Constructive total loss occurs when ...

Constructive total loss occurs when ...

• A. Salvage is not possible
• B. It would cost more to salvage than the cargo would be worth
• C. There is minor damage but not total
• D. Salvage rewards exceed value

Answer: (B)

Constructive total loss happens when recovering or salvaging the damaged cargo would cost more than the cargo is worth. In that case, it’s treated as a total loss for settlement purposes even though the property isn’t physically destroyed, because the expense to salvage would erase or exceed the value of the cargo. The insured may abandon the cargo to the insurer and be paid the insured value. This is the best answer because it directly reflects the economic trigger for a constructive total loss. The other scenarios don’t fit: salvage being impossible points to a total loss by other means; minor damage isn’t total; and salvage rewards exceeding value would make salvage worthwhile, not a constructive total loss.

Constructive total loss happens when recovering or salvaging the damaged cargo would cost more than the cargo is worth. In that case, it’s treated as a total loss for settlement purposes even though the property isn’t physically destroyed, because the expense to salvage would erase or exceed the value of the cargo. The insured may abandon the cargo to the insurer and be paid the insured value. This is the best answer because it directly reflects the economic trigger for a constructive total loss. The other scenarios don’t fit: salvage being impossible points to a total loss by other means; minor damage isn’t total; and salvage rewards exceeding value would make salvage worthwhile, not a constructive total loss.