Indemnity

The term “indemnity” was traditionally used to refer to an amount of compensation that must be paid from one person or entity to another as compensation.  It was used as a sum exacted by the winner of war as one of the many conditions of peace. 

What does indemnity really mean?

To “indemnify” someone means to pay them for their losses.  But, it can also be an exception to legal liability for someone who was at fault in an accident.  The most common example is when someone has insurance for virtually anything. 

For example, if someone slips and falls on your property, then you have a contract with the insurance company to pay for the victim’s damages.  Your insurance company has an obligation, based on your insurance policy with them, to pay the victim, so you don’t have to. 

A contract for indemnity is one that involves one party paying for potential losses or damages caused by the other party.  You pay premiums to get this type of coverage, and the insurance company is expected to step in and pay for any losses that occur. 

How does indemnity work in an insurance contract?

For the insurance company’s obligation to indemnify to apply, the incident involved must meet a series of requirements.  These requirements may include things like:

• The incident happened within a coverage period
• You must meet specific notice requirements
• Deductibles or coinsurance must be paid
• The injury must fall into particular categories (such as a wind damage claim under homeowners insurance)
• The incident cannot include fall into any exceptions listed in your insurance policy

The basic premise of every insurance contract is that the insurance company agrees to pay you or someone else if certain conditions apply. 

Some insurance contracts will still indemnify others if you are at fault for the loss, especially if lawsuits are common in that particular area.  Examples include:

• Errors and omissions insurance (E&O)
• Malpractice insurance (which is common in the medical field)
• Most health insurance policies

In a car accident case, most auto insurance policies will only pay the other party if you are completely or partially at fault for a collision. 

What else do indemnity contracts cover?

Insurance contracts that require indemnification also cover costs associated with those claims.  Those costs may include:

• Court costs
• Attorney fees
• Settlement amounts
• Verdicts obtained at trial

Most insurance companies will limit the amount of coverage that you can use in a particular situation.  For example, an auto insurance policy may have a limit that applies per accident and per person.  The insurance company will only provide indemnification up that specific dollar amount.  Those limits usually only apply to settlements or verdicts, but they can occasionally refer to the cost of defense as well. 

Because insurance is so commonly involved in personal injury cases, John Foy & Associates knows the ins and outs of most standard coverages.  We can help you determine what you should and should not be paying after an incident that involves insurance coverage.  Learn more by contacting our team.  Fill out the form to your right or call us at 404-400-4000 to get your FREE consultation today.