Legal Definitions - marine rule

The marine rule is a principle used in insurance that states that if the cost of repairing damaged property is more than half of the value of the property before the damage occurred, then the property is considered to be completely destroyed.

This rule was originally developed for ships that were insured under marine insurance policies. However, it has also been applied to other types of property, such as buildings.

Suppose a ship is insured for $1 million and is damaged in a storm. The cost of repairing the ship is estimated to be $600,000. According to the marine rule, since the cost of repairs is more than half of the value of the ship before the damage, the ship is considered to be a total loss. The insurance company would then pay out the full $1 million to the owner of the ship.

Similarly, if a building is insured for $500,000 and is damaged in a fire, and the cost of repairs is estimated to be $300,000, the building would be considered a total loss under the marine rule. The insurance company would then pay out the full $500,000 to the owner of the building.

These examples illustrate how the marine rule is used to determine whether damaged property should be considered a total loss or if it can be repaired. If the cost of repairs is too high, it is more cost-effective to consider the property a total loss and pay out the full value of the insurance policy.