Institute Replacement clause

The Institute Replacement Clause was formalised in 1934 (modified in 2008), years before the insuring ICC came into being in 1982. Why? Marine practitioners realised that insuring a manufactured mechanical, electrical or electronic machine comprising of many identifiable parts was totally different from insuring any other commodities.

In the absence of this clause, following a damage to a part(s) of a machine, the insured could claim a Total Loss citing that without the damaged part(parts), the machine was not the same as earlier I.e Loss of specie. By incorporating this clause, the insurer gets the right to pay only the cost of repair/ replacement of the damaged part(s) plus labour charges, freight and customs duty, if covered. Total liability will anyway be restricted to the sum insured of the machine.