Marine insurance: constructive total loss

Under the Marine Insurance Act 1906, where a vessel has been damaged the amount recoverable by the assured depends upon whether there is a total loss (in which case the assured receives the sum insured) or a partial loss (in which case the assured recovers reasonable repair costs). Non-marine law draws a sharp distinction between damage that can be repaired (partial loss) and damage that cannot be repaired (total loss), whereas marine law alone recognises an intermediate possibility of loss that is repairable but not worth repairing (constructive total loss).

If damage does qualify as a constructive total loss, the assured can recover the full sum insured by serving a notice of abandonment. If the notice of abandonment is not served, the assured is held to recovery for a partial loss. Connect Shipping Inc and Another v Sveriges Anfgartygs Assurans Forening (The Swedish Club) and Others [2016] EWHC 1580 (Comm) raises questions as to the service of a notice of abandonment and also the distinction between partial loss and constructive total loss.