This Clause corresponds to Cl. 19-13 but is simplified in accordance with the general rule in Cl. 4-1.
In the event of total loss, cf. Cl. 18-90, the insurer covers the sum insured, but not in excess of the insurable value, cf. Cl. 18-88.
According to Cl. 18-88, the insurable value is defined as the original contract price with any deductions or additions and the value of the owner’s deliveries including existing vessel or MOU. If the assured wishes to insure all of the elements mentioned, they must be declared to the insurer and included in the agreed sum insured. If a sum insured has been agreed at the inception of the insurance and notice of additional work is later given to the insurer, the assured must also ensure that the sum insured is increased correspondingly. The same goes for owner’s supply. If not declared, the sum insured may be lower than the insurable value at the time of loss. This will according to Cl. 2-4 constitute under-insurance. However, the wording of Cl. 18-89 does suggest that in case of total loss the full sum insured shall be paid if the sum insured is lower than the insurable value. This means that the proportion rule in Cl. 2-4 shall not apply.
Likewise, the assured must ensure that the sum insured is reduced in the event of deductions resulting from parts of the work not being carried out. If this is not done, the sum insured will be higher than the insurable value, and the compensation will be limited to the insurable value. This rule corresponds with the rule on over-insurance in Cl. 2-5. In that event, the assured will have paid premium on a larger sum insured than he can recover under the insurance.
In the event of a total loss before the Project is completed, the sum insured will normally be higher than the insurable value and the compensation will be limited to the insurable value calculated according to Cl. 18-88, sub-clause 2. The calculation of the insurable value if this is the case is commented on in more detail under Cl. 18-88, sub-clause 2.
If the insurer pays total loss compensation pursuant to Cl. 18-89, he has a right to take over the title to the Project including any undamaged components or materials, cf. Cl. 5-19, sub-clause 1. The insurer can therefore utilize the residual value that the Project or the components or materials may have after the damage triggering the total loss compensation. If the assured should find it expedient to complete the Project after having received the total loss compensation, he cannot utilise any residual values or undamaged components or materials unless the insurer agrees. Normally, it would be in the insurer’s interest to come to agreement with the assured on an appropriate reduction in the compensation payable in consideration for leaving the title to any residual values or undamaged components or material with the assured.