Claims Lab
Property All Risks
Hypothetical training case
Warehouse fire meets the average clause
How might average or underinsurance affect a partial-loss settlement?
Incident
A warehouse declared at OMR 4 million has an actual reinstatement value of OMR 7 million. An insured fire causes OMR 2 million of damage.
Coverage question
How might average or underinsurance affect a partial-loss settlement?
Relevant clause
Average / underinsurance and reinstatement-value conditions.
Insurer argument
The premium was based on only 4/7 of the required value, so the insured should bear the same proportion of the loss.
Insured argument
The declared basis, valuation date, inflation allowance, policy tolerance, and item-by-item application must first be established.
Indicative analysis
On a simple proportional illustration, OMR 2m × OMR 4m ÷ OMR 7m produces about OMR 1.143m before any deductible, limit, salvage, reinstatement condition, or other adjustment. The actual result depends entirely on the wording and valuation evidence.
Practical lesson
Commission current reinstatement valuations, include freight and duties, test peak stock, and understand whether average applies by item, location, or programme.