Or case 3: You decide meeting the code is too expensive, you don't care about insurance, and you burn down your neighbor's business, killing 3 people, after which you skip town.
If there's a reasonable chance that your firetrap will burn down and possibly kill someone in my building, then yes, I should be able to prevent a situation that *may* cause harm. Because an upset insurance company doesn't do jack for the person dead in the fire. You can't fix everything with money, and there's always someone out there greedy or stupid enough to Just Not Care.
Do whatever you like that can only cause harm to yourself. You can go stuff yourself if you think I'm not going to get upset when you open Moe's Indoor Open Pit Barbecue And Pinata Festival next door, though. If there's a reasonable expectation that your actions can cause harm to me, then I don't want them happening in the first place, insurance or no. I also don't want blind people driving or drunk pilots flying airlines.
I don't trust people's ability to overcome their own stupidity and greed when it comes to my personal safety. Post facto is too late.