What is the effect of an election by an insurer under the indemnity clause of a policy where the insurer elects to replace a damaged or partially destroyed building with a replacement plan?

The effect of an election by an insurer under such a clause is to replace a contract of indemnity with a new contract for replacement. In Brown v. Royal Ins. Co. (1859), 1 E. & E. 853, 120 E.R. 1131, the defendant insurers, having elected to reinstate premises partially destroyed by fire, refused to do so when the Commissioners of Sewers for the city of London subsequently required the balance of the structure to be torn down and replaced as well. In ruling for the plaintiffs, Lord Campbell C.J. said at pp. 858-59: … The case stands as if the policy had been simply to reinstate the premises in case of fire; because, where a contract provides for an election, the party making the election is in the same position as if he had originally contracted to do the act which he has elected to do.