Abandonment Clause

What is 'Abandonment Clause'

An abandonment clause in a property insurance contract, under certain circumstances, permits the property owner to abandon lost or damaged property and still claim a full settlement amount. If the insured party's property cannot be recovered, or the cost to recover or repair it is more than its total value, it can be abandoned and the insured party is entitled to a full settlement amount.

BREAKING DOWN 'Abandonment Clause'

The abandonment clause typically comes into play with marine property insurance, such as boats or watercraft. If a property owner's ship is sunk or lost at sea, the abandonment clause affords the owner the right to essentially "give up" on finding or recovering his or her property and subsequently collect a full insurance settlement from the insurer.

The Legal Definition of Abandonment 

For property to be abandoned, two things must occur. First, the owner must take action that clearly shows that he or she has given up rights to the property. Secondly, the owner must show intention that demonstrates that they have knowingly relinquished control over it.

In other words, an owner must take clear, decisive action that indicates they no longer wants his or her property. Any act is sufficient as long as the property is left free and open to anyone who comes along to claim it. Inaction—that is, failure to do something with the property or non-use of it—is not enough to demonstrate that the owner has relinquished rights to the property, even if such non-use has perpetuated for years. For instance, a farmer's failure to cultivate his or her land or a quarry owner's failure to take stone from his or her quarry, for example, does not equate to legal abandonment.

A person's intention to abandon property may be established by express language to that effect or it may be implied from the circumstances surrounding the owner's treatment of the property, such as leaving it unguarded in a place easily accessible to the public. The passage of time, although not an element of abandonment, may illustrate a person's intention to abandon his or her property.

Various types of property can be abandoned, such as personal and household items, or also contracts, copyrights, inventions and patents can be abandoned. Certain rights and interests in real property, such as easements and leases, can also be abandoned. For example, consider a farm owner that gives a fellow farmer an easement to use a path on their property so that the sheep can get to a watering hole. The shepherd later sells his flock and moves out of the state, with no intention of returning. This conduct demonstrates that the shepherd has abandoned the easement, since he stopped using the path and intends never to use it again.