After paying a $40,000 total loss claim on a commercial vehicle, the insurer takes title to the damaged vehicle and sells it for $6,000 salvage. What is the insurer's net loss on this claim?

Why this is the answer

Salvage is the value recoverable from damaged or destroyed property after a total loss settlement. Once an insurer pays a total loss claim, title to the property (or what remains) transfers to the insurer by operation of the indemnity principle. The insurer then sells the salvage and retains those proceeds to reduce its net loss. Net insurer cost = $40,000 paid − $6,000 salvage = $34,000. The insured cannot keep both the full claim payment AND the salvage, because that would create a profit and violate the principle of indemnity. The insured's obligation is to transfer title promptly upon receipt of the total-loss payment. See FL Outline §II — loss valuation including salvage.