Duty of assured / sue and labour clauses Flashcards
MIA s. 78 Suing and labouring clause
- Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.
- General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.
- Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.
- It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimising a loss.
- DUTY OF ASSURED (SUE AND LABOUR) ITC 83
13.1 In case of any loss or misfortune it is the duty of the Assured and their servants 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.
13.2 Subject to the provisions below and to Clause 12 the Underwriters will contribute to charges properly and reasonably incurred by the Assured their servants or agents for such measures. General average, salvage charges (except as provided for in Clause 13.5) and collision defence or attack costs are not recoverable under this Clause 13.
13.3 Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.
13.4 When expenses are incurred pursuant to this Clause 13 the liability under this insurance shall not exceed the proportion of such expenses that the amount insured hereunder bears to the value of the vessel as stated herein, or to the sound value of the vessel at the time of the occurrence giving rise to the expenditure if the sound value exceeds that value. Where the Underwriters have admitted a claim for total loss and property insured by this insurance is saved, the foregoing provisions shall not apply unless the expenses of suing and labouring exceed the value of such property saved and then shall apply only to the amount of the expenses which is in excess of such value.
13.5 When a claim for total loss of the vessel is admitted under this insurance and expenses have been reasonably incurred in saving or attempting to save the vessel and other property and there are no proceeds, or the expenses exceed the proceeds, then this insurance shall bear its pro rata share of such proportion of the expenses, or of the expenses in excess of the proceeds, as the case may be, as may reasonably be regarded as having been incurred in respect of the vessel; but if the vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under-insurance.
13.6 The sum recoverable under this Clause 13 shall be in addition to the loss otherwise recoverable under this insurance but shall in no circumstances exceed the amount insured under this insurance in respect of the vessel
Who recovers what and why under such clauses
Owners can recover the expenses reasonably and necessarily incurred to avoid or minimise a loss from an insured peril. This is because it is better to avoid/minimise a loss before it happens, rather than wait until till the damage is done. (as it is done to benefit both the insurers and the assured).
Nature and extent of duty
Cl 13.1 ITC 83
Following the Royal Boskalis v Mountain case:
Dreger contracted to work in Iraq, shortly afterwards, Iraq invaded Kuwait.
Iraq seized assets of all countries who had enacted sanctions against them.
Assured was able to buy their way out by paying what was effectively a ransom to the Iraqi gov. Held that where a payment is made, that is not in itself illegal, to recover the property, this can be recovered as Sue and Labour, even though persons demanding such payment are not themselves acting lawfully in doing so.
“The insured is entitled to recover under the sue and labour clause if he can show
(1) that he or his agent has taken ‘unusual and extraordinary’ steps of exertion,
(2) that the object of this action was to preserve the insured property from loss by an insured peril,
(3) that the insured peril was operative or obviously imminent,
(4) that the loss, if it had occurred, would have been of a type recoverable under the policy,
(5) that it was reasonable to take the steps.”
“The imminent danger of the advent of an insured peril is plainly sufficient to bring the right and duty into operation, at least so long as the danger really exists. It is also clear that the right to sue and labour at underwriters’ expense does not arise unless and until the operation of an insured peril is imminent, under usual forms of sue and labour clauses. An expenditure incurred in order to prevent a loss from arising or recurring in future, when there is no existing or imminent threat to the subject matter insured, cannot be recovered as sue and labour. Apart from the fact that such prophylactic expenditure fails to meet the essential requirements of imminence of an operation of insured perils and threat of loss, in most cases such expenses could not be regarded as extraordinary, since underwriters do not engage to meet the cost of ordinary ship’s maintenance. In any event, the circumstances in which the right and duty arise are made a matter of express stipulation, by the words ‘in case of any loss or misfortune’.” [Arnould: 18th Ed., Ch. 25-11
Loss would have very probably fallen on the UW- sufficient to show that peril was obviously imminent – allowable as long as reasonably incurred.
Recoverability of expense in the absence of such clause
There is no cases under English law where this has happened; only in Australian courts. In this case, particular charges are recoverable in absence of S&L clause.
The Arnould agreed – two part test should be imposed, and if met, can recover in S&L;
1) where it can plausibly said that the need for the expenditure is the direct and natural result of the casualty, and
2) Where the MIA 1906 does not lay down a specific MOI which meets the case
Underinsurance
(13.5) if the vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under-insurance.
Expenses incurred trying to save ship and cargo where there is a total loss
13.4 When expenses are incurred pursuant to this Clause 13 the liability under this insurance shall not exceed the proportion of such expenses that the amount insured hereunder bears to the value of the vessel as stated herein, or to the sound value of the vessel at the time of the occurrence giving rise to the expenditure if the sound value exceeds that value. Where the Underwriters have admitted a claim for total loss and property insured by this insurance is saved, the foregoing provisions shall not apply unless the expenses of suing and labouring exceed the value of such property saved and then shall apply only to the amount of the expenses which is in excess of such value.
13.5 When a claim for total loss of the vessel is admitted under this insurance and expenses have been reasonably incurred in saving or attempting to save the vessel and other property and there are no proceeds, or the expenses exceed the proceeds, then this insurance shall bear its pro rata share of such proportion of the expenses, or of the expenses in excess of the proceeds, as the case may be, as may reasonably be regarded as having been incurred in respect of the vessel; but if the vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under-insurance.
