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Published online by Cambridge University Press: 02 January 2018
Recent government proposals seeking to the reform of the law of gambling are likely to have unintended consequences for the law of insurance. This paper considers the likely impact of the judicial enforcement of wagers on the divisions between insurance and gambling and, in particular, the doctrine of insurable interest.
1. Baker ‘On the Genealogy of Moral Hazard’ (1996) 75 Tex L Rev 237 at 246.
2. See Clark ‘Embracing Fatality through Life Insurance in Eighteenth-Century England’ in Baker and Simon (eds) Embracing Risk: The Changing Culture Of Insurance and Responsibility (London: University of Chicago Press, 2002).
3. Hereafter, the DCMS. See http://www.culture.gov.uk.
4. Draft Gambling Bill HL Paper 63-1, HC 139–1 (London: HMSO, 2004)
5. Specifically, the Gaming Act 1710, s 1; the remaining provisions of the Gaming Act 1835; the Gaming Act 1845, s 18; the Gaming Act 1892, s 1; and amendments to the Financial Services and Markets Act 2000, s 412(1).
6. Clause 258 will empower the Gambling Commission to declare a bet void where it appears to be ‘substantially unfair’.
7. There is surprisingly little discussion of the proposed private law changes in either the explanatory notes accompanying the Bill, or the other preparatory materials. See Budd Gambling Review Report Cm 5206 (London: HMSO, 2001) and Department for Culture, Media and Sport A Safe Bet for Success (London: HMSO, 2002).
8. In the insurance context, see Clarke, Insurance of Wilful Misconduct: the Court as Keeper of the Public Conscience’ (1996) 7 Google Scholar ILJ 173.
9. See Illegal Transactions: The Effect of Illegality on Contracts and Trusts (Law Corn no 154, 1999).
10. See Da Costa v Jones (1778) 2 Cowper 729 at 736; 98 ER 1331 at 1335 where Lord Mansfield refused to enforce wagers as to the sex of the Chevalier D'Eon on the grounds that ‘the present case is indecent in itself, and manifestly a gross injury to a third person; therefore, ought not to be endured’.
11. This class of contract includes other arrangements specifically related to risk. See Kreitner ‘Speculations of contract, or how contract law stopped worrying and learned to love risk’ (2000) 100 Col LR 1096.
12. Kent v Bird (1777) 2 Cowper 583 at 585; 98 ER 1253 at 1253, per Lord Mansfield, ‘a policy of insurance is, in the nature of it, a contract of indemnity, and of great benefit to trade. But the use of it was perverted by its being turned into a wager’.
13. See Carlill v The Carbolic Smoke Ball Co [1892] 2 QB 484 at 490–491, per Hawkins J (wagering) and Prudential Insurance Company v Comrs of Inland Revenue [1904] 2 KB 658 (insurance).
14. The Marine Insurance Act 1745, s 1 declared regulated policies without an interest ‘null and void to all intents and purposes’ and the Life Assurance Act 1774, s 1 followed suit, but under s 2 of the 1774 Act policies that fail to name the beneficiary are unlawful. The Marine Insurance Act 1906 makes wagering policies void.
15. The insured, underwriters and brokers involved may commit offences. The author can find no reported prosecutions under this Act. Such prosecutions require the consent of the Attorney-General, and his office has confirmed that it has no record of this consent being granted. See Moran v Lloyd's [1983] 1 Lloyd's Rep 51 at 54–55 for allegations that would have fallen within the 1909 Act had they concerned marine and not aviation insurance.
16. A representative sample would include Harnett and Thornton ‘Insurable Interest in Property: A Socio-Economic Re-evaluation of An Economic Concept’ (1948) 48 Col LR 1 162 and Inglis v Stock (1884–85) LR 10 App Cas 263, HL.
17. Kreitner ‘Speculations of contract, or how contract law stopped worrying and learned to love risk’ (2000) 100 Col LR 1096 at 1098. In the insurance context, the continued use of valued polices, the timing of the interest in life insurance and the ability to assign insurance products all diminish the strict nature of the insurable interest doctrine.
18. However, for the purposes of taxation and the potential overlap of regulatory regimes, there will need to be continued differentiation.
19. The earliest insurance cases tested the effect of a policy made without such an interest. See Oldham The Mansfield Manuscripts and the Growth of English Law in the Eighteenth Century (London: University of North Carolina Press, 1992) p 452.
20. See Fitz-Gerald v Pole (1754) 4 Brown PC 439 at 444–445; 2 ER 297 at 301.
21. The preamble to the Marine Insurance Act 1745 noted ‘… it hath been found by experience, that the making assurances, interest or no interest … hath been productive of many pernicious practices, whereby great numbers of ships, with their cargoes, have … been fraudulently lost and destroyed’.
22. There is a view that in addition to harming marine trade, these gambling policies also harmed the reputation of the fledgling marine insurance market in London.
23. See Viviana Rotman Zelizer Morals & Markets: The Development of Life Insurance in the United States (New Brunswick: Transaction Books, 1983) p 69.
24. See Merkin ‘Gambling by Insurance: A Study of the Life Assurance Act 1774’ (1980) 9 Anglo-Am LR 330. The practice of widespread public betting on the chances of the rich, famous and influential surviving their latest ailment undoubtedly hastened legislative reform.
25. See above n 13.
26. It is recognised that not all insurance agreements are limited to indemnification either in law or in practice. See above n 17.
27. Constitution Insurance Co of Canada v Kosmopoulos ACWS (3d) 22 at 34 DLR (4th) 208.
28. ACWS (3d) 22 at 28–29.
29. Le Cras v Hughes (1782) 3 Douglas 81, 99 ER 549, per Lord Mansfield.
30. Lucena v Craufurd (1806) 2 B & PNR 269, 127 ER 630, per Lord Eldon.
31. (1806) 2 B & PNR 269, 127 ER 630.
32. See Lowry ‘The Quickening of Insurable Interest in Property Insurance …’ (2002) 2 IJIL 225.
33. See Glengate-KG Properties Ltd v Norwich Union Fire Insurance Society Ltd [1996] 2 All ER 487 and Feasey v Sun Life Assurance Co of Canada [2003] 2 All ER (Comm) 587.
34. See Worthington v Curtis (1875–76) LR 1 Ch D 419.
35. See above n 13.
36. The Gambling Minister, Andrew McIntosh, said ‘… the only dead cert for people looking to cheat is that the Gambling Commission are ready, and will be on their case’: DCMS press release 009/04, 5 February 2004.
37. See Macaura v Northern Assurance [1925] AC 619.
38. See Agapitos v Agnew [2002] 2 Lloyd's Rep 42.
39. primarily, under the Unfair Term in Consumer Contract Regulations 1999, SI 1999/2083.
40. This would encompass both equitable and legal rights and duties: see text to above n 30.
41. See the Marine Insurance (Gambling Policies) Act 1909.
42. The use of a lack of insurable interest as a technical defence by underwriters to defeat claims has vexed judges both modern and ancient. See Feasey v Sun Life Assurance Co of Canada [2003] 2 All ER (Comm) 587.
43. Da Costa v Jones (1778) 2 Cowper 729 at 735; 98 ER 1331 at 1334.31 at 1334.
