Sue And Labor Clause
What Does Sue And Labor Clause Mean?
A sue and labor clause is a provision in an insurance contract requiring the insured to take necessary steps to prevent further damage to a property already affected. It also holds the insurer liable for expenses incurred by the insured in protecting the property. While this clause traditionally applies to marine insurance, many other types of property insurance include it or a similar provision, even if it is not explicitly labeled as such.
Insuranceopedia Explains Sue And Labor Clause
A sue and labor clause is a specific provision in an insurance contract that obligates the insurer to reimburse expenses incurred by the policyholder in protecting damaged property from further risks for which the insurer would be liable. Essentially, this clause incentivizes the insured to act reasonably to prevent additional damage, which could otherwise result in higher costs for the insurer.
Under a sue and labor clause, the costs of safeguarding the property are shared according to the respective interests of the insured and the insurer. If the insurance coverage exceeds the value of the salvaged property, the insurer bears the entire sue and labor expenses. In modern insurance contracts, the sue and labor clause is often not a separate provision but is incorporated into the policyholder’s “duties” in the event of a loss.
