Difference Between Salvage And Abandonment In Insurance
Salvage And Abandonment have different meaning in insurance. Salvage generally refers to remains of the property after a loss. Usually, as a result of a loss the whole property is not lost, damaged or destroyed. Mostly, there remains some value in the damaged property or may be it is a case of partial loss when the question of salvage becomes more prominent.
Salvage And Abandonment: The rule is this that when it is a case of partial loss, the insured can only claim to the extent of the loss or damage sustained. He cannot normally abandon the property and claim the full. The situation may be different only if the insured surrenders the remains of the property and the insurer also agrees to accept the salvage. In such a situation the claim shall be paid in full and the insurer shall become the owner of the salvage.
In cases of clear cut total losses, the insurers will pay in full and, therefore, shall be entitled to the benefit of the salvage. Confusion may arise as to the ownership of salvage in circumstances when under-insurance exists and there is a total loss. As the insured will not be fully indemnified he shall be entitled to salvage, but only to such an extent that the loss payment and the value of salvage together does not exceed the full loss or actual indemnity.
It should also be remembered side by side that when full insurance exists and no under-insurance, the loss is paid in full, the insurers become the absolute owners of the salvage, if any, and the total sale proceeds belong to them even though the proceed may turn up to be more than the amount of the claim paid out.
Abandonment usually means surrendering by the insured the remains of the damaged property to the insurer and claiming total loss. It is not basically peculiar to marine, as in marine insurance practice the assured has the right to abandon the property (subject to the acceptance by the insurer) thereby claiming a constructive total loss. When, therefore, the insurer pays a total loss he takes over the salvage as owner thereof. He becomes the absolute owner irrespective of what value is received from subsequent sale.
The situation is different in respect of most of the non-marine policies. Usually, there is a policy condition in such policies prohibiting abandonment by the insured and claiming total loss. However, the insurers may waive this condition in appropriate circumstances on merit basis.