Legal & Jurisdiction
Indemnity
Indemnity is the principle that insurance restores the insured to their pre-loss position (no better, no worse) and it is the foundation subrogation rests on.
Because indemnity means a policyholder should not profit from a loss, any recovery from a third party belongs, up to the amount paid, to the insurer that made the policyholder whole. Subrogation is how the principle of indemnity is enforced in practice.