Exceptions to the principles of indemnity in insurance

The purpose of the insurance contract is to restore the insured to the same financial condition he was in at the time of the loss subject to the application of deductible, depreciation and average clause. The total sum insured serves as a cap to the potential liability of the insurer and not the amount the insurer will pay in case of a loss. The amount of the indemnity is subject to evaluation by the insurer in order to determine the actual extent of loss of the insured. If an insured has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the insured shall be entitled to recover the deficiency from the person causing the loss or injury. ​(See New Civil Code of the Philippines, Article 2207)

Enumeration of  some of the exceptions to this principle.

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​Valued policies  like life insurance and insurance of paintings. Under this type of policy,  the amount of liability of insurer is pre-determined. In the case of Personal Accident, they refer to a Schedule of Indemnity.

Penal or forfeiture bon,  Under these types of bonds, a default will result in the forfeiture of the face amount of the bond. The said amount is not necessarily the amount of damages suffered by the Obligee.

​Replacement cost insurance, As general rule, the amount of settlement shall be based on the depreciated or sound value of the insured property. In replacement cost insurance, the amount of settlement is based on the cost to replace the damaged property.


Credit: The work prepared by scholastic saidy contributor of legusc and a student at Moshi cooperative university (Mocu) 


REFERENCE
1. www.Wikipedia.com

2. legalcareerpath.com
3. Manual book on insurance prepared by Mwakisiki E. Mwakisiki