Which of these settlement features is an exception to the principle of indemnity?
Explanation
Indemnity aims to restore the insured to the same financial position as before the loss and no better, and an actual cash value settlement does exactly that by subtracting depreciation. Replacement cost pays for new property without that deduction, so the insured can end up better off, making it a recognized exception. Subrogation and coinsurance support indemnity rather than defeat it, one by preventing a double recovery and the other by policing the amount carried.
This topic, taught in full in the California Property & Casualty Broker-Agent guide. California Property & Casualty Broker-Agent Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
Practice all 531 questions free — no signup required.
Own the complete California Property & Casualty Broker-Agent guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A commercial applicant does not mention an earlier fire loss that a court found was deliberately set, and the application does not ask about it. Failing to volunteer that fact is:
- On a commercial application, how does a warranty differ from a representation?
- A company sells its warehouse in March but leaves the property policy in force, and the building burns in June. The claim fails because insurable interest in property must exist:
- After a water loss, an insured signs a release of the plumbing contractor that caused it, then files the claim. The insurer may:
- An adjuster accepts a late proof of loss, inspects the damage and negotiates for weeks, then denies the claim because the proof was late. The insurer is most likely barred by:
- A producer has no written power to bind a certain commercial line, but has bound it for years while the insurer accepted the business and paid commissions. A court would most likely find:
Last reviewed: · editorial process