What principle is violated if an insured profits from a loss?

The principle that is violated when an insured profits from a loss is the Principle of Indemnity. This principle is foundational to insurance and ensures that the insured is restored to their financial position before the loss occurred, without making a profit from the insurance payout.

When a loss occurs, the goal of insurance is to reimburse the policyholder for the actual loss suffered, thereby preventing circumstances where the insured might have an incentive to cause a loss, as they would benefit financially in excess of their original position. Therefore, if an insured receives more in compensation than the actual loss incurred, it undermines the essence of indemnity, which seeks to avoid any form of gain from losses covered by insurance.

The other principles mentioned, such as Cooperation, Insurable Interest, and Utmost Good Faith, serve different purposes within the insurance framework. Cooperation emphasizes the need for policyholders to assist in claims processes; Insurable Interest relates to the requirement that policyholders have a legitimate interest in the insured item; and Utmost Good Faith involves the obligation of both parties to act honestly and disclose material facts. None of these directly address the issue of profiting from a loss, which is specifically related to the Principle of Indemnity.