Where does indemnity collide?

The rule that an insurance payout returns the insured to the financial position held just before the loss, and no further, so that a valid claim makes good a real loss but is never allowed to become a source of profit. Noussia's 2007 The Principle of Indemnity in Marine Insurance Contracts sets out how this measure of recovery is calculated and how it separates a contract that restores a loss from one that simply pays a fixed agreed sum. The referent is a ceiling on how much a covered loss can recover, a valuation rule inside a paid policy, not a promise between contracting parties, a statute forgiving past wrongs, or a payment squeezed from a beaten nation.[1]

Unit

One insured loss, valued up to but not beyond the pre-loss position

Recovery means

The insured is put back to the pre-loss position, no higher, and any over-payment is corrected

Measured by

Assessed by valuing the actual loss and deducting betterment and salvage, capped at the sum insured

A clause by which one party agrees in advance to carry a loss or liability that would otherwise fall on another, so that if a defined event happens the indemnifier must make good the other party's loss directly. Courtney's 2014 Contractual Indemnities explains how such a promise works as a primary obligation, owed whether or not anyone else is at fault, which marks it off from a guarantee, where a party only answers for a third party's default. The referent is a private allocation of risk written into an agreement, a promise that shifts a burden between two parties, not a limit on an insurance payout, a law excusing officials, or reparations after a war.[2]

Unit

One contractual promise to answer for a defined loss or liability

Recovery means

Not applicable

Measured by

Read from the wording of the clause: the events covered, the losses included, and any caps