Document Type

Article

Disciplines

Insurance Law

Abstract

From its early eighteenth-century beginnings, modern insurance law has been governed by what can be described as a "non-responsibility" requirement: the insured cannot recover for losses that it caused through its own misbehavior. Although this principle might seem intuitive-you should not be able intentionally to burn down your own home and then get paid for it-scholars continue to debate both the range of the principle's application and its underlying rationale. Current theories of the requirement tend to argue that instrumental goals, such as the minimization of moral hazard or the maximization of victim compensation, ought to determine whether an insured can get coverage for its own bad acts. Yet these approaches fail to describe insurance law as it currently exists. This Article advances a new framework that corrects this deficiency. The framework identifies two distinct elements of the "non-responsibility" requirement: (1) the insured must have had substantial control over the act that caused the loss; and (2) the insured's act must be something that is generally regarded as inherently wrong, rather than merely prohibited. When an insurer can demonstrate both elements, coverage is almost always disallowed. In making this argument, the Article aims to explore and articulate insurance law's internal logic, rather than study it from the perspective of an external discipline. There are multiple benefits to this approach. First, it more accurately describes insurance law as it exists today, as well as its historical evolution. Second, it provides a normatively attractive account of the "non-responsibility" requirement's central role in contemporary insurance law. Finally, the internalist theory of insurance law can help us better predict and justify extensions of private insurance-law concepts into vital policy areas such as healthcare and unemployment.

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