On Principle Of Indemnity In Marine Insurance Law

Principle of indemnity suggests that the insurer is under an obligation to reimburse the insured for the actual loss from the covered risk and an insured is entitled to be restored, subject to the terms and conditions of the policy, to the financial position enjoyed immediately before the loss. Principle of indemnity is the foremost principle of marine insurance law which threads through the whole marine insurance legal system. In addition to close relevance it bears to other principles of marine insurance law, especially principle of insurable interest, principle of indemnity is also the foundation of many important rules such as the rule of subrogation, abandonment, double insurance and contribution. In English law principle of indemnity is not an independent policy but a consequence of the public policy against wagering, while in China it is a corollary of principle of equity and the rule of unjust enriching prohibition. The effects of principle of indemnity is to prevent the insured from profiting from a covered loss and reduce moral hazard, thus principle of indemnity is contributable to the normal operation of insurance system.Within contemporary Chinese insurance legal framework and combined with insurance laws of western developed countries, this paper mainly studies the definition and related systems of this principle. It consists of five parts.Part one introduces general theory of principle of indemnity. Based on definitions of loss, indemnity and principle of indemnity, this paper explores the relation between principle of indemnity, damages and unjust enriching prohibition. Then it analyzes the relation between principle of indemnity and other basic principles in marine insurance law.Part two analyzes the application of this principle in the context of co-insureds. This author discusses the rationale for three different opinions in common law system, and puts forward further improvement.Part three explores the right of subrogation and abandonment.Part four discusses another important rule that derives from principle of indemnity, i.e. multiple insurance. Multiple insurance can be divided into double insurances andconcurrent insurance . This paper discusses some problems arising from double insurance and concurrent insurance.Part five is conclusion. In this part, this author makes some suggestions as to the improvement of principle of indemnity in Chinese insurance law and maritime law.Based on above researches, this paper argues that principle of indemnity is the foremost principle of marine insurance law. Although the principle may be less compelling, it still has utility and is of continuing importance. Contract of marine insurance is a type of contract of indemnity, but not a perfect contract of indemnity. Contracts of marine insurance by no means always result in full indemnity in practice, but indemnity is always the basis of the contract.The effect of principle of indemnity is to a great extent dependent upon interpretations of marine insurance contract, which can be easily seen in the context of co-assureds. Furthermore, principle of indemnity is not self-contained, the implementation of which entails supports of other basic principles of marine insurance law such as principle of insurable interest, principle of proximate cause and principle of utmost good faith.Analysis of different elements of this principle in different jurisdictions shows that there are many common areas of interpretation while a few issues are subject to different interpretations in these jurisdictions. Of particular importance are the distinctions as to insurable interest, subrogation and double insurance. It is suggested that each jurisdiction should learn from others in handling of these issues. Harmonization of these divergences will enhance efficient operation of marine insurance mechanism. So far as China is concerned, comparative analysis points up the fact that the provisions on principle of indemnity are greatly in need of updating and amending.