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



“A sue and labor clause usually clarifies that when the insured takes steps to prevent or reduce a loss, the insured will be reimbursed for the expenses incurred in those mitigating efforts, commonly on an allocated basis.”

...the condition of ISO forms.) The insurer, in other words, argued that with the language of the above provision, located in an area of the policy involving conditions, it did not deal with coverage. (Conditions are said to be the ground rules that both the insured and insurer must observe, and do not deal with the grant of coverage.)

The court disagreed. In doing so, it held that if such amounts were not to be paid, there would be no need to state that the amounts could only be paid if, in doing so, the limits of insurance would not be exceeded.

Some insureds also incur additional expenses to mitigate their losses by taking steps to repair or replace the damaged or destroyed property. This effort — which commonly includes extra wages and transportation costs — falls into the category and is referred to as expediting costs . (It is referred to here interchangeably as an expediting cost or mitigating expense provision.) These kinds of expense provisions are not found in standard AAIS or ISO provisions, but instead are found in some inland marine and equipment breakdown forms, and manuscript property and builders risk policies.

These mitigating (expediting) expense provisions are viewed as a coverage extension but are usually subject to a sublimit. One such provision reads as follows:

Subject to the specific sublimit entered in Item__, this policy shall also pay for the reasonable extra costs to make temporary repairs and to expedite the permanent repair or replacement of the insured property which is damaged by an insured peril, including additional wages for overtime, night work, and work on public holidays and the extra costs of express freight or other rapid means of transportation.

It is important to note that the mitigating expense provision is not to be confused with extra expense coverage or with the expense to reduce loss provisions of earnings forms, although there are similarities. Mitigating...