Codification and Liability Risk: Napoleonic Code vs. Common Law In today's modern world, insurance has become an everyday concept. We ensure our homes, vehicles, and valuable property. In many states, vehicle insurance is now demanded by law of its drivers. Yet, very few of us step back and actually question where this notion of insurance actually comes from. It is a strange concept, to pay a premium monthly in order to protect oneself from damages later in the event of a catastrophe. In fact, insurance around the world is not considered the same thing. In fact, codification of insurance in various countries is influenced by different legal systems. While in the United States, insurance is influenced by common law practices, other countries in Europe, the Middle East, and South America use codification principles stemming from the Napoleonic Code.

In most Western countries, like the United States, common law is the foundation for insurance codification. Common law stems from the civil law of Europe founded early England and elsewhere in western countries, where the law stems from mercantilist principles (Schwartz, 1998). According to the research, "in medieval Europe, beginning as early as the ninth century and continuing up until the 16th century, there existed a remarkably uniform body of customary mercantile law which was applied by merchant courts in commercial disputes" (Tetely, 1999). This places the demand for insurance codification to be determined by particular regulatory body, based on particular case requirements. In most Western nations, including the United States, laws regarding the codification of insurance are dominated by common law principles (Schwartz, 1998). It is true that "the American states legal systems derived from the system of laws and courts developed over centuries in England" which were split into two separate courts: the law courts which "provided justice, however harsh or unfair the result might be, while the equity courts...

Marine insurance also follows common law in regards to how it is set up for codification purposes (Tetely, 1999). In fact, this derives specifically from common law principle seen in maritime law. The research suggests that "Marine insurance was undoubtedly the first form of insurance," and thus background from common law practices have continued in many Western countries, like the United States (Tetely, 1999). The notion of restitution is directly from common law principles, and is often found in modern insurance constructions today (Tetely, 1999). This then secures a certain degree of reliable liability within insurance practices. Is the notion that restitution can be delivered through the common law principles when one party clearly shows the fault at destroying or damaging another party's property or home.
Yet, the notion of liability is found within both styles of legal systems that now influenced insurance codification. Liability is often secured through subrogation, which is common in both common law and Napoleonic Code legal systems. Subrogation is the principle that a party can take over the rights and responsibilities of another against a third party. Here, the research suggests that subrogation is "the substitution of one person in the place of another with reference to a lawful claim, demand or right" (Cozen, 2001). This allows for insurance companies to step in and take on the rights and remedies of their clients in situations where property has been destroyed or damaged. This is essentially the basis for insurance companies, where the insurance companies takes over the rights of the individual in order to fight a third party for any damages to property.

Yet countries using a Napoleonic Code style system have their own unique differences when compared to common law practices in regards to insurance codification. First adopted by Napoleon after the French…