Legal Definitions - deduction for new

Deduction for new refers to the principle that old materials apply towards payment of the new in marine insurance. In case of a partial marine-insurance loss, the value of old materials is deducted from the total repair expenses. From the remaining balance, one-third of the cost of repairs is deducted and charged against the insured shipowner. This principle is also known as new-for-old.

• Suppose a ship's hull is damaged in a storm, and the cost of repairs is $10,000. However, the ship's owner had used old materials in the hull's construction, which have a value of $2,000. Therefore, the insurer will deduct $2,000 from the repair expenses, leaving a balance of $8,000. From this balance, one-third of the cost of repairs, i.e., $2,666.67, will be deducted and charged against the insured shipowner.
• In another example, suppose a car is damaged in an accident, and the cost of repairs is $5,000. However, the car was old and depreciated, and its actual cash value was only $3,000. Therefore, the car owner can only recover $3,000, which is the amount necessary to restore the car to its pre-accident condition.

The above examples illustrate how the principle of deduction for new applies in different scenarios. In marine insurance, the insurer deducts the value of old materials from the repair expenses, and then charges the insured for one-third of the remaining cost of repairs. In the case of a damaged car, the owner can only recover the amount necessary to restore the car to its pre-accident condition, instead of acquiring a new car.