The Supreme Court has ruled that an insurance company that paid insurance proceeds to a building owner due to a fire accident cannot exercise the right of recourse against the tenant of the building. The ruling is based on the reasoning that if the tenant has also purchased "fire liability insurance" from the same insurer, the insurance company simultaneously assumes the positions of both the creditor with the right of recourse and the debtor with the obligation to compensate, thereby extinguishing its rights. On November 20, the Supreme Court's Civil Division 3 (Presiding Justice Noh Kyungpil) overturned the lower court's ruling in favor of the plaintiff in the recourse claim lawsuit (2024Da324200) filed by Insurance Company A against Mr. B, and remanded the case to the Seoul Central District Court.
[Facts]
In 2022, Insurance Company A entered into a fire insurance contract with Mr. C, the owner of the building. Mr. B, the tenant who operated a food wholesale and retail business in the same building, had also signed an insurance contract with Insurance Company A, which included a special clause for fire liability coverage.
In August 2022, a fire of unknown origin broke out in the supermarket operated by Mr. B, resulting in the destruction of the building. Insurance Company A paid approximately 500 million won to the building owner, Mr. C, as tenant insurance proceeds, and about 200 million won as owner insurance proceeds. Later, Insurance Company A filed a recourse claim against Mr. B, arguing, "The 200 million won paid to the building owner as owner insurance proceeds was compensation for damages caused by the tenant's negligence, so Mr. B should reimburse this amount."
[Lower Court Ruling]
The courts of first and second instance limited Mr. B's liability for damages to 60-70% of the total damages. However, they ruled that the insurer could exercise the right of recourse for the portion of the owner insurance proceeds paid to the building owner that corresponded to the tenant's share of responsibility, and thus partially ruled in favor of the plaintiff.
[Supreme Court Ruling]
The Supreme Court took a different view. The Court stated, "If the tenant's insurance contract includes liability insurance that covers the defendant's liability for damages, the insurer cannot easily exercise the right of subrogation against the tenant on the grounds of having paid the owner insurance proceeds."
The bench explained, "The insurer's liability for damages to the tenant, which arises from paying the owner insurance proceeds, is jointly held with the insurer's obligation as the provider of the tenant's liability insurance. Thus, since the insurer becomes both creditor and debtor, a phenomenon similar to extinction of rights by confusion occurs."
The Court further added, "Even if the tenant were to pay recourse to the insurer, the tenant could then claim payment under the liability insurance from the same insurer, which would result in a circular litigation process contrary to litigation economy. Ultimately, claiming reimbursement for money that must be returned is not reasonable in light of the principle of good faith."
An Jaemyoung, Legal Times Reporter
※This article is based on content supplied by Law Times.
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