Salvage: Dealing with Damaged Inventory After a Loss

ADJUSTING TODAY

The “food chain” in the salvage market for canned food is quite extensive. The salvage market for food items can pass through many different hands before being acquired by the final consumer.

Brands and Labels Endorsement

An insured that manufacturers or sells famous brand goods or highly recognized labels may not be able or even allowed to sell items that are marred, damaged or otherwise not in perfect condition. Such entities should consider a Brands and Labels endorsement to their insurance policy. Insurance policy terms and conditions for Brands and Labels will vary from one policy to the next, but basically Brands and Labels coverage is a means of protecting insured damaged goods bearing a particular name, brand, trade- mark, or marking, from being sold, distrib- uted, or even given away. There may even be financial consequences of doing so.

A Brands and Labels endorsement can affect the value of salvageable goods directly and indirectly. A well-known brand item will generally have a higher salvage value than a lesser-known brand. The salvage value of that well-known brand will be considerably reduced if the labels or other markings have to be removed from the items before they can be salvaged or even disposed of.

The cost of removal of such brands and markings are generally covered in a Brands and Labels endorsement. The insured’s claim should include the cost to remove the brand or label from the item in addition to any cost to repair it. The cost to obliterate such labels and markings is covered even if the damaged goods are worthless and must be disposed of.

A loss to designer suits presents a good example for this coverage. A large quantity of name brand suits with a value of $1,500 each were exposed to smoke as a result of a fire. Fortunately the suits were not burned but did retain an odor of smoke. The insured did not want smoke damaged suits with their brand name sold as distressed goods in the “salvage market.” Their Brands and Labels endorsement covered the cost to have the labels removed.

Without the brand name the suit is less valuable, however, the insurance company’s salvor found a buyer and sold them for $500 each. This situation again reduced the payout by the insurance company and, at the same time, removed the brand name off of the suits to protect the policyholder.

To make sure the label removing process is done satisfactory, the insured may choose to remove the labels themselves or supervise the insurance company’s label removal operation as discussed above. The cost to do so is also usually covered by the Brands and Labels endorsement.

In instances where a label is cut out altogether, it is known to be a damaged second . If a label is simply cut through, but left on the article it is a second . If a label is blackened out as with a Sharpie, it is a first quality item that has suffered some sort of damage. There are also area restrictions...


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