Indemnity Flashcards
Is indemnity an expressed, implied or written term
Implied
Define indemnity
To put somebody back in the same place as they were before the loss had ever occurred (less any excess). Nobody can profit from the loss.
Who does indemnity protect?
The insured and insurer
What are the insurers obligations to the insured under indemnity?
They must compensate the insured to put them back to the same position as they were at the time of the loss
First-party claim
Damage happens to your property so you claim off your insurance
Third-party claim
You cause harm and as a result, somebody else sues you and an insurer pays out.
Who is indemnity between
Insured and the insurer only
Does insurance payout for pain and suffering?
no
What policies do indemnity not apply to
Life and health
What case sets precedent that an insured can an insured cant profit from a loss
Castillion v Preston
What statute defines indemnity
MIA
Where does indemnity apply
Policies with an agreed value
Liability policies
Where does indemnity not apply
Life and health insurance
Where the real and actual value of the goods cant be recovered (no emotional value)
Limits of indemnity
Max the insurer will pay out, not the sum received
Sum insured
The rebuild value/replacement value of the property as specified by the insured in the contract.
Valued policy
No fluctuation in the value of the item insured (doesn’t account for depreciation), if it’s destroyed then the face value is paid out
What are the 3 methods of indemnity
- Reinstatement cost
- Cost equivalent
- Market value
Reinstatement cost
The cost to rebuild or replace the item
In reinstatement cost how do insurer ensure that the insured doesn’t profit
They deal directly with the vendor.
Betterment
When the loss occurs and the replacement/rebuild needs to be upgraded to reach a new standard, then the insurer needs to bring it back up to code.
Cost equivalent
Provide you with EXACTLY what you lost
In cost equivalent how is value assessed?
Value = buy cost-depreciation
New for old
A clause in the contract that gives you a new item if the old one is destroyed
Market value
When it is damaged beyond repair then you get a cash amount to the value of the item at the moment of its loss
