Definition of "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:

  1. 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.
  2. 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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Circumstance that produces the loss. ...

All insured losses paid in full. ...

Specified requirements of minimum age and years of service to be met by an employee before the individual's benefits are vested. For example, under the ten year vesting rule, "n employee ...

Coverage that guarantees that the insurance company will pay the insured business or individual for money or other property lost because of dishonest acts of its bonded employees, either ...

Elimination of unnecessary financing costs and the redirection of those sums to activities that are more profitable. The concept is for the company to have a long-term view of its risk ...

Law under which one state gives favorable tax treatment to an insurance company domiciled in a different state that is admitted to do business, provided the second state does the same for ...

Coverage when residential property does not qualify according to the minimum requirements of a homeowner's policy, or because of a requirement for the insured to select several different ...

One where an injury or other harm takes time to become known and a claim may be separated from the circumstances that caused it by as many as 25 years or more. Some examples: exposure to ...

Option to an insurance company to replace, reconstruct (repair), or reproduce (rebuild) damaged or destroyed property covered by property insurance rather than indemnify an insured in cash. ...

Popular Insurance Questions