Constructive total loss

A constructive total loss differs from an actual total loss in that the insured property still exists: it is simply beyond economic recovery. The test is financial rather than physical, and it is worked out by comparing the value of the property once saved against the salvage, towage, repair and reinstatement costs that would have to be incurred. English law sets the threshold at the insured value and requires a notice of abandonment, while French law uses a three quarters threshold to open abandonment, a gap wide enough to make two adjustments of the same casualty diverge. The classification sets off a heavy chain of consequences: the underwriter pays the insured value, becomes owner of the wreck, and then bears the removal cost, which can run to several times the indemnity paid. The problem solved is the casualty where persisting with repair would cost more than replacement, and where leaving the assured sole judge of when to give up would invite abuse.

The car carrier Golden Ray, which capsized in the Brunswick channel in Georgia on September 8, 2019 with 4,161 vehicles aboard, was declared a constructive total loss: the wreck removal, carried out by cutting the hull into eight sections and completed in October 2021, exceeded 800 million dollars, far beyond the value of the ship.

CTL, perte totale réputée