Insurance is applicable to protect men

From the standpoint of the transferee, there is very little difference between insurance and gambling. Both involve the pooling of a large number of homogeneous risks and the application of the law of large numbers to determine the probability of a payout. However, gambling, at least traditionally, has been regarded as contrary to public policy in the United States, while insurance has been generally approved. The difference between the two is that insurance is a contract of indemnity, which is designed to replace or reduce a diminution of wealth that has occurred, while gambling seeks to increase the wealth of the gambler. To guarantee that an insurance policy does not become a functional equivalent of a gambling contract, all American jurisdictions require that insurance can only be sold to a party who possesses an ‘insurable interest’ in the object of the policy. Needless to say, the precise scope and definition of ‘insurable interest’ has been subject of extensive debate and litigation over the years.

Insurance ‘is applicable to protect men against uncertain events which may in any wise be of disadvantage to them; not only those persons to whom positive loss may arise by such events, occasioning the deprivation of that which they may possess, but those also who in consequence of such events may have intercepted from them the advantage of profit, which but for such events they would acquire according to the ordinary and probable course of things’. He recognized that cases could arise in which ‘there may be some difficulty in showing if the event had not happened, that those advantage would have arisen’ and that in such a case ‘an interest so uncertain may not be the subject of insurance’. However, he felt a party has a sufficient insurable interest ‘where a man is so circumstanced with respect to matters exposed to certain risks or dangers, as to have a moral certainty of advantage or benefit, but for those risks or dangers’.