Wilson v. Jones and Lucena v. Craufurd — the tests of insurable interest

Macaura tells you who does not have an insurable interest. These two supply the positive test — the words a candidate should be able to produce from memory when asked to define insurable interest without reciting a statute.

Blackburn J. put the test in a single sentence: a party has an interest in an event if he will gain an advantage if it happens and suffers a loss if it does not happen.

Two things are worth noticing about that formulation.

It is expressed in terms of an event, not of property. That is what makes it usable across the whole subject. A shipowner's interest in his hull, a creditor's interest in his debtor's life, a bailee's interest in goods in his custody and a manufacturer's interest in a liability he may incur are all interests in events, and all satisfy the test.

It is symmetrical. The party must stand to gain from one outcome and to lose from the other. A stranger who will be neither better nor worse off has no interest; what he has, if he takes a policy, is a wager.

The complementary formulation describes insurable interest as the relation or concern in the insured subject such that the interested person is affected or prejudiced on the happening of the peril insured, and is interested in the preservation of the insured subject.

The emphasis there falls on preservation. An insurable interest is the interest of someone who wants the subject-matter to survive. That is the sharpest available contrast with the gambler, whose only interest in the subject-matter is created by his own bet, and who is indifferent to its survival except as it affects his winnings.

Section 7(2) of the Marine Insurance Act 1963 is these two formulations turned into statutory language. A person is interested where he stands in any legal or equitable relation to the adventure or to insurable property at risk in it, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, damage or detention, or may incur liability in respect of it.

Note the three limbs and use them as a checklist:

1. Benefit from safety — the owner, the consignee, the person whose profit depends on arrival.
2. Prejudice from loss — the mortgagee, the bailee liable over, the lessee.
3. Liability in respect of it — the limb that makes third-party liability insurance possible at all, and the limb students most often forget.

Natural love and affection does not, by itself, create insurable interest. There must be some pecuniary interest in addition. A brother's affection for a brother is not an interest; a creditor's exposure to a debtor's death is, to the extent of the debt.

The exceptions are the presumptions: everyone has an unlimited insurable interest in his own life, and interest between spouses is presumed — Griffith v. Fleming.

Open with Blackburn J.'s test, because it is short and complete. Add the preservation idea from Lucena to explain why a wagerer is excluded. Then cite s. 7(2) for the statutory form, and s. 8(1) for the moment at which the interest must exist in property insurance. That is a full answer to the standard question in four sentences and one section reference.