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The Indemnity Principle: From A Financial To A Function Paradigm, Brad Wilson, Jeffrey E. Thomas

Faculty Works

Although the indemnity principle is well-accepted, its customary meaning has not kept up with insurance practice. This paper explores the evolution of the indemnity principle in the context of property insurance in the United States. When property insurance was standardized in the 19th century, "indemnity" had a strict, financial meaning. An insured was only entitled to receive actual cash value for a loss, less depreciation. This ensured that insureds received a financial recovery equal to the value of their property prior to the loss. This approach to indemnity was developed in the context of concerns about the morality of insurance, …