What Is The Meaning Of Marine Insurance Abandonment System?

According to the above provisions, the premise of abandonment is that the insured object is presumed to be a total loss, that is, after the occurrence of the insurance accident, although the actual total loss of the target is not caused, the actual total loss is unavoidable, or the cost of salvage and repair will exceed the value after the recovery of the target, and shall be treated as a total loss.

In practice, the insurer will stipulate the conditions for presumption of total loss on the policy.

Constructive total loss is the deviation from the principle of insurance compensation.

According to the principle of compensation, if the insured fails to prove partial loss or total loss of the insured object, it will not be compensated accordingly.

Considering the risks at sea and the particularity of insurance companies, sometimes the subject matter is not the whole loss, but it is almost the same as the total loss. Sometimes, although all losses have been made, the proof is too costly and time-consuming because of the formality of the procedures.

Under such circumstances, the right to refuse the insured's claim for insurance compensation will cause the funds invested in the enterprise to be frozen, which is not conducive to the development of international trade.

Therefore, in order to seek practical convenience, avoid loss expansion, and protect the interests of the insured, when estimating the total loss of the insured subject, but it has not yet been determined, that is, the total loss is deemed to be, so that the insured has to discard and pfer all rights on the insured subject to obtain the full insurance amount from the insurer.

It is precisely because of the particularity of marine insurance that almost all the total loss cases can only be claimed according to constructive total loss.

Conditions for exercising abandonment

1) the insured shall make a declaration of abandonment to the insurer within the prescribed time or statutory time, i.e. abandonment notice.

A notice of abandonment is a reminder that the insured has given up the property to the insurer and has been disposed of by the insurer.

The way of abandonment notice and the time limit for notification shall conform to the provisions of the contract or the law.

If the insured fails to issue a notice of abandonment on time, he will lose the right to claim the total loss from the insurer, except for the total loss presumed by the freight, and only claim some loss from the insurer.

2) no strings attached.

The purpose of establishing the system of abandonment is to solve the uncertain legal relationship between the parties quickly. If the conditions of abandonment are allowed, there will be more disputes between the parties, and there is a simple purpose of abandonment.

Moreover, if the conditional conditions of abandonment are allowed, the complicated procedure of abandonment is bound to be more complicated. Therefore, the maritime law of various countries clearly stipulates that there is no strings attached to abandonment.

The 249th article and second paragraph of the "maritime law" clearly stipulate: "abandonment shall not be attached to any conditions."

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3) abandonment shall be made to all the subject matter of the insurance.

After the presumption of total loss occurs, if the insured decides to pay the abandonment, all the subject-matter insured shall be abandoned and not partially paid or partly paid.

In this way, the relationship between the insurer and the insured can be prevented from complicating and preventing the insured from abandonment of the insurance object which is unfavourable to him.

4) abandonment is not a separate act, but must be accepted by the insurer in writing.

If the insured has issued a notice of abandonment, it will become effective if it is not properly established.

In China, the notice of acceptance of abandonment by the insurer must be in writing, not implied or silent.

Even if the insurer has taken reasonable rescue measures after receiving the notice of abandonment, it does not mean that the insurer has accepted the abandonment and assumed the liability for total loss compensation.

Effect of abandonment

When the insurer promises to accept the abandonment, it has the following effect:

1) the insured will pfer all the rights and obligations of the property to the insurer.

The essence of abandonment is subrogation on the property. Therefore, after accepting the abandonment, the insurer is not only entitled to the rights to be paid, but also to his obligations.

The 250th article of the maritime law of China stipulates that: "the insurer accepts the abandonment, and the insured's full rights and obligations to the property are pferred to the insurer."

"This is the essential difference between the abandonment system and the marine insurance subrogation system.

The right of subrogation obtained by the insurer is not restricted by the insurance compensation paid by the insurer.

However, in incomplete insurance, the insurer can only obtain some rights on the subject matter of insurance according to the ratio of the insured amount to the insured value.

For the insurer's obligations, it does not include any liability arising from the risk before the insurance accident or the coverage of the insurance contract, and the liability of the insurer to pay the freight to the carrier.

2) the insurer shall compensate the insured amount in full according to the insurance contract.

The 249th clause and second paragraph of the Maritime Code of China stipulates: "... The abandonment is accepted by the insurer and must not be withdrawn.

"In practice, if the insurer accepts the abandonment, he may ask the other party to provide a guarantee if there is any doubt about the documents submitted by the insured.

If the other party provides a guarantee according to his requirements, the insurer shall pay the insurance amount in full.

In addition, the insurer's obligation to pay the insurance amount in full is not affected by the reason of abandonment. If he refuses to pay the insurance premium, the insured can realize his rights through litigation.

4, the protection of insurers - the right to rescission in advance.

The 255th provision of China's maritime law stipulates: "after an insurance accident occurs, the insurer has the right to give up the right to the insurance subject matter and pay the insurance compensation stipulated in the contract in full, so as to relieve the obligation of the insurance subject matter.

The insurer shall notify the insured within seven days from the date of receipt of the notice of the insured's compensation for loss when exercising the rights specified in the preceding paragraph; the insured shall still pay the necessary reasonable expenses to avoid or reduce the loss before receiving the notice.

"This provision gives the insurer the privilege to unilaterally terminate the contract before the expiry of the insurance period.

In short, abandonment enables the insured to enjoy the option of partial loss or total loss in the case of presumption of total loss, and this article stipulates that the insurer can make a total loss compensation before the insured fails to exercise his option, thereby relieving the obligation of the insured.

This "early cancellation right" will make the insurer face difficulties in changing the original arrangement for rescuing or repairing insurance objects and rescheduling insurance.

Accordingly, when the insured knows that the insured subject has a constructive total loss, he should make a quick loss of claim or a full loss claim as soon as possible. If he chooses the latter, he should issue a notice of abandonment as soon as possible.