2 ADJUSTINGTODAY.COM An “impairment of recovery rights” clause may allow an insurer to avoid paying on a loss if the policyholder has impaired salvage recovery by any act or agreement after sufering a loss. So, a hasty decision to dispose of damaged property could have serious consequences. Commercial property insurance policies typically have explicit provisions for how the value of salvage is to be factored into the settlement of a claim. For all but very small losses, salvage value is usually estimated by professional salvors who undertake a comprehensive survey to determine the extent of damage and the cost of repair (if practical), and the cost to move the property (if required) from the loss location to another site for restoration, storage and/ or sale. Commercial insureds need to be prepared for several issues that may arise during this process. For example, whose responsibility is it to separate damaged from undamaged property, the policyholder or the salvor? This can be an especially costly undertaking if hazardous substances are involved or if damage at the insured location makes it hard to access the property. While professional salvors can help with the logistics of salvage disposal, they cannot help with disputes that arise over insurable interests in the property. Damaged goods destined for sale may not be owned outright by the insured but held under contract for purchase or sale, or on consignment from the owner. For various reasons, any one of the parties in such an arrangement may not want the salvage to be sold at all. Among other things, no vendor likes to have their products ofered in a “fre sale.”What’s more, markeddown salvage items that are functionally equivalent to their “brand new” counterparts can dilute brand value and market demand for the “real thing.” Salvage sales can also lead buyers to question the cost and value of new items. For these and other reasons commercial insureds are well-advised to know their rights and obligations regarding treatment of salvage, before a loss occurs. For all but very small losses, salvage value is usually estimated by professional salvors who undertake a comprehensive survey to determine the extent of damage and the cost of repair (if practical), and the cost to move the property (if required) from the loss location to another site for restoration, storage and/or sale.
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