The ‘sue and labour clause’ is one of great antiquity dating back to the 16th century. It is mostly used in marine insurance contracts but has also in recent times found its way into property insurance contract. The clause requires the ship owner to make every attempt to reduce or save the exposed interests from loss. It permits the assured to recover from the insurer any expenses incurred by the assured in order to minimize or avert a loss to the insured property, for which loss the insurer would have been liable under the insurance policy.
The clause is primarily targeted at encouraging the insured to take measures whilst the insured property is still at peril in order to preserve the subject matter of the insurance policy from further destruction. In exchange, the insurer must reimburse the insured for the expenses it incurs, since the insured has acted to benefit the insurer by averting or mitigating an otherwise recoverable loss.
Most marine contracts (if not all) usually introduces the sue and labour clause using the phrase: “sue, labour and travail…”. The clause usually provides in part that: “In the event of expenditure under the Sue and Labor clause, the Underwriters shall pay the proportion of such expenses that the amount insured hereunder bears to the Agreed Value, or that the amount insured hereunder, less loss and/or damage payable under this policy, bears to the actual value of the salved property; whichever proportion shall be less.” In White Star S.S. Co. v. North British & Mercantile Ins. Co. the US Court held that the law is well settled that the sue and labor clause is a separate insurance and is supplementary to the contract of the underwriter to pay a particular sum in respect to damage sustained by the subject matter of the insurance.
This clause has not been clothed with plethora of judicial interpretation in Nigeria as in the US and UK, but this does not in any way limit its efficacy or applicability in Nigeria. Section 65(2) of the Marine Insurance Act unequivocally incorporate in express terms the sue and labour clause in Nigeria. The section provides that expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured other than general average and salvage charges, are called particular charges, and are not included in particular average. The Act went further to incorporate the clause in the form of a marine insurance policy in the first schedule to the Act. Without doubt, the sue and labour clause is as binding in Nigeria as the marine insurance policy itself and an insured can rightly maintain an action in a Nigerian Court for reimbursement under the clause.
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