California Insurance Code §22 defines insurance as:
“A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.”
Let’s break that down:
Contract: There must be a formal agreement between two parties.
Indemnify: The insurer promises to financially compensate the insured for specific losses.
Contingent or Unknown Event: The event triggering the compensation must be uncertain in timing or occurrence (e.g., a fire, accident, or death).
Examples of Insurance under CIC §22:
Homeowners insurance covering damage due to fire
Auto liability insurance covering third-party injury claims
Life insurance paying a death benefit to beneficiaries
What is an Insurable Event?
California Insurance Code §250 provides this definition:
“An insurable event is any contingent or unknown event, whether past or future, which may cause loss or damage to a person having an insurable interest, or create a liability against him.”
Key concepts:
The event must have the potential to cause loss, damage, or liability.
The person affected must have an insurable interest—they must stand to suffer financially if the event occurs.
The event may already have occurred (in some cases) but must remain unknown to the parties involved.
Examples of Insurable Events:
Theft of a vehicle
A worker slipping on a job site (potential liability)
Death of a key employee in a business
Example
Jessica owns a small retail store. She purchases a business owner’s policy that covers theft, fire, and liability. One week after purchasing the policy, a fire damages her storage room.
Is this insurance as defined by CIC §22?
(spoiler)
Yes—Jessica is indemnified for fire damage under a contract.
Is this an insurable event per CIC §250?
(spoiler)
Yes—the fire is a contingent event that caused loss to someone with an insurable interest.
