Recently, I had to use the insurance concept of "indemnification" to save a marriage. Ok, that might be an overstatement but I did use it to settle a dispute. A teenage daughter had parked a car, gone into a local shop, and then someone backed into her. The parents of the girl got an estimate for the damage, which was $1500. The party that had done the damage had their insurance company pay the $1500 to the family. Pretty straight forward, right? Then the wife suggested that since it was an old car and the dent was not causing any trouble, they should use the $1500 to make some needed mechanical repairs. The husband felt that this was unethical and that the money should be used to fix the dent. This is where I come in. I explained that the wife was not being unethical at all. The insurance company has a duty to "indemnify" the injured party. "Indemnify" means to "make whole". In this case, the insurance company had a duty to make the injured party financially whole by paying them the amount of their assessed loss. They had fulfilled that requirement. In this type of loss there is no requirement that the owners of the auto "repair or replace" anything. They had been paid what was owed and the insurance company had fulfilled their side of the contract. What was done with the money is of no consequence here.
Sometimes the indemnification part of an insurance contract is upsetting to people. Usually it is in the case of a property loss in which the client loses something that had a large sentimental value. That special painting of your mother that means so much to you because she recently passed away, does not make the painting more valuable to the insurance company. They can only pay for financial loss irrespective of any emotional attachments.
In any case, indemnification is a legal term that is part of an insurance contract. If you need assistance knowing how this legality will affect you, please reach out to us at 877-352-2121 by phone, or via email at service@clark-mortenson.com.
