PHILOSOPHICAL BATTLE AGAINST MORAL HAZARD: DO WE NEED LAW METHODOLOGY CHANGE FROM “ALL OR NOTHING PRINCIPLE” TO “PRINCIPLE OF PROPORTIONALITY”?

Abstract

Introduction: this article looks into the central problem in insurance law, where the principle of “all or nothing” applied by insurance providers and legislators to moral hazard (if the risks of people are covered with insurance contracts then the people often change their risk behavior to involve higher risks by presuming that the concluded insurance contract always covers the loss incurred) is being replaced by the principle of proportionality in the modern insurance law of Western countries. Purpose: to identify significant methodological changes in determining the scope of performance of an insurance provider’s obligation caused by the application of the principle of proportionality. Methods: the authors use the approach of the Baltic Sea States (e.g. Estonia, Lithuania, Russia and Finland) and PEICL (Principles of European Insurance Contract Law1) in a comparative approach, analyzing the respective paradigmatic methodological shift (which currently among the named countries is directly reflected only in the Finnish Insurance Contract Act2) in the context of practical philosophy. Results: the paper demonstrates the necessity to change the paradigmatic legal methodology, according to which the principle of “all or nothing” would be replaced by the principle of proportionality.