The Sue and Labour Clauses – intention to save the subject matter insured

Dr Özlem GürsesUniversity of Southampton

Sue and Labour Expenses in Marine Policies •Marine Insurance Act 1906 •S.78(4) “It is the duty of the assured and

his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.”

SG Policy •“in case of any loss or misfortune, it

should be lawful to the assured, their factors, servants, and assigns, to sue, labour, and travel for, in, and about the defence, safeguard, and recovery of the said goods and merchandises and ship, &c., or any part thereof, without prejudice to that insurance, to the charges whereof the assurers should contribute each one according to the rate and quantity of his sum assured.”

ICC 2009 (A,B,C), Cl 16• ‘MINIMISING LOSSES Duty of Assured’: “It is

the duty of the Assured and their employees and agents in respect of loss recoverable hereunder

• 16.1 to take such measures as may be reasonable for the purpose of averting or minimising such loss, and

• 16.2 to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised and the Insurers will, in addition to any loss recoverable hereunder, reimburse the Assured for any charges properly and reasonably incurred in pursuance of these duties.”

•Aitchison v Lohre (1879) 4 App. Cas. 755

•The sue and labour clause is a wholly independent contract in the policy from the contract to pay a certain sum in respect of damage done to the subject-matter of insurance

•It applies, whatever be the amount of such damage, and whether indeed any such damage occur or not.

• Aitchison v Lohre• An intention as to benefit the underwriters is not

required.• The required conditions are

▫ there was a danger of damage to the subject insured by reason of perils insured against, and

▫ unusual or extraordinary efforts made or expenditure incurred in consequence of such efforts made to attempt to prevent such damage

• Royal Boskalis Westminster v Mountain [1997] L.R.L.R. 523

Kidston v. Empire Insurance Co., (1866) L.R. 1 C.P. 535

•Mr. Justice Willes: “There is … a loss or misfortune threatening the safety of the subject-matter of the insurance, and by the operation of which, unless averted by labour, that subject-matter will be imperilled and the underwriters may become liable.”

The scope of the policy

•The Marine Insurance Act 1906 s.78(3) states: 

•“Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.”

Loss which is not covered by the policy•The Great Indian Peninsular Railway

Company v. Saunders (1862) 2 B. & S. 266

•“The expenses that can be recovered under the suing, labouring, and travelling clause are expenses incurred to prevent impending loss within the meaning, of the policy”

Loss which is not covered by the policy•Booth v. Gair (1863) 15 C.B. N.S. 291

•Kidston v Empire Marine Insurance Co (1865-66) L.R. 1 C.P. 535

All risks policies • Integrated Container Service v British

Traders Insurance Co [1981] 2 Lloyd's Rep. 460

•“If the assured has established the existence of a threat of loss or damage, no matter if that threat resulted from the insolvency of the lessee, he is entitled to recover monies laid out to avert a loss which might result from a variety of reasons.”

Apportionment/average •A ship valued at £5000 is insured for

£1000. The ship is stranded, and the owner spends £1000 in trying to get her off, but eventually she is totally lost. The insurer must pay £1000 on the policy, and £200 (i.e. one-fifth) under the suing and labouring clause.

Ace European Group & Ors v Standard Life Assurance Limited [2012] EWCA Civ 1713•Averaging or apportionment is a concept

having its origin in underinsurance of ship or cargo

•An arithmetical apportionment is likely to be difficult if not impossible if the sue and labour expenditure is directed to two objectives which are different in kind.

•Apportionment/average does not apply to liability insurance.