Sue and labor clause
A clause that reimburses, in addition to the sum insured, the expenses the assured itself incurs to avert or reduce an insured loss.
Section 78 of the Marine Insurance Act 1906 makes it a duty: the assured and its agents must, in all cases, take reasonable measures to avert or minimize a loss. The sue and labor clause is the other side of the bargain: the underwriter bears the reasonable costs the assured incurs to avert or reduce an insured loss. Its distinctive feature is that these costs are settled in addition to the sum insured rather than within it, so the underwriter may end up paying more than the policy limit. The clause applies even where the intervention succeeds and no loss ultimately occurs. That is the behavior sought, since an assured who feared not being reimbursed would simply do nothing. It differs from salvage, which rewards a third party acting voluntarily and outside any contract, and from general average, which apportions a sacrifice among all the interests in the adventure. The problem solved is a direct conflict of interest: without the clause, an assured already covered would have no economic reason to spend its own money to cut its underwriter's bill.
The refloating of the Ever Given was carried out by Boskalis-SMIT between March 23 and 29, 2021, with thirteen tugs and the dredging of some 30,000 cubic meters of sand. It shows where the line falls. What the owner spends itself to avoid losing the ship falls under sue and labor. The paid intervention of a third party salvor falls under salvage and its own award.
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