"No Obligation to Pay Insurance Benefits" Insurer Files Preemptive Lawsuit... Supreme Court Rules "No Problem"

[Asia Economy Reporter Baek Kyunghwan] The Supreme Court's full bench has ruled that when a dispute arises over insurance payment, it is not problematic for the insurance company to file a lawsuit first against the policyholder or beneficiary claiming "there is no obligation to pay the insurance money."

On the 17th, the Supreme Court's full bench (Presiding Justice Lee Gitaek) upheld the lower court's ruling that dismissed the appeal in the case where DB Insurance filed a declaratory judgment lawsuit against Mr. A to confirm non-existence of debt.

Mr. A's younger brother entered into an insurance contract with DB Insurance in September 2016, which stipulated a payment of 200 million KRW in case of death due to an accident. However, Mr. A's brother died in a lift fall accident the month after the contract was signed.

Mr. A claimed the insurance payment, but the insurance company notified the cancellation of the insurance contract citing breach of the duty of disclosure, stating that "Mr. A's brother declared his occupation as office work when signing the contract, but in reality, he was engaged in plastic coating work," and filed a lawsuit for confirmation of non-existence of debt against Mr. A. In response, Mr. A filed a counterclaim demanding payment of the insurance money.

Mr. A won in the first and second trials, but the insurance company appealed, and the Supreme Court referred the case to the full bench to discuss whether it is lawful for the insurance company to file a declaratory judgment lawsuit first against the policyholder or beneficiary.

On this day, the Supreme Court ruled by majority opinion (8 justices) that "when there is a dispute between the parties to an insurance contract regarding the existence or scope of contractual obligations, the insurance company has the interest to file a declaratory judgment lawsuit first against the beneficiary to eliminate legal uncertainty," and upheld the second trial's decision.

On the other hand, Justices Lee Gitaek, Kim Seonsu, and Noh Jeonghee dissented, stating that the insurance company can only file a lawsuit first if there are 'special circumstances' in addition to the fact that there is a dispute between the insurance company and the policyholder. They reasoned, "Considering the public nature of insurance, special regulations on the insurance business, the content of the insurance contract, and the status of the parties, it can only be recognized if there are special circumstances that justify the insurance company’s immediate interest in confirming the existence or scope of the obligation to pay insurance money beyond the mere fact of dispute over the scope of insurance payment."