Constructive total loss: a critical and historical analysis
Date: 15 April 2019
University of Exeter
PhD in Law
Constructive total loss is a concept that sits midway between partial loss and actual total loss. It entitles the assured to full indemnity where notice of abandonment has been duly served; otherwise he would recover no more than a partial loss, unless in certain circumstances, such a notice could be excused. Constructive total loss ...
Constructive total loss is a concept that sits midway between partial loss and actual total loss. It entitles the assured to full indemnity where notice of abandonment has been duly served; otherwise he would recover no more than a partial loss, unless in certain circumstances, such a notice could be excused. Constructive total loss originated from the cases of capture, to rescue the plight of the assured where he could not claim for a loss under the policy until the ship was recaptured; and this was soon extended to cases of dispossession in other types and cases of damage. The application of the principle of constructive total loss, a doctrine peculiar to marine insurance, has addressed the intractable problems caused by sea perils, and has also balanced and protected the rights of both the assured and the underwriter. Considering the benefits of constructive total loss to the marine insurance market and the parties to the marine insurance policy, it is important to explore the possibility as to the application of constructive total loss to non-marine areas, especially industries in which large amounts of capital are often locked up, such as in the aviation industry. The purpose of this thesis is to trace the growth of the principle of constructive total loss, examining its application to hulls, cargo and freight, and then to consider whether the Marine Insurance Act 1906, a milestone in the marine insurance industry, is consistent with the earlier authorities, viz. how the Act echoes or alters the pre-statute cases and, how it works in the modern world. An application of constructive total loss coupled with a notice of abandonment, as generally set out, would not be properly applied to any indemnity contract other than that of marine insurance. However, regardless of the specific artificial terminology of ‘constructive total loss’, there is a trend for considerations of constructive total loss or a concept of commercial loss to be taken into account in ascertaining a total loss in non-marine cases. Concern that there is a need for its legal application in the non-marine area of insurance and prompted by developments in the insurance market, the issue as to whether constructive total loss has any part to play in the non-marine market is a remarkable and hotly-debated subject and will be comprehensively analysed here for the first time.
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