What is Indemnity?

“Indemnity” refers to an undertaking by one party to compensate another party for certain costs and expenses (collectively, “Losses”) by operation of law or contract.

What Does Indemnity Actually Mean?

If you are required to “indemnify” someone, you may be required to pay them for the losses they’ve incurred. Conversely, in the context of insurance, indemnity may serve as a backstop for legal responsibility for the insured party. 

By way of example, if someone were to trip and fall on your property, you may be required to compensate the injured party for their losses. However, if you have applicable insurance coverage (i.e., homeowners insurance, general or professional liability insurance), your insurer may be obligated, under the terms of your applicable insurance policy, to compensate the injured party for their Losses, thereby reducing or eliminating your indemnity obligations as the policyholder.

In an Insurance Contract, How Does Indemnity Work?

In order for the insurer to fulfill its duty to indemnify the policyholder, the incident in question must first satisfy a number of prerequisites. The following are some examples of these requirements:

  • The event took place during the applicable coverage period
  • You must meet specific notice requirements
  • Deductibles or coinsurance must be paid
  • The damage must correspond to one of several predetermined categories (such as a wind damage claim under homeowners insurance)
  • The incident in question cannot qualify for any of the exclusions that are specified in your insurance policy

Every single insurance policy is based on the fundamental assumption that the insurer has made the commitment to pay out either you or another party if certain criteria are met.

Even if you are at fault for the loss, certain insurance policies will still indemnify others for their Losses. Examples include:

  • Automotive Insurance
  • Homeowner’s Insurance
  • Errors and Omissions Insurance
  • Malpractice Insurance
  • Most Health Insurance Policies

In the event of a car accident, the majority of auto insurance policies will not pay the other party any money unless it can be proven that the policyholder was wholly or partially responsible for the collision.

What Other Things Do Indemnity Agreements Cover?

Insurance policies that call for indemnification may also pay for the expenses related to those claims. These costs may consist of the following:

  • Court Costs
  • Attorney Fees
  • Settlement Amounts
  • Verdicts Obtained at Trial

Most insurance providers will place a cap on how much coverage you can utilize in a given circumstance. An auto insurance policy, for instance, might have a cap that applies to both accidents and individuals. The insurance provider will only offer compensation up to that particular dollar amount. Although they occasionally refer to the cost of the defense, those limits typically only apply to settlements or verdicts.

Because of the frequency with which insurance is involved in cases involving personal injuries, our law firm is familiar with the ins and outs of the majority of the standard coverages. After an incident that involves insurance coverage, we are able to assist you in determining what you should be paying and what you should not be paying for through the resolution of your case.

Contact the Personal Injury Lawyers at The Brown Firm

If you have been injured, the experienced personal injury attorneys at The Brown Firm offer free consultations to accident victims in Georgia and South Carolina. To learn more, call 800-529-1441 to speak with our personal injury team today!

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