Texas General Lines — Property and CasualtyProperty and Casualty Insurance BasicsMedium
A business owner's commercial property policy contains a clause stating that if the insurer pays for a loss to property, the insurer has the right to take possession of the damaged property. This clause is known as:
- ASubrogation
- BSalvage
- CAbandonment
- DLiberalization
Show answer & explanationAnswer & explanation
Correct answer: B. Salvage
The Salvage clause allows the insurer to take possession of damaged property after paying for the loss. The insurer can then sell the damaged property to recover some of the loss payment.
Why the other options are wrong
- A. Subrogation is the insurer's right to pursue a third party responsible for the loss.
- C. Abandonment states the insured cannot abandon damaged property to the insurer.
- D. Liberalization automatically broadens coverage without additional premium.
Salvage
The right of the insurer to take possession of damaged property after paying for a total or partial loss, and then sell it to recover some of the loss.
- Reduces the net cost of a claim for the insurer.
- Prevents the insured from profiting from a loss.
- Often applies to property that is damaged but still has some value.
Memory trick: Subrogation pursues, Salvage sells, Abandonment prevents dumping.