Insurance plays in important role in our modern day civil justice system. Insurance is compensating a person or a business or a loss. In exchange for a payment to the insurance company called a “premium,” the insured receives a benefit that is due if a certain event occurs. There are many types of insurance today: Life, health, liability, disability. You can purchase insurance for just about any type of loss that might occur. Insurance products are complicated financial products. Insurance contracts or “policies” can be very complex, and hard to understand. The insurance industry is regulated by the states, and most insurance policies must be written in a way that is consistent with the particular state’s rules and regulations. Today, just about everyone has some type or insurance. Insurance today is a crucial part of our modern complex society.

Insurance existed in ancient times. For example 3000 years ago in China ship merchants insured their ship from the possibility to being lost to pirates or to storms. Insurance existed in all civilizations. Until the seventeenth century the insurance industry focused on insuring the risk that certain business ventures were successful, a process called underwriting. In 1766 the Great Fire of London burned over 430 acres of the city, and destroyed over 13,000 homes. Fire insurance and our modern insurance industry were born. Today, insurance is sold not only to protect business venture profits, but to protect people and business from losses that occur.

The purpose of insurance is to spread the risk over a large enough group so that the risk can be absorbed, and adequately predicted. The risk of a fire in your house in any given year is hard to predict. But the risk of a certain number of fires throughout the entire state of Connecticut is probably fairly consistent over time. If the risks can be predicted the cost of insurance can be assessed. Insurance companies employ actuaries to make very complicated calculations to determine if an adverse event will occur. For example, insurance companies selling homeowners insurance are experts in determining the predictability of whether a hurricane will occur. Life insurance companies are experts in determining the life expectance of a male, age 70, who smokes. The goal is for the insurance company to accurately predict the costs of the losses it will probably pay so that it can accurately set the prices or “premiums” for its products.

The second purpose of insurance is to spread the risk so it can be absorbed by society with the minimal impact. Our society could not function without safety nets in place to protect all of us from catastrophe. For example, the odds that lightning will strike you this year are very small. So small, it is almost irrelevant. But the odds that lightning will strike someone in Connecticut this year is 100%. In our society we do not want that very unlucky person or their family to become destitute due to the fact that he or she was the one who was so unlucky to be struck by lightning. We are all at risk. In any given year someone can be killed, or become disabled, or our house can burn down. So our society has produced safeguards to protect all of us from these risks. Insurance is part of this protection to protect us from unforeseen harmful events.

For those with insurance, that insurance provides financial protection from the consequences from the unforeseen events. For those without insurance, only government welfare type programs offer protection. In this sense, for those without insurance the government (you and I) are the insurance. Therefore, if someone is seriously injured by someone who has no insurance to pay the loss, then the injured person, if they are disabled, will become wards of the state subsisting on only welfare benefits from the government (you and I). Because it is sensible for all people or businesses to have liability insurance to protect them in the event that they are responsible for harming someone else, laws exists today in most states that require liability insurance. For example, in Connecticut like the vast majority of states, it is illegal to drive a car without car liability insurance. Liability insurance is a key part of protecting all of us in the event we are harmed by someone else.

Liability insurance is insurance to protect against a claim based on conduct that gives rise to legal liability. Typically, the wrongdoer’s liability insurance protects you so that the wrongdoer can afford to pay for all of the harms and losses that the law allows compensation for. One common example of liability insurance is automobile insurance. Another part of most automobile liability insurance policies is uninsured motorist insurance which protects you in the event that you are harmed by someone who does not have any insurance.

Insurance is “taboo” in court cases. The rules forbid parties from even mentioning insurance except in very rare circumstances. The reasoning behind the rule is that court’s fear that if juries believe that insurance is available they will make higher damage calculations. Courts apparently believe that people somehow forget about insurance the moment that are selected to be members of the jury. This rule that forbids the parties from discussing insurance exists even though in our modern society everyone is aware of insurance. Juries are probably very surprised to hear cases with no mention about insurance when they know full well that insurance is involved, and very integral to the case. In fact, it is the defendant’s insurance not the defendant that generally makes decisions about the case, and whether to settle a case or take it to trial. That is why very often some local defendant is represented by a huge firm in the big city.

Insurance plays a major role in any case brought today. In fact, unless there is adequate insurance, the case will probably not even be brought. The defendant’s insurance company controls just about every part of the litigation for the defendant. The insurance company will decide what lawyer to defend the case with, what strategy to employ, whether to settle the case, or take the case to trial. In Connecticut, it is the defendant’s insurance company that invariably files a “jury claim form” which is the form required to request a trial by jury. Although, the defendant’s insurance company is not even a named party to the case, they control every aspect of the case.