Claims paid by insurers in the event of a loss is irrecoverable when the?

A. average clause is applied
B. sum insured has been exhausted
C. sum insured has not been exhausted
D. payment is an ex gratia basis

Correct Answer: Option A

A. average clause is applied

Explanation

Average Clause: Is an insurance policy that restricts the amount payable to a sum not to exceed the value of the property destroyed and that bears the same proportion to the loss as the face of the policy does to the value of the property insured