An actual total loss occurs where the subject matter insured is destroyed or so damaged as to cease to be a thing of the kind insured or where the assured is irretrievably deprived thereof. There is a total loss where a vessel founders or destroyed by fire or sinks after collision. Actual total loss is presumed when after a lapse of reasonable time , a vessel is hopelessly wrecked; where goods are rendered worth less as dates become unfit for human consumption by sea water or tobacco worthless through the stench from hides rotting from sea water and so on., the subject matter ceases to answer the description under which they were insured and their species is entirely altered, so that in all such cases there is a total loss.
CONSTRUCTIVE TOTAL LOSS-
Subject to any express provision in the policy there is a constructive total loss where the subject matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable or because it could not be preserved from actual loss without an expenditure which would exceed its value when the expenditure had been incurred. In the case of damage to goods , there is a constructive total loss , where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.
SALVAGE LOSS-
When a damaged consignment of goods is sold for salvage , the term salvage loss is used for the difference between the true value of goods and the price obtained from them as salvaged material.
ABANDONMENT-
it is to be observed that abandonment is a situation precedent to a claim for constructive total loss. Abandonment consist of a formal letter under the hand of the insured , addressed to the underwriters in which he abandons absolutely his interest in the property insured and claims payment from them of a total loss. The notice may be given orally or partly in writing , partly by writing or by word but it must however given be unambiguous and abandon all interest unconditionally. The notice must be given with reasonable diligence. Underwriters are not bound to accept valid notice of abandonment , but if accepted the acceptance is irrevocable and if refused in no way prejudices the rights of the insured. An actual example can be adduced to show the difference between actual and constructive total loss. A great American liner tomahawk insured partly but somewhat heavily by British underwriters was badly damaged by fire. The owners abandoned the vessel to the underwriters and claimed 3,000,000 dollars as for a total loss. The underwriters refused to accept notice of abandonment , contending that the vessel was not a constructive total loss , but could be required for less cost than its insured value. The American court decided in favor of the owners and the underwriters had to pay the insured as for total loss.
GENERAL AVERAGE-
In considering the subject of general average, the question of marine insurance must be altogether dismissed. The term General average implies some voluntary sacrifice of property made or extra ordinary or incurred in a time of peril threatening the whole property involved in a common maritime adventure with a view to preserving it from that peril and embodies the principle that when such sacrifice has been made or expenditure incurred the whole property preserved shall contribute to the loss sustained or the expenditure incurred as the case may be. General average formed part of the Rhodium law and was in existence centuries before marine insurance was known at all. A good definition of general average is “all loss which arises in consequence of extraordinary sacrifice made or expense incurred for preservation of the ship and cargo comes within general average and must be borne proportionately by all interested. The obligation to contribute in general average exists between the parties to the adventure whether they are insured or. The circumstances of a partly being insured can have no influence upon the adjustment of general average the rules of which are entirely independent of insurance. But this obligation as between ship owner and cargo owner may be limited or varied or even excluded by special terms in the contract entered into between them; although these days shippers of cargo are rarely able to exercise control over stipulations in contracts of affreightment in regard to general average. The obligation on the part of all who are interested in ship , freight or cargo to contribute to make good a general average loss is one reasons for marine insurance. The losses to be made good in general average are either (a) Sacrifices of property (b) Expenditure incurred to preserve property.
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