Texas General Lines — Property and CasualtyProperty and Casualty Insurance BasicsMedium
A client has a property policy that covers their inventory. The policy includes a clause stating that if the insurer pays for a loss, the insured cannot then give up the damaged property to the insurer and demand full payment. This clause is known as:
- ANo Benefit to Bailee
- BSubrogation
- CSalvage
- DAbandonment
Show answer & explanationAnswer & explanation
Correct answer: D. Abandonment
The Abandonment clause prevents the insured from 'abandoning' damaged property to the insurer and demanding a total loss payment. The insured must continue to protect the property and work with the insurer on settlement options.
Why the other options are wrong
- A. No Benefit to Bailee prevents a bailee from benefiting from the insured's policy.
- B. Subrogation is the insurer's right to pursue a third party.
- C. Salvage is the insurer's right to take damaged property after paying the claim.
Abandonment
A policy condition that prohibits the insured from abandoning damaged property to the insurer to claim a total loss, especially if the damage is only partial.
- Prevents insured from forcing a total loss settlement.
- Insured still has a duty to protect the property.
- Distinguished from Salvage, which is the insurer's right after payment.
Memory trick: Don't Abandon, Protect and Report.