When does an insurer have the option of keeping the salvage property?

• A. If the insured has been fully indemnified
• B. Whenever they choose
• C. Under any circumstances
• D. Only in cases of total loss

Answer: (A)

An insurer has the option of keeping the salvage property if the insured has been fully indemnified. This means that once the insurer has compensated the policyholder for their loss, the insurer is entitled to the salvage, which is any remaining property that can be recovered or salvaged after a loss event.

The principle behind this practice is rooted in the idea of indemnity. Indemnity is designed to restore the insured to the financial position they were in prior to the loss, without providing a profit from the insurance claim. If the insurer pays the full value of the loss, they assume ownership of any remaining value in the damaged property. Keeping the salvage allows the insurer to mitigate their loss by selling the salvageable item and recouping part of the amount they paid out for the claim.

This practice is not arbitrary or at the discretion of the insurer at all times. There are specific conditions under which the insurer may retain salvage. For instance, if a claim is settled at an amount less than the actual cash value (ACV) of the damaged asset, the insurer may not have the right to claim the salvage, as they have not fully indemnified the insured.

In cases of total loss, while insurers often retain salvage, it is not exclusively limited