This is an odd duck of an obsolete legal term. The verb damnify means to physically damage or injure (from Latin, ultimately from a form of damnum, harm/injury -- which ultimately is, yes, the source of the all-purpose intensifier damn, originally meaning to condemn to punishment), so you might think that damnification would be the act of damnifying. But no -- in legal terms, it's the agent of damnifying. So, yeah, odd duck. It's also odd in that I don't have a usage example that it's three yards long and stuffed with more legal jargon than you can shake a turkey leg at. So ... yeah.