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Report No. 21

Clause 64

General.-This deals with the effect of abandonment.

On abandonment, the interest of the assured in whatever remains of the subject-matter is transferred to the insurer, including all proprietary rights incidental thereto. Further, he is entitled to any freight in the course of being earned (less certain expenses). Lastly, he is entitled to a reasonable remuneration for the carriage of the goods subsequent to the casualty causing the loss.

Abandonment and subrogation.-The distinction between abandonment and subrogation can be understood by a reference to the provisions of the section relating to subrogation.1

"Is entitled."-Where there is valid abandonment, then under the English Act, the insurer "is entitled" to take over the interest of the assured. He is, however, not bound to do so. The question has arisen in England whether the ship or other subject-matter insured becomes res-nullius on abandonment if the insurer does not take over the property.2 It is considered that the insurer should have an option to take over; he should not be placed under a legal obligation to do so Hence no departure from the English Act is necessary. The change proposed will make the position clear.

[It appears that in the United States of America,3 if the underwriter after the abandonment takes possession of the vessel and repairs her and returns her to the insured, it constitutes an acceptance of abandonment; but it has also been held that the underwriter may, without accepting an abandonment take and repair a vessel and return her to the insured if the expenses of the repair are not sufficient to constitute a constructive total loss. But if the expenses exceed such amount, the insured cannot be required to retake the property. If the insured does not accept the return of the vessel and thereafter finds the repairs insufficient, he can recover the cost of additional repairs. The insured may impose reasonable conditions to be complied with before he can be required to accept the vessel.

It has been held in the U.S.A.4 that abandonment when made relates back to the time of the loss and the underwriters become vested as from that date.]

1. See section 79 of the English Act-clause 80 and notes thereto.

2. See Chalmers, p. 97.

3. 45 Corpus Juris Secundum, Insurance, p. 115, para. 965, left-hand column.

4. 45 Corpus Juris Secundum Insurance, p. 116, para. 965, left-hand column,-"Relation back."

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