Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

In the context of commercial property insurance, what does "Sue and Labour" mean?

1. The insured must file claims to collect payment

2. The insured must take all reasonable action to recover stolen property

3. The insurer must cover legal expenses incurred by the insured

4. Insureds are protected from classic lawsuits

The correct answer is: The insured must take all reasonable action to recover stolen property

In the realm of commercial property insurance, "Sue and Labour" refers to the obligation of the insured to take reasonable steps to minimize loss or damage and to recover stolen property. This means that policyholders have a duty to act with due diligence when a loss occurs, which could include activities such as trying to locate and retrieve stolen items or mitigating any further damage to their property. This concept is crucial as it demonstrates the insured's proactive role in protecting their interests and the insurer's financial exposure. By taking reasonable actions, the insured helps to preserve the value of the property, which ultimately benefits both parties. The insurer’s liability may be adjusted based on the insured’s actions in response to a loss event, reinforcing the importance of this duty. The other options, while related to aspects of insurance, do not accurately reflect the meaning of "Sue and Labour." Filing claims is a standard procedure after a loss but does not capture the proactive nature described in the correct choice. Legal expenses and protection from lawsuits pertain to different areas of insurance coverage and do not define the obligations under the "Sue and Labour" clause.