What Is the Sue and Labour Clause in Yacht Insurance?

The Sue and Labour Clause in yacht insurance covers the costs you incur to try to save your boat when it’s in danger. If your boat is damaged or at risk, this clause pays for reasonable efforts like hiring tugs, using equipment, or calling professionals to prevent further loss. It’s separate from the main hull coverage and has its own limits, usually a percentage of your boat’s insured value.

What the Sue and Labour Clause Covers

This clause is all about giving you financial support to act quickly when your boat is in trouble. It pays for expenses like:

• Hiring salvage teams or tugs to refloat a grounded boat.
• Using pumps, fire extinguishers, or tools to stop damage from spreading.
• Calling professionals to stabilize the boat during a storm or mechanical failure.

Importantly, these efforts must be reasonable and aimed at saving the boat—not just delaying repairs. The insurance company will assess whether the costs were necessary and proportionate to the risk.

How It Differs from Other Coverage

Salvage vs. Sue and Labour

Salvage refers to third-party contractors who recover a wrecked boat. They’re paid a reward for their work, which comes out of your insurance payout. Sue and Labour, however, is about your own efforts. For example, if you hire a local diver to free your boat from rocks, that’s Sue and Labour. If a professional salvage company later removes the boat, that’s a separate salvage claim.

Connection to Hull and Machinery Cover

Hull and machinery coverage pays to repair or replace your boat after a covered loss. Sue and Labour is an extra layer that funds your immediate actions to prevent that loss. Think of it as “first aid” for your boat before the main repair coverage kicks in.

Key Limits and Exclusions

Sue and Labour coverage is not unlimited. Most policies cap it at 10–15% of your boat’s insured value. For example, a $1 million boat might have a $100,000 Sue and Labour limit. Also, the clause doesn’t cover:

• Costs that exceed the boat’s total insured value.
• Efforts made after the boat is declared a total loss.
• Expenses for saving cargo or personal items (those are covered under personal effects or cargo insurance).

Scenarios: How Sue and Labour Works in Practice

Scenario 1: Grounding and Refloating

Your $600,000 yacht runs aground on a reef. You hire a tug for $8,000 and a diver for $5,000 to free it. Your policy has a 10% Sue and Labour limit ($60,000) and a 5% deductible ($30,000).

Expense	Amount
Total Sue and Labour Costs	$13,000
Deductible (5%)	$30,000
You Pay	$0
Insurance Pays	$13,000

The deductible applies to the main hull claim, not the Sue and Labour costs. Since the $13,000 is under the $60,000 limit, the insurance covers it fully.

Scenario 2: Fire Suppression

A fire breaks out on your $400,000 yacht. You spend $12,000 on fire extinguishers and call a fire department for $7,000. Your policy has a 15% Sue and Labour limit ($60,000) and a $20,000 deductible.

Expense	Amount
Total Sue and Labour Costs	$19,000
Deductible (Main Hull)	$20,000
You Pay	$0
Insurance Pays	$19,000

Here, the deductible applies to the hull damage, not the Sue and Labour costs. The insurance covers the full $19,000 because it’s under the $60,000 limit.

Scenario 3: Total Loss After Efforts

Your $800,000 yacht is damaged in a storm. You spend $40,000 trying to save it, but it sinks and is declared a total loss. Your policy has a 10% Sue and Labour limit ($80,000) and a 5% deductible ($40,000).

Expense	Amount
Sue and Labour Costs	$40,000
Deductible (Main Hull)	$40,000
You Pay	$40,000 (deductible)
Insurance Pays	$40,000 (Sue and Labour) + $760,000 (hull value - deductible)

The Sue and Labour costs are fully covered because the boat was later declared a total loss. The deductible applies to the hull claim, not the Sue and Labour expenses.

Agreed Value vs. Actual Cash Value and Sue and Labour

If your boat is insured for agreed value (a fixed amount set at policy inception), the Sue and Labour limit is based on that value. For example, a $700,000 agreed-value boat might have a $70,000 Sue and Labour limit. With actual cash value (ACV), which accounts for depreciation, the limit might be lower. Suppose your boat is worth $500,000 under ACV—your Sue and Labour limit could be $50,000, even if you paid $600,000 for it. Always confirm how your policy calculates these limits.

Total Loss and Constructive Total Loss

Definitions

• Total Loss: The boat is destroyed or unrecoverable.
• Constructive Total Loss: Repair costs exceed the boat’s value.

Sue and Labour can be used before a total loss is declared. If the boat is later declared a total loss, the insurance company will reimburse your efforts up to the policy limit. For example, if you spend $30,000 to save a boat that later becomes a constructive total loss, the insurance will cover the $30,000 (assuming it’s under the limit).

Final Takeaway

Review your policy to confirm the Sue and Labour limit as a percentage of your boat’s insured value. A common range is 10–15%, but higher limits may be available. Ensure your deductible structure is clear—Sue and Labour costs are usually separate from the main hull deductible. If you’re unsure, ask your insurer to explain how these clauses interact with hull coverage, agreed value, and total loss scenarios. A well-structured Sue and Labour clause can save you thousands in emergency costs.