The indemnity due to the insured in case of a loss, through one of the perils covered by the policy, varies according to the nature of the policy itself.
If the insurance was contracted under an open policy the indemnity should be equal to the value of the thing lost or destroyed as resulting at the outset of the risk. When covered by a valued policy, however, the value of the portion lost or destroyed is calculated in proportion to the amount insured. In a case of total loss the whole sum insured is to be paid.
In the case of a general average the insured receives from the insurer a sum equal to the rate of contribution assessed upon him by the adjustment of average-of course, within the limits of the amount covered by the policy.
In the case of particular average the mode adopted is to ascertain the difference between the gross proceeds of the goods on their arrival at their destined port and what would have been their value had they not been injured.
ADVERTISEMENTS:
Total Loss.-
A case of total loss may arise-
(a) When the subject assured is wholly lost and its recovery impossible.
(b) When, although not wholly lost, it may be considered as such for the owners. For example: should the subject assured be reduced by average to such a condition as not to be worth repairing; or thrown on a deserted coast and consequently unavailable by the owner. The former of the above cases should be called: an absolute total loss ; the latter: a constructive total loss. A case of total loss must be formally declared.
ADVERTISEMENTS:
Abandonment.-
The declaration of total loss must be made by the insured through a notice of abandonment, which is a written note whereby he informs the insurer that he selects to treat the case as one of total loss, and gives over to the latter the property of what still remains of the goods insured which are placed under his care by the following clause of the policy:
And in case of any loss or misfortune, it shall be lawful to the assured, their factors, servants, and assigns, to sue, labour, and travel for, in and about the defence, guard, and recovery of the said goods and merchandises and ship, etc., or any part thereof, without prejudice to this insurance; to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured.
By accepting the abandonment, the underwriter binds himself to pay the full amount assured, whatever the case may turn out to be. It is customary, therefore, for the underwriter to refuse it, which, however, does not exempt him from paying if the total loss is afterwards legally established.
ADVERTISEMENTS:
The insured is meanwhile empowered to sell what is left of his property for the account of those whom it may concern, without prejudice to his claim under the policy.
Re-insurance.-
The usual means by which insurers protect themselves against heavy risks, is by reinsurance, being a contract by means of which an underwriter, for the purpose of lessening his own liability, insures with another party the whole or part of the risk he has agreed to cover by insurance.
The contract is effected through an ordinary policy in the usual form, a special clause being added as follows: being a re-insurance, subject to all clauses and conditions of original policy or policies, and to pay as may be paid thereon.