The concepts "agreed total loss" and "compromised total loss" do not exist under the Plan, even though they are often used in practice. If the assured is not entitled to total loss compensation under Chapter 11, he was previously not entitled to any compensation unless the vessel was actually repaired, see Cl. 12-1. If the vessel was sold, the assured as seller could claim compensation for unrepaired damage, see Cl. 12-2. Cl. 12-2 was amended in the 2007 version so that the assured may opt for cash compensation for unrepaired damage at the expiry of the insurance period.
However, these provisions do not prevent the assured and the hull insurer from reaching an agreement on "total loss compensation" in cases other than when the assured is entitled to compensation pursuant to Chapter 11 or Cl. 12-2. Such agreement would, in reality, be an agreement for compensation for unrepaired damage. In certain circumstances, such an agreement may be to both parties' benefit. That may be the case if the vessel is not a constructive total loss but the sum of the estimated repair costs and the value of the damaged vessel exceed the market value of the repaired vessel. It would benefit both parties if the insurer paid the assured the difference between the market value of the repaired vessel and the value of the vessel in damaged condition. The insurer would save money as compared with paying the repair costs. On the other hand, the assured may recover the equivalent to the market value of the vessel in repaired condition if he sells it in damaged condition plus receives the aforementioned compensation from the insurer. It goes without saying that the assured will not accept such a compromise if he believes that he will earn more by trading the repaired vessel in the market. He will then benefit from getting the actual repair costs covered by the hull insurer.