Double recovery: Overview, definition and example
What is double recovery?
Double recovery occurs when a party receives compensation for the same loss or damage more than once. This can happen if a person or business claims and collects damages from multiple sources for the same incident. Double recovery is generally not allowed, as it would result in unfair enrichment. In legal disputes, courts typically aim to prevent double recovery by ensuring that any compensation paid is not duplicated.
Why is double recovery important?
Double recovery is important because it helps maintain fairness in legal and financial matters. Allowing one party to receive compensation more than once for the same harm can lead to an unjust outcome. For businesses and individuals, preventing double recovery ensures that compensation is fair and equitable, without overcompensating or penalizing the wrongdoer.
Understanding double recovery through an example
Imagine a business suffers damage due to a supplier’s breach of contract. The business receives compensation from its insurance company for the loss. However, the business also sues the supplier for the same loss and wins additional damages. If the business receives both the insurance payout and the lawsuit damages, that could be considered double recovery, as they are receiving compensation twice for the same damage.
Another example might be an employee who is wrongfully terminated and receives severance pay from the employer. If the employee then successfully sues the employer for wrongful termination and also receives compensation for lost wages, they could be in danger of double recovery, as both payments cover the same lost income.
Example of a double recovery clause
Here’s how a double recovery clause might look in a contract:
“In the event of a claim or dispute resulting in compensation, the claimant agrees that they will not seek or accept more than one payment for the same loss or damage from any source, including but not limited to insurance, third parties, or other remedies.”
Conclusion
Double recovery can undermine fairness in legal and financial agreements, and it’s important to ensure that any compensation received is not duplicated. By understanding double recovery and including appropriate clauses in contracts, businesses and individuals can avoid this issue and ensure that the compensation process is fair and just.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.