Legal Definitions - sue-and-labor clause

A sue-and-labor clause is a specific provision found in marine insurance policies. It obligates the insurer to reimburse the insured party for reasonable expenses incurred while actively working to protect the insured property from an impending loss or to minimize the extent of damage once a peril has begun. This clause encourages the insured to take immediate and prudent action to safeguard the vessel or cargo, knowing that these preventative or mitigating costs will be covered by the insurer, even if the actions ultimately prevent a larger claim or exceed the policy's primary coverage limit for the actual loss. It is sometimes referred to as a rescue clause.

Here are some examples illustrating the sue-and-labor clause:

• Imagine a cargo ship carrying a valuable consignment of electronics encounters a severe storm at sea. The crew, under the captain's direction, spends extra hours securing containers, reinforcing protective coverings, and rerouting the vessel through a longer, calmer path to avoid the worst of the weather. These actions incur additional costs, such as increased fuel consumption for the longer route and overtime pay for the crew. The sue-and-labor clause would cover these expenses because they were reasonably incurred to prevent potential water damage or loss of the insured cargo due to the storm, an insured peril.

• Consider a fishing trawler that experiences a small fire in its engine room. The crew successfully extinguishes the blaze, but the engine is damaged, and there's a risk of the fire reigniting or spreading to other parts of the vessel. To prevent further damage, the captain immediately arranges for emergency towing to the nearest port for repairs and hires a specialized salvage crew to stabilize the vessel and safely remove damaged components. The sue-and-labor clause would cover the costs of the emergency tow and the salvage crew, as these actions were taken to minimize further damage to the insured vessel after an initial incident.

• A shipment of perishable goods, such as frozen seafood, is being transported across the ocean in a refrigerated container. Mid-voyage, the container's refrigeration unit begins to malfunction, threatening to spoil the entire cargo. Before any spoilage occurs, the shipping company immediately arranges for a specialized technician to be flown to the next port of call to repair the unit. As a precaution, they also secure additional dry ice and temporary cooling units to maintain the temperature until the repair is complete. The sue-and-labor clause would cover the costs associated with flying in the technician, purchasing dry ice, and renting temporary cooling units, as these expenses were incurred to protect the insured perishable cargo from damage or loss.