Restitution in Kind (Naturalrestitution)
Restitution in kind is the reinstatement of the condition that would have existed absent the damaging event, as opposed to indemnification through a pure monetary payment.
Concept
In the law of damages, restitution in kind refers to the principle whereby the party causing the damage must restore the condition that would have existed absent the damaging event – generally through the actual repair or reinstatement of the damaged item rather than a mere monetary payment. Under German law, this principle is enshrined in Section 249 of the Civil Code (BGB) and forms the baseline rule of the general law of damages.
Relevance in Property Insurance
In property insurance, restitution in kind is regularly reflected in a contractually agreed option or obligation for the insurer to settle the claim through actual repair or replacement (indemnity in kind) rather than paying the corresponding monetary amount to the policyholder; this is of particular practical relevance in motor own-damage insurance with contractually designated repair shops.
The Injured Party’s Right of Election
Under the general principles of the law of damages, the injured party generally remains free to demand the monetary amount required for reinstatement instead of restitution in kind (the so-called right of substitution); in motor claims handling practice, this leads injured parties frequently to settle on the basis of an expert appraisal rather than proving the actual repair, provided the amount claimed does not exceed the demonstrated repair cost.