"Unlicensed Accident Cannot Be Capped at 3 Million Won"... Supreme Court Upholds Insurer's Right of Recourse

"Accident Deductible Clause of 100 Million Won Not Unfair"

The Supreme Court has overturned a lower court ruling that significantly limited a driver's scope of liability in an accident in which he hit and injured a police officer while driving without a license, a decision that had resulted in a loss for the insurer, and remanded the case to the lower court.

According to the legal community on February 18, the First Civil Division of the Supreme Court (Presiding Justice Noh Taeak) on January 8 set aside the appellate ruling that ordered the defendant, identified as A, to pay only 3 million won in recourse and sent the case back to the Suwon District Court. The first and second instance courts had previously granted only 3 million won of the amount claimed by the plaintiff, Hyundai Marine & Fire Insurance, and dismissed the remainder.

At around 12:10 a.m. on January 14, 2022, A was driving a car without a license in Hwaseong, Gyeonggi Province, when he fell asleep at the wheel. After receiving a report of suspected drunk driving, a police officer was dispatched to the scene and knocked on the window to wake A. When A opened his eyes, he drove the vehicle forward and struck the officer. The officer suffered a leg fracture that required six weeks of treatment.

In accordance with its insurance contract with A, Hyundai Marine & Fire Insurance paid approximately 22.8 million won in insurance benefits to the injured officer. Under the policy terms, if the insurer pays insurance benefits for an accident caused by unlicensed driving, the insured must pay the insurer an accident deductible of 3 million won for the unlicensed driving and up to 100 million won for bodily injury.

Hyundai Marine & Fire Insurance therefore filed a lawsuit seeking full recourse from A for the insurance benefits it had paid. A, on the other hand, argued that the relevant terms and conditions were disadvantageous to customers and thus void for violating the Act on the Regulation of Terms and Conditions.

The courts of first and second instance did not accept Hyundai Marine & Fire Insurance's claim and held that A was required to pay only 3 million won. The courts viewed the relevant policy provision as invalid because it contravened the former Enforcement Rule of the Guarantee of Automobile Accident Compensation Act, a related statute. Under that Enforcement Rule, the accident deductible per accident could not exceed 3 million won. Allowing the insurer to claim up to 100 million won under the terms and conditions, the courts held, constituted a clause that violated the principle of good faith, lacked fairness, and was unduly unfavorable to customers.

The Supreme Court, however, reached a different conclusion. It held that "in light of the legislative purpose and structure of the relevant laws and regulations, it is reasonable to interpret the Enforcement Rule setting a cap on accident deductibles as applying only to compulsory insurance, and not to voluntary insurance."

The Court went on to state, "Given that the Financial Supervisory Service has revised the standard terms and conditions in response to social demands to strengthen the liability of those who cause serious violations of laws and regulations, it is difficult to regard the clause at issue, which reflects this policy, as unduly unfavorable or unusual for customers." The Court indicated that the mere fact that the accident deductible is a large amount does not, in itself, render the terms and conditions void when viewed against prevailing social norms.