What Is an 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.

Key Takeaways

  • An abandonment clause in a property insurance contract, under certain circumstances, permits property owners to abandon lost or damaged property and still claim a full settlement. 
  • If the insured party's property cannot be recovered, or the recovery or repair costs are more than its total value, it can be abandoned, and the insured party is entitled to a full settlement.
  • The abandonment clause typically comes into play with marine property insurance, such as boats or watercraft. 
  • To meet the legal definition of abandonment, an owner must take clear, decisive action that indicates they no longer want their property.
  • Inaction is not enough to demonstrate that the owner has abandoned the property, even if non-use has perpetuated for years.

Understanding Abandonment Clauses

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 their property and subsequently collect a full insurance settlement from the insurer.

The Legal Definition of Abandonment 

An owner must take clear, decisive action that indicates they no longer want their property. Any act is sufficient so 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 their land or a quarry owner's failure to take stones from their quarry does not meet the standard for legal abandonment.

A person's intention to abandon property may be established by their 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 their property.

Various types of property can be abandoned, such as personal and household items; but 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 who 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 their flock and moves out of the state, with no intention of returning. This conduct demonstrates that the shepherd has abandoned the easement since they stopped using the path and never intend to use it again.