What does Indemnity Mean?
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Indemnity is the legal philosophy upon which the
concept of most insurance policies rests. Strictly speaking,
indemnity is protection from loss and damage claims filed
by another person. For example, the owner of an amusement
park may have indemnity insurance to compensate visitors
injured on his or her property. The eventual insurance
payout would be enough to restore the injured person back
to the financial state he or she was in before the accident,
but nothing more. Only a legal lawsuit brought against
the park owner could result in additional damages if legislation
of a particular jurisdiction allowed such. Indemnity insurance
protects the holder from suffering financial loss due
to a lawsuit.
The principle behind indemnity is a financial restoration to a level just before the
accident or injury or illegal act. Most laws concerning civil court actions also use
indemnity as a measuring stick for damages. If a plaintiff is entitled to compensation for
the actions of the defendant, the amount awarded should only bring him or her back to a
state of wholeness. Whatever actual losses were suffered would be repaid, but punitive
damages would be a separate matter.
Many people encounter indemnity situations and don't even realize it. Many rental
agreements contain an indemnity clause which prevents the customer from suing the rental
agency for damages caused by use of the equipment. Leases for apartments may also contain
indemnity clauses which limit claims against the owners in case of accidents. Whenever a
ticket is purchased for a sporting event or concert, part of the condition of admission is
an indemnity agreement between the ticket-holder and the venue itself. If an errant
football strikes a fan or a faulty pyrotechnic display burns a concert-goer, the indemnity
agreement protects the stadium or hall from a major lawsuit.
Even if the word 'indemnity' is nowhere to be found on a document, there may be an
agreement to 'indemnify' another party. This means that you agree not to hold someone else
responsible for any accidents or injuries you may suffer while on his or her property.
"Swim at your Own Risk" signs at an unguarded swimming pool are indicators of an
implied indemnity. If you choose to swim and suffer a head injury from diving, you may not
be able to sue the owner of the swimming pool for medical expenses. If you understood the
sign's meaning at the time, you agreed to indemnify the owners. Sometimes an indemnity
claim will hold up in court proceedings, but not always. Claiming indemnity from damages
does not always mean protection from liability. A property owner may still be responsible
for injuries on his property, even if the renter signed an indemnity clause as part of the