"Settlement Money Not Covered by Insurance After Criminal Procedure Ends"…Important Notes on Traffic Accident Settlement Support Special Agreement

On the 27th, the Financial Supervisory Service Discloses Precautions for Driver Insurance's 'Traffic Accident Settlement Support Special Contract'

An office worker, Mr. Park, violated a traffic signal while driving and made a left turn, colliding with a vehicle going straight from another direction, causing injuries to the passenger that required six weeks of treatment. After a summary order for a fine was finalized, Mr. Park signed a settlement agreement to pay the victim 10 million won and filed a claim with the insurance company. However, the insurer refused compensation, stating that the amount paid after the criminal proceedings had concluded could not be considered a criminal settlement payment.

On the 27th, the Financial Supervisory Service disclosed consumer precautions related to the driver insurance 'Traffic Accident Handling Support Fund Special Contract.' The Traffic Accident Handling Support Fund Special Contract, a major optional product of driver insurance, is linked to criminal procedures, leading to various disputes regarding compensation. This special contract covers losses that the insured may incur by paying a criminal settlement amount to the victim due to a traffic accident.

Criminal Procedure for Traffic Accidents. (Source: Financial Supervisory Service)

The insurance policy Mr. Park subscribed to states that "the amount paid or agreed to be paid by the insured to the victim as a criminal settlement amount shall be compensated to the insured as a traffic accident handling support fund." A criminal settlement is an agreement made between the offender and the victim during the investigation or trial process to terminate criminal proceedings or reduce criminal punishment. The criminal settlement amount refers to money paid or agreed to be paid to the victim while the insured’s criminal liability is either confirmed or not yet determined. Payments agreed upon or made after it is clear that there is no criminal liability or after criminal liability has been determined by investigative or judicial authorities are excluded, which is why the insurance claim was denied.

In traffic accidents involving serious violations of regulations, if the victim’s diagnosed treatment period does not reach a certain duration (usually six weeks), the traffic accident handling support fund may not be paid. Mr. Lee, who was driving 20 km/h over the speed limit, collided with another vehicle, causing injuries to the occupant requiring four weeks of treatment. Through a criminal mediation process, Mr. Lee agreed to pay the victim 4 million won and filed a claim with the insurer for that amount. Although exceeding the speed limit by 20 km/h constitutes a serious regulatory violation, the insurance payment conditions (diagnosis of six weeks or more) were not met, so the insurance payment was denied.

In general traffic accidents without serious regulatory violations, if the victim does not suffer serious injuries, the traffic accident handling support fund may not be paid. Mr. Kim, while driving a private vehicle, hit a pedestrian causing injuries classified as level 6 injury severity. Mr. Kim agreed to pay approximately 3 million won for the victim’s medical expenses and filed a claim with the insurer for that amount. Although the pedestrian was involved in a general traffic accident, the injury severity did not meet the criteria for serious injury or levels 1 to 3 injury, so the insurance payment was not applicable.

Additionally, when filing an insurance claim, it is essential to submit the criminal settlement agreement specifying the settlement amount, which was submitted to the police station or prosecutor’s office, along with accident and injury proof documents.