Abandonment Clause
In marine insurance, clause giving an insured the right to abandon lost or damaged property and still claim full settlement from an insurer (subject to certain restrictions). Two types of losses are provided for under abandonment clauses:
- Actual total lossproperty so badly damaged it is unrepairable or unrecoverable; causes include fire, sinking, windstorm damage, and mysterious disappearance. For example, until the 1980s the Titanic, which sank off Newfoundland in 1912, was deemed to be unrecoverable and the Commercial Union Insurance Company had paid its owners for their loss due to sinking. Owners of ships that mysteriously disappeared in the Bermuda Triangle have been able to collect insurance proceeds. Disappearance of pleasure craft due to drug pirates has resulted in indemnification of owners through insurance proceeds.
- Constructive total lossproperty so badly damaged that the cost of its rehabilitation would be more than its restored value. For example, a ship and/or its cargo is damaged to such a degree that the cost of repair would exceed its restored value. The insured can abandon the property if (a) repair costs are greater than 50% of the value of the property after it has been repaired and (b) the insurance company agrees to the insured's intent to abandon.
Popular Insurance Terms
Expense of soliciting and placing new insurance business on a company's books. It includes agent's commissions, underwriting expenses, medical and credit report fees, and marketing support ...
Table charting relative costs of a group of cash value life insurance policies derived by using the net cost method of comparing costs (traditional net cost method of comparing costs; net ...
Mechanism used by a fidelity and surety insurance company to spread its liability through reinsurance by issuing a surplus treaty as a first layer of coverage, thereby enabling a cedent to ...
process of discovering sources of loss concerning the liability risk faced by individuals and business firms. The first step in risk management is to identify the causes of a loss by ...
Amount of the loss absorbed by an insurance company after deducting any reinsurance applicable to the loss, as well as subrogation and ABANDONMENT AND SALVAGE rights. ...
Formula for a given line of insurance used by property and casualty insurance companies to compare losses and loss adjustment expense with premiums. This shows the amount of each premium ...
Maximum amount of insurance that an insurance company will issue on a particular risk exposure. This limit is used by the insurance company to avoid having to pay for a loss on the exposure ...
Fund that comes into existence because premiums for ordinary life insurance policies in their early years are higher than necessary for the pure cost of protection. These excess premiums, ...
Coverage for an insured firm if its business debtors fail to pay their obligations. The insured firm can be a manufacturer or a service organization but it cannot sell its products or ...
Have a question or comment?
We're here to help.