Indemnity Insurance

Apr 4th, 2016 | By | Category: Indemnity Insurance

Indemnity Insurance

Indemnity is a compensation made by one party to another in event of loss or damages. It can also be referred to as exemption from liability for damages in the legal sense.

The concept of indemnity depends on the contractual agreement when one party takes on the obligation to pay for any damage or loss that might be incurred by another individual. The duty to indemnify and the right to indemnity arise from a contractual agreement that protects individual against loss, liability or damage.

Private sector workers are entitled to indemnity as clearly stated by the Labor Law 6/2010. According to Dr Jarfour, a worker who has spent ten years with his employer will receive one month salary for each year while the total indemnity should not be more than 18 months.

How is your Indemnity Computed?

When the labor relationship between an employer and private sector worker ends, the worker is entitled to an indemnity which will be computed as follows:

  • A worker who receives wages on daily basis will be entitled to an indemnity of ten days in the first five years. This number will gradually increase to fifteen days after the worker have put in 5 years of service.
  • A worker who receives monthly salary will get fifteen days indemnity in the first 5 years and it increases to one month after the initial 5 years.
  • A employer who resigns without completing at least 3 years with an employer is not entitled to an indemnity.
  • However, in a situation where an employee have already worked between 3 and 5 years with a particular employer before resigning, he will be entitled to half of the indemnity. Assuming he completes 5 to 10 years, he will be paid 2/3 of the indemnity.
  • An employee would be paid his full indemnity if he completes 10 years of work before resigning. The full indemnity is one month salary for every year he spent with the employer at work according to Article 51 of labor Law in the private sector.

How Indemnity is Calculated Depending on the Basic Salary?

The following examples below will show you how your indemnity will be calculated when you have decided to resign from your job.

Question: I have worked with my firm for seven years, how much indemnity money will I be entitled to if I resign today?

According to the Labor Laws for private sector; an employee shall receive a fifteen days remuneration for every of the first 5 years of service, including one month remuneration for each year thereafter.

First Scenario

If an employer decided to sack a worker or he decided against renewing the contract of a worker after it has expired, then the employee should get full end of service benefit indemnity.

Example:

Here is how your end of service benefit indemnity will be calculated when you have worked for ten years with $500 salary

1st 5 years: 15 days x 5 = (75 days/26 days) = 2.88 months.

The following 5 years: 1 month x 5 = 5 months

Total months = 2.88 + 5 = 7.88 months

Total Service Benefit = 7.88 months x $500 = $3940

Second Scenario

When a worker resigns just after three to five years of working, he will be entitled to half of the end of service benefit indemnity.

Example

Your end of service benefit indemnity will be calculated like below if you resign after working for 4 years with $500 salary.

Total months = 15 days x 4 (60 days/26 days) = 2.3 months

Total Service Benefit = 2.3 months x $500 = $1150/2 =$575

Third Scenario

When a worker resigns after just working for more than five years but less than ten years, the worker shall receive two-third of the end of service benefit indemnity.

Example

Your end of service benefit indemnity will be calculated like below if you resign after working for seven years on $500 salary.

1st 5 years: 15 days x 5 = (75 days/26 days) = 2.88 months

The following 2 years: 1 month x 2 = 2 months

Total Months = 2.88 + 2 = 4.88 months

Total Service Benefits = 4.88 month x $500 = $2440 x 2/3 = $1626.66

Difference between Indemnity Contract and Guarantee Contract

Below are some of the major differences between the “indemnity Contract” and the “Guarantee Contract”.

  • According to Section 124 of Contract Act, an indemnity is a contract between two parties in which one party takes it on himself to save the other party from loss caused to him by the conduct of the promisor himself or by conduct of any other party while section 126 of Contract Act defines a “Guarantee” as a contract to perform the promise or discharge the liability of a third party in case of his default.
  • There are two party involved in indemnity; the indemnifier and indemnified. However “contract of guarantee” has three parties which are creditor, debtor and surety.
  • In the contract of indemnity, the contract of the liability of the indemnifier is primary whereas it is secondary when we talk about the guarantee of liability of surety since the primary liability is of the debtor.
  • The major objective of indemnity contract is to save the other person from loses while in guarantee contract, the major objective is to give the creditor the assurance that either the contract will be performed or liability will be paid.
  • The liability arises when the contingency occurs in the contract of indemnity while the liability is already in existence in the contract of guarantee.

What is the movie “Double Indemnity” about?

Double Indemnity is a movie that takes a look at how humans beings respond to different life situations and how we always to manipulate situations to suit our needs irrespective of who got harmed.

Double Indemnity is a 1944 film noir, written by Wilder and Raymond Chandler and directed by Billy Wilder. The movie was nominated for seven Academy Awards and was named by the American Film Institute in 2007 as the 29th greatest film of all-time.

The film throws light at one of the types of insurance frauds that is obtainable in recent times. In the movie, the insurance salesman connived with his client (a housewife) to kill her husband and make a claim for his accident insurance policy from which they hope to receive large amount of money. The insurance agent motivated by greed, come up with a plan to get twice the amount of money as a result of double indemnity clause in the policy which states payment of double indemnity in case the death is ruled accidental.

Double Indemnity (the movie) throws a light at insurance fraud and in some way shows how getting an indemnity contract can go a long way to help alleviate the pains of a family in difficult times.

As a freelancer, why should you be aware of indemnity clauses?

The freelance industry is a booming industry especially since the arrival of internet in every home. Most freelancers don’t give second thought before signing any contract thrown before them just to get a work. Most companies normally would have indemnification clause in their contract which holds you legally responsible for any damage, losses, or expenses that comes as a result of your work.

As a freelancer, you need to be aware of indemnity clauses about the content of your work and the company that you are submitting your work to. In fact, the freelance market is somewhere between uninsured and underinsured. This implies that an average freelancer can be sued whether he can be able to afford the cost of defending himself or not. You can lose your house, cars and other properties if you are sued because of your content while the company that host the content fails to protect you from this loss.

Before submitting your work to any company as a freelancer, you must be aware on indemnity clauses by the company to protect freelancers. The company normally would require you sign a contract with which they have right to sue you if you fail to abide by the content of the contract.

Here are examples of such contract:

Huffington Post: If you violate any of the Blogger terms, or we receive an inquiry or complaint about your post, you agree that you are responsible, and you agree to indemnify and hold harmless Huffington Post for all resulting claims and liabilities. This agreement is governed by New York law, and if we have a dispute about it, or about any content that you submit to us, the dispute will be resolved only in the courts of New York. We may provide you notices about the Huffington Post Blogger Program and these terms by e-mail. These terms make up the entire agreement between you and us and cannot be changed unless we agree to it in writing. Source poynter.org

Philadelphia Inquirer: You agree that you will be the sole author of the works transferred to PNI, which will be original works of authorship by you, free of plagiarism. You agree to use reasonable care to ensure that all facts and statements in the transferred works are true and that they do not infringe upon any copyright, right of privacy, proprietary right, right of publicity or any other right of a third party. Source poynter.org

 Conclusion

As a freelancer, you should try and negotiate an indemnity with a publisher before accepting the work. If he refuses to negotiate, thank him for his time and look somewhere else. Some indemnity clause in contract can ruin your career as a freelancer is you fail to negotiate it with the parties responsible.

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