There is a fuller version here that might help, although it is not quite the same situation:
http://www.schumachercargo.com/shipping-insurance.html
Repair and Replacement Clause:
The insurer shall be entitled at its sole option to replace, with like kind and quality, or repair any article damaged (whether wholly or in part), or to pay cash, in any event not exceeding the insured value thereof. ...
It sounds American to me, so there are native speakers and real natie speakers ;-)
I think the expression is intended to cover what is often a statutory right for the consumer, in the EU at least, but it is shortened down so much here that it is not clear!