The Fundamental Principle of Indemnity in Law and Its Significance to the Law of Natural Justice
Opening Epigraphs
"No better, no worse — the essence of indemnity is restoration, not enrichment."
— Fame Agidife, TheLegalLens
"Compensation is just when it restores, but unjust when it rewards."
— Adapted from classical legal maxims
Indemnity:
What is Indemnity?
The principle of indemnity is a cornerstone of modern legal systems. Its core idea is simple: a person who suffers a loss should be restored, as nearly as possible, to the position they were in before the loss occurred.
This principle is most visible in insurance law, tort claims, and contract disputes. In insurance, for example, indemnity ensures that a claimant receives "no better, no worse" compensation. This means the insured cannot profit from their loss; they are simply compensated to the extent of their injury or damage.
Indemnity is not confined to financial damages alone. Courts can also award material compensation, restitution of property, or declaratory reliefs—all aimed at restoring the victim to their prior condition.
1. Indemnity and Natural Justice: The Link to Fairness
The principle of indemnity strengthens the law of natural justice by ensuring fairness and equity in legal remedies.
Fairness: A person who has been wronged should not be left uncompensated, as this would offend the natural justice principle of fairness.
Equity: At the same time, compensation must not exceed the loss. This would amount to unjust enrichment—which is equally offensive to the principle of fairness.
Illustration: If a car accident destroys a vehicle worth ₦5 million, indemnity ensures the victim receives compensation to cover that value. Paying less would deny justice; paying more would create an unfair windfall.
Thus, indemnity transforms the moral demand of audi alteram partem ("hear the other side") into material justice. The victim is not only heard but their loss is also equitably redressed.