Most insurance policies contain an “abandonment of property” condition that usually reads along these lines: “We need not accept any property abandoned by you.” With policy language like that, it is not surprising abandonments are uncommon in the residential and commercial property insurance world. Abandonment is more common, for example, in the marine insurance world. This blog series does not discriminate between common and uncommon policy conditions, however, so I will say a bit more about abandonment.
For an insured to be eligible for abandonment, the insured’s property has to have sustained a “technical or constructive total loss.”1 “Abandonment is the act of the insured in relinquishing what remains of the subject of the insurance to the insurer in exchange for the value of the insurance.”2 “The insured cannot be compelled to make an abandonment. Rather, the insured may use his discretion to preserve the thing insured by his own exertions, or he may await the final outcome and recover for a total or partial loss… . The omission to abandon for a good cause does not deprive the insured of his right to recover the actual loss sustained.”3
Electing to abandon property to an insurer is not an easy decision, and the law seems to understand:
The insured’s delay in making an abandonment may be justified because of the uncertainty of the information, or uncertainty of the [property’s] condition. The insured also has a right to examine the circumstances in order to ascertain the degree and nature of the damage, as whether the loss is a total or partial one, and a necessary delay for this purpose does not forfeit the right to abandon.4
“In order for an abandonment to be valid, there must be an absolute surrender of the insured’s rights in the property to the insurer, without condition, and unfettered by contingencies or limitations.”5 And “[s]ince the abandonment by the insured is a transfer of interest, it necessarily follows that the insured must not have made any prior transfer of his interest to a third person or have done any act with respect to the title which would prevent him from making a transfer by way of abandonment.”6
To read previous posts in my series on insurance policy conditions, click here.
1 12 Couch on Ins. § 183:26 (West, Dec. 2012) (internal citations omitted).
2 Id. at § 183:12 (internal citations omitted).
3 Id. (internal citations omitted).
4 Id. at § 183:75 (internal citations omitted).
5 Id. at § 183:22 (internal citations omitted).
6 Id. at § 183:12.