Sue and Labor Clauses: The Basis for Mitigating, Expediting and Other Policy Provisions



While the great weight of authority shows that the sue and labor clause is not going to apply to a loss that is not covered, cases still arise from time to time presumably for at least two reasons: The first is that the costs incurred to remediate are substantial and probably an amount that could cause an insured a financial hardship to assume. The second reason is that the facts of cases differ and so, too, do the arguments. Thus, while the courts are fairly uniform in their decisions not to honor remediation costs for losses not involving covered causes to covered property, there is always the chance that a court may see the insured’s argument to be more convincing than the insurer’s.

Summary — Conclusion

“The sue and labor clause, to the extent it is otherwise applicable, only applies to a covered cause of loss. Although there may be situations where insureds still obtain coverage based on the facts and how they are pled, the consensus of the court cases appears to be that the sue and labor clause will not apply to losses that are not covered, such as error in design or faulty workmanship.”