What principle does John’s inability to insure Janet's car due to lack of financial relationship illustrate?

John’s inability to insure Janet's car due to the lack of a financial relationship illustrates the principle of insurable interest. Insurable interest is a fundamental concept in insurance that requires the policyholder to have a legitimate financial stake in the subject of the insurance. This means that the individual seeking the insurance must stand to suffer a financial loss if an event occurs affecting the insured item.

In this scenario, John cannot insure Janet's car because he does not have any financial interest or relationship to it. For example, if Janet's car were to be damaged or destroyed, John would not incur any financial loss, so there is no justification for him to take out a policy on her vehicle. The principle of insurable interest exists to prevent moral hazard, ensuring that insured parties have a vested interest in the safekeeping and responsible use of the insured item. This ensures that they will act in good faith to protect the asset, thereby adding an element of integrity to the insurance arrangement.

The other principles mentioned, such as the contra proferentem rule, material damage proviso, and the principle of utmost good faith, do not directly address the need for a financial relationship between the insurance policyholder and the insured item. The contra proferentem rule relates