total loss


When property is lost or destroyed, or when the insured is irretrievably dispossessed of their possessions, or when they arrive so damaged as to not be recognizable by the insured.  There are two types of total loss; actual loss and constructive total loss.

Actual Total Loss:

An actual total loss happens when the goods are destroyed, when the insured goods are irrecoverable, or when they arrive so damaged as to not be recognizable by the insured. Examples of this last, which is known as a “loss of specie,”  are cement arriving as rock or textiles as rags.

Adjustments of actual total losses usually are not very difficult. The being a valued one, payment for total loss is in the full amount of the policy. Emergencies that result in a 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 happens when the cost of recovering or repairing the goods would surpass their value after this expenditure had been made.

In the adjustment of constructive total losses, the value of any remaining salvage abandoned to underwriters may at time, by agreement, be taken under advisement, with payment to the assured upon a net basis. Otherwise, underwriters pay full insured value and may then get rid of the salvage for their own account, provided they have chosen to accept abandonment.

A survey report may not be able to be completed when a complete loss has taken place, but claim documents should include evidence that the shipment was actually loaded on board the ocean vessel in the full amount claimed. If the loss was due to sea peril, a “master’s protest” will usually be required. This states the fact that unusually heavy weather or other extenuating circumstance happened during the trip and is extended to cement the loss of the shipment in question. In claims for total loss, it is very necessary that a full set of insurance certificates and bills of lading be presented to the insurance company representative.

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