The Principle of Indemnity in Insurance Law

Abstract

The principle of indemnity, as one of the most fundamental principles in damage insurance contract is thematic and has a broader subject area than the concept of damage in civil liability.  Methodology: This is the principle underlying the two effects: first, due to this principle, the policy holder is obligated to compensate a damage that has been resulted due to the occurring a coverage event on the property of the policy holder in the property insurance and on the people in the insurance of liability. Results: Thus, A defining characteristic of insurance, providing that a loss payment will replace what is lost, putting the insured back to where it was financially prior to the loss without rewarding or penalizing the insured for its loss. In fact, based on this principle, the resulted damage should be compensated totally and ideally. This is known as “positive aspect.” Secondly, the compensation should not lead to the increase in the assets of the victim and it should not be turned into a benefit source for the injured party (the negative aspect). Anyway, although this principle has two different approaches, positive and negative, applying it requires the judicial precedent rely on the positive aspect, unless the contrary is approved. Conclusion: This is a binding principle of damage insurance contracts that insurers are obligated in administering it to compensate the actual loss (assessed) of the victims according to the contents and conditions of issued policy up to maximum insurance obligations. In insurance law approved in 1361, legislator has employed the word “damage” in 15 articles out of 36 articles (1,7,13,10,14,15,16,19,20,21,22,23,28,29, and 30) indicating that damage is highly important in insurance law.