Indemnity Is the ALIGNED Term of The Day

Indemnity Is the ALIGNED Term of The Day

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Indemnity def: Restoration to the victim of a loss up to the amount of the loss.

Indemnity Explained

Indemnity is often used as a synonym for compensation or reparation. All three can be construed as obligations to act on an injured party’s behalf given the occurrence of a contractually-specified event. However, indemnity as a legal concept has a much broader meaning than the other two terms; namely, an indemnity is to make a party to a contract “whole” again should that contractually-specified event occur.

While the event may be specified by the contract, the actions that must be taken to compensate the injured party are largely unpredictable, and the maximum compensation is often expressly limited.

Car insurance is an example of indemnification. A car owner may purchase different kinds of insurance to indemnify him for various kinds of loss arising from operation of the car, such as damage repairs to his own car, or medical expenses of others for which he is liable due to being at fault for an accident.

It is in the breadth of the insurance carrier’s obligations that we see the application of an indemnity; in other words, an indemnity is a “generalized promise of protection against a specific type of event by way of making the injured party whole again.”

An indemnity should also be differentiated from a guarantee. A guarantee is the promise of a third party to honor the obligation of a party to a contract should that party be unable or unwilling to do so (usually a guarantee is limited to an obligation to pay a debt). This distinction between indemnity and guarantee was discussed as early as the eighteenth century in Birkmya v Darnell.[1] In that case, concerned with a guarantee of payment for goods rather than payment of rent, the presiding judge explained that a guarantee effectively says “Let him have the goods; if he does not pay you, I will.” See Source 

Ultimately ALIGNED believes insurance is not about winning or losing, profits or losses.  It’s about indemnity and helping put someone else back in the position they were in prior to a loss or put another way:  Indemnity Explained –  A contractually-specified event being the responsibility Of A Party To A Contract.  Contact Us Today To Learn More or connect with us at
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