Mark incurred $8,000 damage to his car in an accident. He received $8,000 from his insurance and $4,000 from the other driver's company. By receiving a profit from the loss, Mark could be in violation of:

The principle of indemnity is fundamental to insurance and holds that an insured party should not profit from a loss but should instead be restored to the position they were in before the loss occurred. In this scenario, Mark incurred an $8,000 loss due to damage to his car and received $8,000 from his own insurance. Additionally, he received $4,000 from the other driver's insurance, totaling $12,000 in compensation.

By receiving this total amount, Mark ends up with a financial gain of $4,000, which means he is profiting from the accident rather than merely being restored to his prior financial condition. This situation violates the principle of indemnity because it aims to prevent insured individuals from receiving more than their actual loss, ensuring fairness in the insurance system and protecting against moral hazard. Thus, the correct answer relates directly to this principle.