A Video Explaining the Equitable Remedy of Salvage and Insurance

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The term “salvage” simply means used or damaged property that retains an asset value. It does not connote equipment that was valueless or incapable of use. [G.J. Leasing, Co. v. Union Elec., 854 F. Supp. 539 (S.D.Ill. 06/6/1994).]

Historically, courts have applied the maritime law of salvage when ships or their cargo have been recovered from the bottom of the sea by those other than their owners. Under this law, the original owners still retain their ownership interests in such property, although the salvors are entitled to a very liberal salvage award. Such awards often exceed the value of the services rendered, and if no owner should come forward to claim the property, the salvor is normally awarded its total value. On salvage generally. [3A M. Norris, Benedict on Admiralty: The Law of Salvage (7th ed. rev. 1991)].

Salvage is another equitable remedy, like subrogation, that the adjuster should never ignore. An insurer that pays for a loss is entitled, in equity, to receive the salvage for which it has paid. If the debris is left to the insured to sell, he or she will receive more than the indemnity bargained for when the policy of insurance was obtained. In essence, by paying a claim, the insurer is buying the salvage.

The adjuster should always protect the possible salvage and be sure a salvor is standing by to take possession. By taking salvage the adjuster helps to reduce the total amount of the loss paid without reducing the indemnity the insured receives.

The insurer has a right to salvage proceeds when the insured incurs a loss greater than the policy limits. However, most first party property policies today do not refer to the term “salvage.”A site for the insurance claims professional and anyone who wants to know something about insurance, insurance claims, insurance coverage, and insurance law.