Citation(2006) 18 SAcLJ 693
Date01 December 2006
Published date01 December 2006

An assured under a marine insurance contract has a duty to take reasonable measures to avert or minimise a loss, whether under s 78(4) of the Marine Insurance Act (Cap 387, 1994 Rev Ed) or under the inevitable suing and labouring clause in the policy. He also has a corresponding right to recover suing and labouring expenses properly incurred. Authorities are scant on the duration of such right or duty. This paper discusses when the right or duty should end.

I. Introduction

1 Man, the assured says, marks the earth with ruin; his control stops with the shore. Upon the watery plain, wrecks are the deed of the sea. That may be so, says the underwriter, but you must still sue and labour. Time writes no wrinkles on the ocean’s brow, pleads the assured, but shall I be thus yoked till the stages of my age and youth are passed?

2 The sue and labour provision in the old Lloyd’s SG (ship and goods) Form had been likened to poetry.1 Perhaps because it would take a doctoral thesis to unravel its meaning:

And in case of any loss or misfortune it shall be lawful to the assured, their factors, servants and assigns, to sue, labour, and travel for, in and about the defence, safeguards, and recovery of the said goods and merchandises, and ship, etc., or any part thereof, without prejudice to this insurance: to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured.

3 Clearly, the clause is prolix, not Byronic. But what about the assured’s plea: When does sue and labour end? The travel continues in prose.

4 The SG Form version is couched in permissive language, referring to a right.2 The modern version, found in, for example, the International Hull Clauses 1/11/03 (“IHC”) speaks of the “duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimizing a loss which would be recoverable under this insurance”. It also requires the underwriters to contribute to “charges properly and reasonably incurred” for such measures.3 The right and the duty are correlative, and it is the premise of this paper that, as the right ends, so shall the duty.

5 Section 78 of the Marine Insurance Act4 (“the Act”) refers to both right and duty:

78.—(1) 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.

(2) General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.

(3) 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.

(4) 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.

6 The essence of sue and labour is neatly summarised by Lord Hobhouse of Woodborough in the House of Lords decision of Kuwait Airways Corporation v Kuwait Insurance Co SAK:5

It is not in contention that the ordinary purpose and understanding of a sue and labour clause is to authorize the assured to take reasonable steps to recover the insured property or reduce the extent of the insured damage or loss. Indeed it is ordinarily to be inferred that the assured has a duty to take these steps. …

Just as the authority and obligation to sue and labour are supplementary to the contract of indemnity so also is the underwriters’ liability to reimburse sue and labour expenses reasonably incurred. Provided those expenses have been reasonably incurred, it does not matter whether they were in the end successful or not. They may not succeed in averting a total loss of the subject matter of the insurance. But, having properly sued and laboured in accordance with authority given by the clause, the assured is entitled to look to the underwriter to reimburse him the expenses so incurred. The fact that the underwriter is also having to pay for a total loss does not alter this position.

7 The suing and labouring duty is triggered on the happening of any insured peril, ie, loss or misfortune covered by the policy. The duty operates when the peril has arisen or is imminent — when the subject matter (eg, the vessel) is “in the grip of a peril”.6 Rix J (as he then was) explained in State of the Netherlands v Youell:7

In my judgment the duty to sue and labour does not arise until a peril is at any rate imminent: it is a duty which arises in response to a casualty, actual or imminent. Thus the right to recover sue and labour expenses, where a sue and labour clause exists, and the statutory duty to take reasonable measures for the purpose of averting or minimizing a loss, are in this respect correlative.

8 When the right and duty end does not enjoy such clear judicial pronouncements. We know that they continue as long as the peril is in place,8 but beyond this, there are few cases that have explored their duration. This question can become particularly important when there is a total loss. For brevity, the examples in this paper refer mainly to an insured vessel. But sue and labour principles apply equally to other subject matter, for example, goods insured under the Institute clauses.9 These principles do not generally apply outside the marine insurance context, and it is rare to find a sue and labour clause in a non-marine policy.10

9 In Bayswater Carriers Pte Ltd v QBE Insurance (International) Pte Ltd,11 the assured’s tug was hijacked by armed men while she lay at anchor at Batam, Indonesia. The decision turned mainly on whether this amounted to “piracy” within the meaning of cl 6.1.5 of the ITCH 1/10/83. Belinda Ang Saw Ean J held that it did. A corollary issue arose regarding sue and labour because the insurer counterclaimed for breach of the sue and labour duty in cl 13.1 of ITCH and s 78(4) of the Act. The insurer alleged that the assured failed, amongst other things, to offer rewards or actively pursue or locate the tug through their own contacts and the relevant authorities (before the action was commenced). This counterclaim was dismissed because the judge found that, on the facts, the assured had not failed to do what a reasonable prudent uninsured would do.

10 The assured had lodged reports with various authorities in Singapore, Indonesia and Malaysia. They had arranged for searches by helicopter and speedboats. The assured gave notice of abandonment which was rejected by the insurer. Notwithstanding this, the insurer intervened and assumed responsibility for the search of the tug. The assured was not fully updated on the progress. Up to the time that the assured commenced action, the tug had not been found. It was only in the defence that the insurer alleged breach of the sue and labour obligation. The judge held that the assured did not breach its duty, and the alleged failures were in any event not the proximate cause of the loss.

11 An interesting question that was not decided in the Bayswater case is, when does the duty (and corresponding right) of sue and labour end? Obviously, as long as the insured peril is operating and the subject matter is not totally lost, the duty and right ought to continue. Conversely, the clause ceases to apply once the subject is free of the peril. But what about a situation like Bayswater’s, where a vessel is hijacked or the assured is otherwise deprived of possession of the vessel or goods in circumstances that make recoverability unlikely?12 Do the duty and right of sue and labour continue?

12 There is no easy answer. The following possibilities have to be considered:

(a) where there is a constructive total loss or actual total loss;

(b) where the assured commences action against the underwriter, on the policy;

(c) where the underwriter accepts abandonment;

(d) where the underwriter pays on the policy without accepting abandonment; and

(e) where there is a partial loss.

13 There is hardly any judicial explication. The following are propositions extrapolated from concepts of total loss, abandonment and ademption:

(a) Whether the loss is a constructive total loss or actual total loss should not make any difference to the duration of sue and labour.

(b) Sue and labour should stop at the door of the writ, provided that at that stage it could also be said there was a constructive or actual total loss.13

(c) If the underwriter accepts abandonment (and therefore takes over the property), the sue and labour provision should be exhausted.

(d) Sue and labour might end upon payment, or admission of duty to pay, though there are arguments either way on whether it should.

(e) Partial loss might well require a different approach as there is no question of an immutable loss being crystallised at the time of the writ. Events after the writ can affect the loss payable under the policy. Sue and labour does not end on the occurrence of a partial loss. In addition, there is a residual right on the assured to convert its claim from a total loss to a partial loss even after commencement of action, and it may arguably claim sue and labour expenses incurred to avert total loss.

14 As sue and labour is inextricably connected to concepts like total loss, abandonment and ademption, we shall start with a review of these concepts.

A. Constructive total loss

15 A total loss can be actual or constructive.14 It is useful to bear in mind that constructive total loss is peculiar to marine insurance. Non-marine insurance recognises only actual total loss. Lord Atkinson gave a good account of the origin...

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