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

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...done in case of loss. Some examples are:

2. You Must Protect the Property —

“You” must take all reasonable steps to protect covered property at and after an insured loss to avoid further loss.

3. Duties In The Event Of Loss Or Damage

a. (4) Take all reasonable steps to protect the Covered Property from further Damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.

Commercial property forms also will provide limited coverage if the covered property is stolen, for example, after that property is temporarily removed from the premises because of an actual covered loss. The commercial property forms of AAIS refer to this as “emergency removal coverage,” whereas the term “preservation of property” is the term used by ISO. These coverage provisions of AAIS and ISO are similar. Both require that the covered property be moved from the described premises when endangered by a covered cause of peril. The time period for such covered property while at a temporary location is 10 days under the AAIS forms and 30 days in ISO forms.

If fire breaks out in a building located in a crime-prone area, and the business owner hires the services of an off-duty law enforcement officer to protect the inventory from theft, vandalism and any further fire damage, rather than moving the property elsewhere, an interesting question is whether the policy will pay for those services. At least one court has answered that question affirmatively.

In this case of American Commercial Finance v. Seneca Insurance Co., 850 N.E.2d 1114 (App. Ct. MA 2006), the insured had to bring an action against the insurer to recover expenses...

“Commercial property forms also will provide limited coverage if the covered property is stolen, for example, after that property is temporarily removed from the premises because of an actual covered loss.”


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