Insurance, Illegality and Legal Certainty: Reflections on the Legacy of Professor Malcolm Clarke

This paper pays tribute to the legacy of Professor Malcolm Clarke and reflects on an area where his work was of a considerable influence: the application of the law of illegality to insurance contracts. The paper revisits some of the long-standing issues around illegality in insurance contracts in light of modern case law by reflecting on the work of Professor Clarke. The fundamental question is whether the insured is able to enforce its contractual claim to indemnity despite its illegal conduct in the circumstances surrounding the loss. It is argued that the needs of the insurance market in this regard are best served by a rule which allows ‘localisation’, that is, context specificity. A rule which seeks to provide a single rule across all contracts, all torts and all examples of restitution lacks the flexibility required for insurance markets. On this basis, the gradual shift towards a rule which has a broadly discretionary basis favours insurance more than a closely structured model.