Salvage: Dealing with Damaged Inventory After a Loss

ADJUSTING TODAY

...demnified. If the insured sells the salvage for $30,000, the insured would recover a total of $80,000 for their $100,000 inventory loss.

Note that sometimes time is of the essence and it may be necessary to salvage the inventory for the benefit of both the insured and the insurer. Proceeds are subsequently allocated once the claim is adjusted.

Unfortunately, dealing with salvage is not al- ways a clear scenario. As stated above: “The difficult part is establishing the accurate salvage value of damaged goods.” To make the best decisions for your business, you need to know your market, consider all available options, understand your policy language regarding salvage and know how the insur- ance company views and handles salvage.

The Professional Salvage Dealer

The handling of goods or salvage after a loss does not necessarily mean just the removal of the inventory from the damaged location. A professional salvage dealer (salvor) is usu- ally hired by the insurance company and is paid a commission for their services. Salvors are used primarily on commercial losses where quantities are greater and higher val- ues are involved. Salvors can also be hired by self-insureds as well as by underinsured owners. Therefore, salvors do not exclusively work for insurance companies and regard- less of who hires them they attempt to be a neutral third party between the insurance company and the insured.

The salvor’s job is to determine the value of the damaged property. They report their opinion of the property’s “net value” after all handling and moving expenses are calcu- lated. Additionally, a salvor’s duties can be multifaceted and may include one or more of the following operations:

The Value of Salvage

At the time of the loss a salvor may or may not have an immediate buyer for the goods. That one factor will have a big impact on the salvage value of the goods to be considered in the loss claim adjustment.

Many things can affect the value of salvage. The following are some considerations an insured and an insurance company may have when observing damaged goods for the purpose of determining if there is any potential salvage value:

1. Insurable Interest

To make the best decisions for your business, you need to know your market, consider all available options, understand your policy language regarding salvage and know how the insurance company views and handles salvage.


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