Sue and Labor Clause
Definition - What does Sue and Labor Clause mean?
A sue and labor clause is a provision in an insurance contract that compels the insured to take the necessary steps to protect a damaged property from further loss and makes the insurer liable for expenses incurred by the insured in protecting said property. This clause only usually applied in marine insurance; however, many other types of property insurance include it or a similar provision that may not be labeled as such.
Insuranceopedia explains Sue and Labor Clause
Sue and labor clause refers to a specific provision in an insurance contract that renders the insurer liable to reimburse expenses incurred by the policyholder in protecting damaged property from further risks that the former would be liable for. In essence, the clause rewards the insured party for acting reasonably to prevent further damage that may result in more expenses on the part of the insurance company.
According to a sue and labor clause, the expenses of safeguarding the property will be paid according to the respective interest of the insured and the insurer. As such, if the insurance coverage is greater than the value of the salvaged property, the insurer will pay the entire sue and labor costs. These days, the sue and labor clause in an insurance contract is not a distinct provision and forms part of the "duties" of the insured in event of loss.