Page 28 - The Insurance Times February 2026

insurancepe: Series

Salvaging the

Salvage

Dr K. Rajagopal Reddy
PhD, FIII, FCII (UK), FLMI (US), FT
Chartered Insurance Practitioner
Topspot Insurance Broking Pvt. Ltd.

When I run over libraries, persuaded of the principles of Indemnity and Salvage, what havoc must
I make? If I take in my hand any volume of insurance or the decided case laws for instance, allow
me to ask, does it contain any information of definition of Indemnity and Salvage? No. Does it
contain any explanation giving reasoning concerning Indemnity and Salvage?

I RDAI's website has just the below information about Sal- The question therefore arises as to when did the client agree
vage:
to hand over to the insurer the wreck of a car or any ma-
"In case of claims under various types of insurance poli- chinery or any other property once the claim is settled on
cies, the partly damaged goods or the wreck of a car or any Total Loss Basis? Nowhere in the proposal forms, nor in the
machinery or any other property settled on Total Loss Basis policy conditions it is stated if "the client agrees to hand over
is known as "Salvage". After settling the claim for the full the wreck of a car or any machinery or any other property
amount, the salvage becomes the property of insurance once the claim is settled on Total Loss Basis". This is what
company." our present understanding of "Salvage" is.

While THE INSURANCE ACT, 1938 says nothing about Salvage. The phrase "once the claim is settled on Total Loss Basis"
shall mean once indemnity is paid. This brings us to the
And THE MARINE INSURANCE ACT, 1963 - RIGHTS OF IN- question what is Indemnity? How is Indemnity paid?
SURER ON PAYMENTS Section 79. Right of subrogation -
reads as follows: What is Indemnity?
Indemnity is compensation for loss or injury so that the af-
"(1) Where the insurer pays for a total loss, either of the fected person is placed in the same financial position as
whole, or in the case of goods of any apportionable part, of before the accident. He will be neither worse nor better off.
the subject-matter insured, he thereupon becomes entitled
to take over the interest of the assured in whatever may Insurable interest must be calculable in financial terms since
remain of the subject-matter so paid for, and he is thereby this would represent the amount lost in the event of dam-
subrogated to all the rights and remedies of the assured in age or loss. Obviously, one cannot put a value on one's own
and in respect of that subject-matter as from the time of life or limb and therefore these policies are not subject to
the casualty causing the loss." the doctrine, but all motor, property and liability policies are.

The Insurance Times February 2026 25