Abandonment is the insured's surrender to the insurer of all rights and interests in goods that have been damaged or whose salvage is uneconomic, in return for claiming the full sum insured. It arises when the goods have not been physically destroyed completely but the cost of salvaging and forwarding them exceeds their value, i.e. in the case of a constructive total loss.
Actual total loss, constructive total loss and partial loss
In cargo insurance, losses are assessed in three ways. Abandonment is only relevant in the middle case:
| Type of loss | What does it mean? | Compensation |
|---|---|---|
| Actual total loss | The goods have been destroyed or have entirely lost their character; for example, cargo on a sunken ship | Full sum insured; no notice of abandonment required |
| Constructive total loss | The goods physically exist, but salvaging, repairing and forwarding them to destination would cost more than their value at destination | Full sum insured if the insured abandons the goods |
| Partial loss | Part of the goods is damaged or the loss in value can be measured | Payment in proportion to the damage |
Section 60 of the English Marine Insurance Act 1906 defines constructive total loss: where the subject-matter insured is reasonably abandoned because its actual total loss appears unavoidable, or because it could not be preserved from actual total loss without an expenditure that would exceed its value when the expenditure had been incurred. An example for cargo: the cost of repairing and forwarding the goods to destination exceeds their value at destination. Cases in which the insured is deprived of possession of the cargo by an insured peril and is unlikely to recover it also fall within this scope.
Where is abandonment regulated in Turkish law?
The insurance provisions of the Turkish Commercial Code No. 6102 do not regulate abandonment as a separate institution. The "abandonment" (terk) in Article 1004 of the Code is a different concept, relating to the renunciation of registered ownership of a ship. Because cargo policies issued in Türkiye are largely based on the Institute Cargo Clauses (ICC), abandonment works in practice through the constructive total loss provision in the policy and the practice of English law. Under the ICC, no claim for constructive total loss is recoverable unless the goods are reasonably abandoned. For the structure of the clauses, see the entry on ICC (A), (B), (C).
The abandonment process step by step
- Establishing the event: An accident, fire, seizure or prolonged detention is reported to the insurer immediately.
- Survey and cost calculation: The surveyor compares the costs of salvage, repair, repacking and forwarding with the value of the goods at destination. The process is explained in the entry on the cargo damage survey.
- Notice of abandonment: The insured notifies the insurer in writing and without delay that it abandons the goods. If the notice is delayed, the claim may be treated as a partial loss.
- The insurer's decision: The insurer may accept or reject the abandonment. A rejection does not in itself extinguish the insured's right if the conditions of a constructive total loss actually exist; the dispute is resolved by survey and, if necessary, in court.
- Payment and transfer of rights: The insured receives the full sum insured; the remaining goods and the rights against third parties pass to the insurer.
- Salvage and recourse: The insurer can recover part of its outlay by selling the remaining goods and can take recourse against the responsible party.
Why might the insurer reject the abandonment?
An insurer that accepts abandonment may take over not only the goods but also the liabilities attached to them, such as wreck removal, destruction, environmental clean-up or port storage. For this reason, insurers often pay total loss compensation but decline to take over ownership of the goods. In that case, the goods and the related costs remain with the insured; the parties need to clarify this point in writing.
Why is it rare in practice?
The vast majority of losses in logistics are partial: crushing, wetting, short delivery. Abandonment is seen mostly with ship casualties, major fires, prolonged seizures or cargo that has been salvaged but has no economic value left. In ship salvage operations, general average comes into play first; the two concepts should not be confused.
Common mistakes
- Selling or destroying damaged goods without the insurer's approval. Article 1471 of the TTK prohibits changes that would make it harder to establish the loss, except with the insurer's consent or for the purpose of mitigating the loss.
- Delaying the notice of abandonment while waiting for the survey report.
- A sum insured in the policy that is below the actual value of the goods; even in a total loss, payment is limited to the sum insured.
For high-value cargo, the scope and amount of cover should be clarified before transport within the framework of cargo insurance.