Constructive Total Loss

Constructive Total Loss

A constructive total loss is where the subject-matter insured is reasonably abandoned on account of:

1. its actual total loss appearing to be unavoidable; or
2. because it could not be prevented from actual total loss without an expenditure which will exceed its insured value.
3. where an assured is deprived of Possession of his ship or goods by a peril insured against and it is unlikely he can recover them or the cost of recovering exceeds the insured value. In the case of goods, the cost of repairing the damage and despatches to destination exceed their value.

A Constructive total loss is where a ship is in danger of breaking or under war risk, she is entrapped by war wrecked vessel. A Constructive total loss is also where the ship is grounded and so damaged that the retrieval and repairing cost will exceed the insured value. When an owner claims a constructive total loss, he must abandon the property to the insurer.