Opinion ID: 75785
Heading Depth: 2
Heading Rank: 3

Heading: the effect of the sue and labor clause

Text: 23 There is another issue raised by Swire's contention that the cost of making the structural repairs to the condominium building is covered by the Sue and Labor Clause. That issue arises in this case only if the occurrence of a covered loss is not a prerequisite to application of the clause. If the clause does apply even when there has been no covered loss at the time the repairs are made, then what might be called a mixed motives issue arises. The Sue and Labor Clause provides that [i]n case of loss or damage, it shall be lawful and necessary for [Swire] to sue, labor and travel for, in and about the defense, safeguard and recovery of the insured property hereunder. Swire contends that the Sue and Labor Clause is a separate insuring agreement, and that the repair action, even if taken to correct an uncovered loss (a design defect), is covered by the clause because that action also prevented a future covered loss (the collapse of the building). 1 Zurich, of course, disagrees. 24 While both Swire and Zurich cite case law in support of their positions on this issue, neither points to a Florida case directly on point. In support of its position, Swire relies on a 1996 Minnesota appellate court decision, as well as a 1916 King's Bench decision. See Witcher Const. Co. v. St. Paul Fire and Marine Ins. Co., 550 N.W.2d 1, 2-3, 8 (1996) (where property insurance policy contained an exclusion for delay and loss of use as well as a provision similar to a sue and labor clause, the policy's exclusions for delay and loss of use did not limit the expenses that are reimbursable, provided the insured directed its efforts primarily at preventing an imminent covered loss); Wilson Bros. Bobbin Co. v. Green, [1917] 1 K.B. 860, 860, 864 (1916) (where policy insuring goods on board a steamship against war risk contained both an exclusion for all claims arising from delay and a sue and labor clause, the exclusion for claims arising out of delay did not affect recovery under the sue and labor clause where costs associated with delay were incurred to avoid the loss of the goods never reaching their destination). Zurich, on the other hand, points to Southern California Edison v. Harbor Insurance Co., 83 Cal.App.3d 747, 148 Cal.Rptr. 106 (1978), the decision that the district court in this case relied on. In contrast to the courts in Witcher and Wilson, the court in Edison held that the insured could not recover under a builder's risk policy's Sue and Labor Clause for costs it claimed were incurred to mitigate and prevent a covered loss (loss to the superstructure) where the means (correcting a design defect) the insured used to mitigate and prevent the loss were excluded from recovery under the policy's exclusion for the [c]ost of making good faulty workmanship, construction or design. Id. at 107, 111-13 25 Swire does cite one Florida decision, although it recognizes that decision is not on all fours with this case. It cites Steuart Petroleum Co., Inc. v. Certain Underwriters at Lloyd's London, 696 So.2d 376 (Fla.Dist. Ct.App. 1997), for the proposition that where, under Florida law, two insurance contract provisions are in conflict, the clause affording greater coverage should prevail. Id. at 379 (where insurance policy's Foam Loss Assumption Clause and Expenses to Reduce Loss Clause both dealt with loss reduction expenses and conflicted, the court allowed the latter clause, which afforded greater coverage, to prevail). Although Steuart has the advantage of being a Florida decision, it is distinguishable. In contrast to Steuart, only one of the provisions at issue here — the Sue and Labor Clause — specifically deals with the subject of loss reduction expenses. This is not a case where coverage is provided by two clauses. Moreover, the Steuart court's holding turned in part on the fact that the Expenses to Reduce Loss Clause was an endorsement, which, to the extent it was inconsistent with the body of the policy, controlled. Id. Here no endorsement is involved.