'Duty of care' and 'Due diligence' are the phrases we should all keep in mind.
I have been involved in criminal and civil law most of my working life and as a former Health & Safety professional who (apart from earning well over double what I earn now!!) got sick to death with the over-regulation within the industry I can regrettably assure you that there is an absolute mass of regulation that applies to FTOs (and RTFs) - although certain CFIs would have you believe otherwise
!!!!
I could detail a frightening list of activities that we undertake as FIs and expect our students to undertake, when dual and solo, that could have legal repercussions on us should it all go Pete Tong, that would make your hair stand on end.
But to keep it in perspective, you have to bear in mind what is reasonable; what level of duty of care would you, as a student, expect from both the training provider and from your instructor(s)? Keep it simple, keep it real but don't cut corners and whatever you do, if in doubt bring it to the attention of someone in managerial authority (and document it! E-Mail is a wonderful tool for covering one's arrse!!). Buck passing? Abso-bloody-lutely but that's what they are paid for.
Similarly, if the student feels uncomfortable about doing something they must be encouraged to say so. There are no prizes for bravado. That's not to say students should be prevented from attempting to do things that stretch their capabilities - that is all part of the learning process - but so long
as you are sure of the student's competence, within what is reasonable, that should provide you with an adequate defence....again, so long as you have it well documented.
As for insurance, you can have as much insurance as you like but if you fail to abide by the rules (or cannot prove that you did obey the rules) then you can be fairly sure that the insurer will walk away from you.
We live in a very litigious society and it is not going to go away in a hurry.