Indemnity Principle Law and Legal Definition
Indemnity principle is a rule of insurance law which says an insurance policy should not confer a benefit greater in value than the loss suffered by the insured. It is a basic principle of insurance law, absent bad faith on the part of the insurer, an insured is entitled to compensation only for losses actually suffered.
Under the indemnity principle of insurance, an insured receives only that amount that will indemnify actual loss, not an additional windfall above this amount. [Fireman's Fund Ins. Co. v. Holland Am. Line-Westours, Inc., 25 Fed. Appx. 602 (9th Cir. Wash. 2002)]