The Collaborative International Dictionary of English v.0.48:

Damnify \Dam"ni*fy\ (d[a^]m"n[i^]*f[imac]), v. t. [LL.
   damnificare, fr. L. damnificus: cf. OF. damnefier. See
   Damnific.]
   To cause loss or damage to; to injure; to impair. [R.]
   [1913 Webster]

         This work will ask as many more officials to make
         expurgations and expunctions, that the commonwealth of
         learning be not damnified.               --Milton.
   [1913 Webster]

Bouvier's Law Dictionary, Revised 6th Ed (1856):

DAMNIFY. To cause damage, injury or loss.