158) Discuss the role of insurance, especially compulsory insurance, and how it relates to
Answer: This is a little more difficult, requiring that students understand that tort law is
based on finding one party at fault and requiring that party to pay the damages. Insurance,
on the other hand, is based on the principle of sharing the risk. Students should discuss
the disadvantage of torts placing overwhelming and ruinous financial liability on one
party, and how insurance can avoid that outcome. This leads to compulsory insurance,
especially in motor vehicle cases, and the introduction of no-fault systems. Students
could also discuss the requirement of insurance for professionals.
Topic: Ch. 5 - Insurance
Objective: Chapter 5: 9. Describe the four types of insurance businesses commonly need.
159) Explain what is meant by an “insurable interest” and how the existence of this
principle impacts on the right to collect on an insurance claim.
Answer: Discussion: One of the most important aspects of insurance law is the
requirement that the person taking out insurance have an insurable interest in the thing
insured. Students should demonstrate an understanding of what an insurable interest is
and why it is so important. The insurable interest requirement is simply that it be clear
that the person purchasing insurance coverage will lose something if the insured against
event happens. Thus, when the insurance is paid, there is no windfall to the person taking
out the insurance; rather, there is simply compensation for a loss. Otherwise, it would be
like gambling. You place a wager that the house in question will burn down, and when it
does, you win. Of course, you don't win, and the insurance is just a way of spreading the
risk; however, if you could insure something you didn't have such an interest in, such as
your neighbour's house, you could get a windfall, and it would be like gambling.
Students must first show they understand this and then could explain how insurable
interest works in different situations. Where you have an interest in property and insure it,
you can collect only what you can lose (to the limit of that interest). Where life insurance
is involved, the extent of the interest is assumed to be the amount of insurance coverage