Wen owned a fabric-making business. The building and its contents were

QUESTION

Wen owned a fabric-making business. The building and its contents were valued at $500,000. Wen also owned the property on which the building sat. It was valued at an additional $200,000.

When the building was struck by lightning and burned to the ground, Wen’s insurance company sent him a check for $500,000. Wen wrote to the insurance company, saying it owed him the additional $200,000. Wen was right.
Indicate whether the statement is true or false.

ANSWER

Answer: FALSE
Explanation: The principle of indemnity states that insurers will not pay the insured more in damage claims than the dollar loss actually sustained. Because the property was not damaged and Wen could rebuild on it if he wanted to, the insurance company did not have to pay him the extra $200,000.