted. (Saskatchewan Government Insurance v. Wilson, 2008 SKCA 35.)
Statutory Condition 9 — “Requirements After Loss”
“The insured shall take all reasonable steps to prevent further damage to the property, and the insurer shall contribute pro rata towards any reasonable and proper expenses incurred for that purpose.”
This condition creates a shared mitigation obligation: the insured must act reasonably to prevent further loss, and the insurer must bear its share of those expenses. In practice, this means insurers can’t demand mitigation while withholding the funds needed to do it.
FSRA’s Fair Treatment Rules
Ontario’s Financial Services Regulatory Authority (FSRA) reinforces this principle in its 2021 Fair Treatment of Customers Guidance:
“Insurers must handle claims promptly and fairly, ensuring timely settlement of undisputed amounts.” … “Customers must not face financial hardship due to claim delays where liability is reasonably clear.”
FSRA’s interpretation of fair conduct requires insurers to issue advance payments when delay would cause hardship or hinder mitigation. If the insurer knows there is covered damage, it must fund it — not wait for every estimate to be finalized.
Case Law: Good Faith and Timely Funding
Canadian courts have long rejected insurer delay as a negotiation tactic.
Whiten v. Pilot Insurance Co. (2002 SCC 18)
The Supreme Court found that withholding payment and forcing the insured into financial distress was bad faith conduct, stating that delay “defeats the very purpose of insurance.”
Fidler v. Sun Life Assurance Co. (2006 SCC 30)
The insurer’s duty of good faith includes avoiding actions that cause unnecessary hardship or financial strain.
Hunt v. Peel Mutual Insurance Co. (2019 ONSC 746)
Insurers must not “use delay as leverage.” Prompt payment of undisputed amounts is part of fair dealing.
Gibb v. Guardian Insurance (1993 ONSC)
The insurer “must not use the insured’s lack of resources as a pretext for non-payment.” Mitigation presumes cooperation, not self-financing.
“Prompt indemnity is not goodwill — it’s a legal duty.”
The Misuse of the “Duty to Mitigate”
Insurers frequently tell homeowners: “You’re required to prevent further loss — submit receipts later.” That’s a misrepresentation. The duty to mitigate does not mean the insured must personally finance emergency work. It means taking reasonable steps, supported by the insurer’s contribution, to prevent further damage.
Statutory Condition 9 explicitly requires insurers to “contribute pro rata” toward those costs. Refusing to do so while invoking mitigation as a defence contradicts both the contract and the duty of good faith.
“Mitigation without funding isn’t cooperation — it’s coercion.”
When an Advance Payment Is Required
An insurer should issue an advance when:
- Coverage is accepted or reasonably clear.
- Immediate mitigation (water removal, tarping, cleanup) is needed.
- The insured faces financial hardship or displacement.
- The adjuster has confirmed damage, even if valuation continues.
Examples include:
- Emergency restoration or cleanup
- Temporary housing (ALE)
- Debris removal or safety stabilization
- Partial payments for structural repair
These advances uphold both the principle of indemnity and FSRA’s fair treatment standards — ensuring insureds can act promptly and safely.
The Real-World Impact of Delay
When insurers withhold mitigation funds:
- Damage worsens over time.
- Homeowners assume debt to finance temporary repairs.
- Insurers gain leverage by letting losses escalate.
The longer the delay, the more power shifts to the insurer. That’s why Whiten and Hunt treat delay as a bad faith tactic — it defeats indemnity.
“The duty to mitigate means to act reasonably — not to go broke saving the insurer’s money.”
PAAC’s Model: Immediate Funding, Total Accountability
PAAC eliminates the funding gap by pairing financial capability with legal and technical expertise.
Through PAAC’s integrated model, we:
- Provide immediate funding for mitigation and stabilization.
- Track and document every incurred cost for insurer reimbursement.
- Ensure compliance with Statutory Condition 9 and FSRA guidance.
- Remove the insurer’s delay leverage while maintaining full claim defensibility.
“We don’t wait for insurer approval — we protect your property and prove every dollar.”
This one-team model combines adjusting, construction, and financial recovery — ensuring mitigation begins immediately and payment follows without friction.
The Takeaway
The insured’s duty to mitigate doesn’t erase the insurer’s duty to pay promptly. The Insurance Act, FSRA guidance, and Canadian case law all confirm that once coverage is reasonably clear, the insurer must contribute promptly to mitigation costs.
Delaying funds while demanding action is not cooperation — it’s a breach of good faith. PAAC ensures mitigation happens immediately, costs are documented, and the insurer has no room to delay or deny.
“You shouldn’t have to finance your own claim. PAAC makes sure you never do.”