SUE AND LABOUR’: THE ASSURED`S DUTY OF MITIGATION
A GENERAL DUTY AT COMMON LAW OR A CONTRACTUAL OBLIGATION?
PLEASE EXAMINE THIS `DUTY` TO MITIGATE AND CRITICALLY ASSESS THE EXTENT TO WHICH IT IS A DUTY AND ANY POTENTIAL PROBLEMS IN A MARINE INSURANCE CONTAINING A SUE AND LABOUR CLAUSE THAT SUCH A REQUIREMENT, IF NOT TAKEN SERIOUSLY, MIGHT CAUSE.
Discussion of the `Sue and Labour` clause
and Labour` is a clause in the Marine Insurance Act (1906) and its appendixes,
the Institute Clauses for hulls and cargo. Although both parties, the
insurer and the insured can make an agreement leaving out such a clause
from their policy, expenses that fall under the `Sue and Labour` clause
could be recoverable. This decision was made in the Australien case, Emperor
Goldmining Co v Switzerland General Insurance Co 1 Lloyd’s
though `Sue and Labour` are extraordinary expenses they do not include
charges for general average, salvage or cost which arise from defending
or instituting a collision action.
In cases where the police covers a total (or partial) loss, additional cost by suing and labouring may arise and regarded as legal matter. Thus an insurer must bear the cost for the total loss and for expenses which derive from the trial to minimise loss. The latter however can not exceed the value of the insured vessel and therefore insurer are limited in their liability, i.e. maximum twice the insured value of the vessel.
Breach of Duty to Sue and Labour
Section 11(1) of ITCH (95) states:
In case of any loss or misfortune it is the duty of the Assured and their servant and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance.
duty is expressed in round terms but what will be the consequences if
the assured or their servant and agents fail to do so?
An example case is Currie and Co v The Bombay Native insurance Co (Hodgesa, p.464) where a captain and uninsured part-owner failed to minimise the loss of cargo. The vessel was insured for a total loss only and the cunning captain disregarded any advice from surveyors to save the cargo or part of it. Thus it is not surprising that the judge decided against the assured who claimed for total loss. In the statement delivered by the court it was stated that:
This omission of the captain to take any steps towards saving the cargo, at a time when it was probable that this endeavours would be successful, in their Lordships’ judgement, precludes the assured from claiming for a total loss of the cargo into whatever condition it might have been brought afterwards(cited in Hodgesa, p. 464).
as one could see from the case of State of The Netherlands v Youell 
1 Lloyd’s Rep 236, CA Underwriters can be held liable even if a
breach of contract occurs. Phillips LJ declared:
judge decided on s 55(2) (a) and stressed the circumstance that the assured
shipowner can not be held liable for the negligence of “his” master.
55 (2) (a)
Bloedel Ltd and Canadian Transport Co. Ltd. v. John
is one example where the question of common law or contract was decided by the British Columbia Court of Appeal. A short summary of the case is intended to make the facts of the case clear:
MacMillan subsidiary Canadian Transport Co. Ltd (CTCO) was a time charterer
of MV Warschau and agreed with the owner to carry coal from New Orleans
and goods) form and the other standard hull form. The standard printed
wording was recognised as sue and labour although not explicitly titled.
...’sue and labour’ expenses were, nevertheless, recoverable at common law under the doctrine of ‘imminent peril’ (cited in .
Walton J ‘s decision in Cunard Steamship Company v Marten (cited in Clemens & Swanson) was the basis for the British Columbia Court of Appeal where the Underwriter tried to revise the decision mentioned above.
difficulty of determining whether the suing and labouring clause forms
part of the contract of insurance in this case arises (as so frequently
happens in questions of marine insurance) from the very peculiar way in
which contracts of marine insurance are expressed. [...] In almost all
cases certain parts of the printed form have no application to the risk
described by the written words.
a person insured under a policy covering his liability at law to third
persons entitled to recover from his insurer as a matter of law expenses
which he incurs to minimise the amount of liability when his breach of
contract or tortious act has occurred and damage to a third person is
occurring (cited in Clemens & Swanson)?
Excursion to the world of contractual law
A breach of contract represents an infringement of contractual rights and it is a right to proceed against the contract-breaker. There is however a difference between primary and secondary obligations in contractual law. For marine insurance policies it would mean that the insurer would pay for the loss an assured is insured against.
obligations on the other hand are substitutes when a breach of contract
has been committed, i.e. compensation for damages.
for unliquidated damages
for liquidated damages
for quantum meruit
contractual law one distinguishes moreover between fundamental breach
and breach of condition. The consequences in both cases vary. A contract-breaker
may be agree to pay a penalty or in the worst case the innocent party
terminates performance of the contract. It is recognised that the consequences
depend on how strict the terms are formulated in a contract.
... technically incorrect to state that the plaintiff is under a ‘duty’ to mitigate his loss because he does not incur any liability if he fails to mitigate his loss.[...] ... but, if he [the plaintiff] fails to mitigate his loss, he will be unable to recover that portion of his loss which is attributable to his failure to mitigate (McKendrick, p.314).
Summary and conclusion:
Again, ‘Sue and Labour’ should not be left out in the assumption
that it is subject of common law and will apply automatically when sue
and labour expenses occur. The past has shown that this is might be the
case but not the rule. A ‘duty’ to mitigate is therefore not
indisputable related with common law, as far as Marine Insurance is concerned.
If the assured acts against s 78(4) it is contravention to
While it is not possible to state with certainty all the adverse consequences which will be suffered by an assured who fails to perform his duty under the sue and labour clause, there is no doubt that he incurs a risk of his claim for loss and damage being rejected in whole or in part if it can be shown that he failed to act when he should have done (Hodgesb, p.783).
rule 30(2) of the Britannia P&I club supports this view by stating
that it is the discretion of the Committee [of the Britannia P & I
This essay has highlighted different opinions and results related with `Sue and Labour` as an important clause of Marine Insurance Policies. In my opinion the `duty´ to minimise a loss is in most cases of importance for the assured too, who would risk their claims to be rejected when they fail to avert or minimise a loss, whether a `Sue and Labour` clause is included in the policy or not. In most examples I read the view is held that the `duty` to mitigate relates to contractual law and the contract-breaking party has to bear the consequences for its breach.
Bennett, H. (1996). The Law of Marine Insurance. First Edition). Oxford University Press Inc. New York
Clement and Swanson. (1995). `Sue and Labour` expenses: Common law or contract?. sent by FAX
Hodges, S. (1996). Law of Marine Insurance. (First Edition). Cavendish Publishing Ltd, London
Hodges, S. (1999). Cases and Materials on Marine Insurance Law. (First Edition). Cavendish Publishing Ltd, London
Ivamy, H. (1993). Chalmers’ Marine Insurance Act 1906. (Tenth Edition). Butterworth & Co, London
Major, W.T. (1988). Law of contract. (Seventh Edition).Pitman Publishing, London
McKendrick, E. (1994). Contract Law. (Second Edition). the MacMillan Press Ltd, Hampshire and London