What is a sue and labor clause in an insurance policy?

A sue and labor clause in an insurance policy is designed to encourage insured individuals to take proactive measures to mitigate further losses after a covered incident has occurred. This clause typically requires the insured to act in good faith and take reasonable steps to protect property from additional damage. For example, if a building suffers water damage, the insured may be expected to call a plumber and cover broken windows to prevent flooding or theft.

By specifying that the insured must take necessary actions, the sue and labor clause reinforces the principle of minimizing losses, which is beneficial for both the insured and the insurer. Insurers generally want to reduce the overall impact of claims, and this clause aligns the interests of the insured with that goal.

The other choices do not accurately describe the sue and labor clause. For instance, the requirement to pay legal fees regardless of coverage or guaranteeing coverage are not relevant to this clause, nor does it conditionally limit claims types. Instead, it emphasizes taking action to lessen potential losses after an incident occurs.