Opinion ID: 75785
Heading Depth: 2
Heading Rank: 2

Heading: the scope of the sue and labor clause

Text: 20 Swire contends that even if the Design Defect Exclusion Clause would otherwise exclude the cost of repairing the structural deficiencies in the condominium project, that cost is included because of the policy's Sue and Labor Clause. That contention raises two issues. The first is whether the policy's Sue and Labor Clause even applies where there has been no actual, covered loss. The Sue and Labor Clause applies, by its terms, [i]n the case of loss or damage. In light of that language, Zurich argues the clause has no application here because no actual, covered loss had occurred at the time Swire incurred the costs of correcting the structural deficiencies. 21 While several courts have addressed this issue, they have reached conflicting results, and none of the decisions applied Florida law. See Witcher Constr. Co. v. Saint Paul Fire and Marine Ins. Co., 550 N.W.2d 1, 7-8 (Minn. Ct.App. 1996) (where policy provision requires the insured to do everything possible to protect the property from further damage upon the occurrence of a covered loss, that provision does not alter the insured's common law duty to prevent harm to the insured property or the insurer's corresponding obligation to reimburse the insured for such efforts); Wolstein v. Yorkshire Ins. Co., 97 Wash. App. 201, 985 P.2d 400, 409 (1999) (where sue and labor provision by its terms applies in case of any Loss or Misfortune, a covered loss does not have to occur in order to invoke coverage under the clause; actions taken to prevent a covered loss come within the scope of the clause); Thornewell v. Ind. Lumbermens Mut. Ins. Co., 33 Wis.2d 344, 147 N.W.2d 317, 321 (1967) (where policy provision permits the insured [I]n the event of loss hereunder to make and be reimbursed for the cost of reasonable repairs, the loss that has occurred must be one that is otherwise covered under the policy). 22 Several Fifth Circuit decisions state generally that, under a sue and labor clause, the insured has a duty to minimize or prevent covered losses. See Blasser Bros., Inc. v. N. Pan-American Line, 628 F.2d 376, 386 (5th Cir.1980) (where sue and labor provision applied [i]n case of any loss or misfortune, the court stated that any action to preserve insured goods or mitigate damages would be included expenses under the clause); Cont'l Food Prods., Inc. v. Ins. Co. of N. Am., 544 F.2d 834, 837 & n. 1 (5th Cir.1977) (stating that the insured has a duty under a sue and labor clause to protect insured property in order to minimize or prevent covered losses); Reliance Ins. Co. v. The Escapade, 280 F.2d 482, 488 (5th Cir.1960) (same). But those decisions all involve mitigation claims where an actual loss took place before any expenses were incurred. See Blasser, 628 F.2d at 378; Cont'l Food, 544 F.2d at 835; Escapade, 280 F.2d at 484.