The rules relate to the amounts that an insured is entitled to receive from his or her policy in case a loss occurs; the central concept here is that of indemnity, which, simply put, requires the insured to receive full compensation for his or her losses, without being overcompensated. The principles of insured interests guarantee that compensation paid is no greater than the loss, thus discouraging a policyholder from making a profit on his or her losses. Right at the heels of the insurable interest doctrine, the insurable interest doctrine goes on to further explain that the purpose of the insurance contract is not to profit. This principle keeps an insured from making a profit from losses, and it secures a greater social good.
The insured is protected against losses through the doctrine of compensation, but by provisions that keep him or her from being in a position to cheat and profit. The principle of indemnity guarantees that the insurance contract will protect and pay for you in case you suffer damage, loss, or harm. The principle of indemnity is designed to place the insured person (in case of a loss) back into the same position they were in just before that event. Under the Principle of Mitigation, an insured is required to take reasonable steps to minimize the damage or loss to the insured person or property.
Under that principle, once an insured, i.e., an individual, has been compensated for losses suffered by the insured in respect to the insured subject, which is covered, ownership rights of such property are transferred to the insured, i.e., to the corporation. Under the subrogation principle, once compensation has been provided to the insured on the subject matter, the insurance company gets all rights against a third party. Subrogation is a crucial principle for individuals injured by third-party Third parties, as their insurer may assume title to them and assure the responsible party is the one to pay the damages. If you fail to try to minimize your damages, believing you will get compensation no matter what, your insurance company may be able to show you violated the minimization-of-loss principle and violated the duty of good faith.
The proximate cause doctrine says an insurer is liable only for losses if the losses are caused by the proximately occurring peril specified in your insurance policy. The Proximate Cause Principle states that proximate or close causes must be taken into account to determine liability. When the property is uninsured for all forms of loss, the nearest cause is at the forefront. The doctrine of the insured's interest is the key that assures a high degree of good faith under many assurance contracts. The basic principle is that both parties in an insurance contract must behave with good faith toward one another, that is, they should give plain and simple information regarding the terms and conditions of the contract. The law does not permit you to be irresponsible or act in negligence simply because you know that you are covered.
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