(insurance) When property is lost or destroyed, or when the assured is irretrievably deprived of their possession, or when they arrive so damaged as to cease to be a thing of the kind insured. There are two types of total loss: actual total loss and constructive total loss.
Actual Total Loss.
An actual total loss occurs when the goods are destroyed, when the assured is irretrievably deprived of their possession, or when the goods arrive so damaged as to cease to be a thing of the kind insured. Examples of this last, which is spoken of as a “loss of specie,” are cement arriving as rock or textiles as rags.
Adjustment of actual total losses usually involves little difficulty. The policy being a valued one, payment for total loss is in the full amount of the policy. Disasters likely to give rise to total loss include fire, sinking, or stranding of the vessel, collision, and loss overboard in the course of loading or discharge.
Constructive Total Loss.
A constructive total loss occurs when the expense of recovering or repairing the goods would exceed their value after this expenditure had been incurred.
In the adjustment of constructive total losses, the value of any remaining salvage abandoned to underwriters may at time, by agreement, be taken into consideration, with payment to the assured upon a net basis. Otherwise, underwriters pay full insured value and may then dispose of the salvage for their own account, provided they have elected to accept abandonment.
A survey report may not be practicable when a total loss has taken place, but claim documents should include evidence that the shipment was actually loaded on board the ocean vessel in the full quantity claimed. If the loss was due to sea peril, a “master’s protest” will usually be required. This certifies the fact that unusually heavy weather or other exceptional circumstance was encountered during the voyage and is extended to confirm the loss of the shipment in question. In claims for total loss, it is especially necessary that a full set of insurance certificates and bills of lading be submitted to the insurance company representative