Sue and Labour Clause
The sue and labour clause requires the insured to take reasonable steps to avert or minimise a loss where an insured event threatens or occurs, and covers the costs reasonably incurred in doing so in addition to the sum insured.
- Clause type
- Extension
- Origin/Market
- London Market (LMA/NMA/Lloyd’s)
- Favours
- Neutral
- Negotiability
- Market standard
Purpose
Originating historically in marine insurance law, the sue and labour clause requires the insured, where an insured event threatens or has occurred, to take all reasonable steps to avert or minimise the loss as if no insurance existed. In return, the clause makes clear that reasonable costs incurred for such salvage and loss-mitigation measures are reimbursed in addition to the agreed sum insured, rather than being deducted from it.
Effect and limits
The clause requires that the measures relate to an insured event and are proportionate to the threatened loss; disproportionately high expenditure, or expenditure incurred without any reasonable prospect of success, is not automatically covered. As no dedicated marine cargo coverage currently exists in the register, cov-yachtversicherung is additionally referenced here for the clause’s marine origin; in modernised form, however, the clause is also found in property policies outside marine law.
Negotiation and practice
Insureds should carefully document loss-mitigation measures so that, in the event of a claim, the entitlement to reimbursement of sue and labour costs can be evidenced. When negotiating, it should be clarified whether a separate sublimit applies to such costs and how the clause interacts with the policy’s general loss-mitigation duties.