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Report No. 21

8. Abandonment-effect of subsequent acts at the insurer as change of circumstances.-

The law as to the rights of the assured when there is constructive total loss as enacted in the English Act of 1906 requires, in our opinion, to be clarified. Under that law, when there is a constructive total loss, the assured may abandon the subject-matter and treat the loss as if it were an actual total loss.

Two questions arise with reference to this provision. The first question is, is it open to the insurer thereafter to salve the subject-matter, and claim that the assured could recover only on the footing of a partial loss? It is settled law that he cannot.1 That is because the election of the assured to treat the loss as total constructive loss has the effect of transferring the title to the insurer.2 The English Act is silent on this question, obviously because the law was not in doubt. We have considered it desirable that it should be made explicit.

1. Vide Blairmore Sailing Ships Co. v. Macredie, 1898 AC 593 (607); Halsbury's Laws of England, 3rd Edn., Vol. 22, p. 156, para. 302, and Amould (1954) Vol. 2, Article 1126.

2. Vide Chalmers Marine Insurance Act, 1906, 5th Edn., p. 91.

9. The other question arising on this topic is as regards "ademption" in case of total loss. When the subject-matter of insurance is seized by a third person and the assured is deprived of possession thereof, he can elect to treat it as constructive total loss. That might happen, for example, when a ship is seized by enemies or pirates. But if after the assured has elected to treat it as a constructive total loss and before he sues to recover the damages, the subject-matter is got back and the insurer is able to deliver possession thereof to the assured, can that be pleaded as a defence to the action on the policy by the latter? According to the common law of England, that is a valid defence, and the right of the assured is only to recover for partial loss.

But that is not the law in Scotland or the Continent or the United States. The English Act of 1906 is silent on this question, and there has been a difference of opinion as to whether under the Act, the common law of England as to ademption has been changed.1 We think that the position should be made clear, and in agreement with the law of Scotland, of the Continent and of the United States, we have provided2 that the right of the insured to recover for total loss should not be affected by events subsequent thereto.

1. Vide Halsbury's Laws of England, Vol. 22, p. 159, para. 308, and the cases cited in foot note 8. See also Arnould, (1954) Vol. 2, pp. 1000-1001, Article 1096 et seq.

2. See App. 1, clause 62(2).

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