Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What does the 'Sue and Labour' clause require of the insured?

1. To hire attorneys at all costs

2. To take reasonable action to recover stolen property

3. To refrain from reporting to authorities

4. To ignore any theft incidents

The correct answer is: To take reasonable action to recover stolen property

The 'Sue and Labour' clause is a key provision in many insurance policies, particularly in marine and property insurance. It obligates the insured to take reasonable steps to mitigate or minimize losses after an incident occurs, such as theft or damage. The requirement for the insured to take reasonable action to recover stolen property aligns with the purpose of the clause, which emphasizes the shared responsibility between the insurer and the insured in managing claims. By taking proactive measures, the insured can help the insurer limit potential losses, which ultimately facilitates the claims process and ensures that the insured's interests are also upheld. This obligation does not extend to hiring attorneys at all costs, refraining from reporting to authorities, or ignoring theft incidents, as these actions would not align with the intent of cooperation and loss minimization that the 'Sue and Labour' clause embodies. Therefore, taking reasonable actions to recover stolen property directly fulfills the requirements of this clause and serves the mutual interests of both the insured and the insurer.