Abandonment Clause

Under certain conditions, an abandonment clause in a property insurance contract allows the property owner to abandon lost or damaged property while still claiming the full settlement amount.

If the insured party's property cannot be recovered, or if the cost of recovering or repairing it exceeds its total value, it may be abandoned, and the insured party is entitled to the full settlement amount.

Understanding Abandonment Clauses

The abandonment clause is most commonly found in marine property insurance, such as boats or watercraft.

If a property owner's ship is sunk or lost at sea, the abandonment clause allows the owner to effectively "give up" on finding or recovering their property and receive a full insurance settlement from the insurer.

The Legal Definition of Abandonment 

An owner must take decisive action indicating that they no longer want their property. Any act is sufficient as long as the property is left free and open for anyone to claim.

Inaction—that is, failure to do something with the property or non-use of it—is not sufficient to establish that the owner has relinquished rights to the property, even if such non-use has persisted for years.

A farmer's failure to cultivate their land, for example, or a quarry owner's failure to take stones from their quarry, do not meet the legal abandonment standard.

A person's intention to abandon property may be established by express language to that effect, or it may be implied by the circumstances surrounding the owner's treatment of the property, such as leaving it unguarded in a public place. Although time is not an element of abandonment, it can indicate a person's intention to abandon their property.

Personal and household items, as well as contracts, copyrights, inventions, and patents, are examples of property that can be abandoned. Certain real estate rights and interests, such as easements and leases, can also be abandoned.

Consider a farm owner who grants a fellow farmer permission to use a path on their property so that the sheep can reach a watering hole. The shepherd later sells their flock and leaves the state, with no plans to return. This behavior demonstrates that the shepherd has abandoned the easement because they have stopped using the path and have no intention of using it again.