What outcome would likely result if a piece of machinery is partially damaged in a fire under an indemnity policy?

Under an indemnity policy, the principle is to restore the insured party to the same financial position they were in before the loss occurred, without providing profit or advantage. When machinery is partially damaged in a fire, the most appropriate option aligns with this principle by indicating that repairs will be covered while also considering the depreciation that has occurred over time—often referred to as wear and tear.

In the context of an indemnity insurance policy, it is standard practice to account for depreciation when determining the costs associated with repairs. As such, the insurer will assess the extent of the damage, deduct any depreciation reflective of the machinery's condition prior to the loss, and then reimburse the insured for the repair costs after considering this depreciation.

This approach ensures that the insured does not benefit from the claim but instead is compensated fairly for the necessary repairs to restore functionality, making option C the most accurate outcome based on the terms of an indemnity policy. This option reflects the operational essence of indemnity, balancing the need for compensation with fair treatment regarding value depreciation.