Hello, this is Attorney Oh Seung-hyun of Cheongchul Law Firm.

After filing a claim, some policyholders receive a notice from the insurer that the policy is being cancelled and the claim denied because "your medical history or occupation was not properly disclosed at the time of enrollment." The first thing to sort out here is this: whether the insurer may cancel the policy and whether it must pay benefits for an insured event that has already occurred are two separate questions. Even if a breach of the duty of disclosure is found, there are cases where you can still receive benefits, and if the requirements for cancellation are not met, you can contest the cancellation itself.

Does every undisclosed fact justify cancellation?

① There must be intent or gross negligence

For a cancellation under Commercial Act Article 651 (상법 제651조) to be upheld, the policyholder or the insured must have, intentionally or through gross negligence, failed to disclose a material fact or disclosed it inaccurately at the time of contracting. A mere discrepancy between the answers on the application and the medical records does not by itself make the cancellation lawful. If it is shown that you did not know the diagnosis when completing the application, or did not remember a minor treatment, intent or gross negligence may be denied.

② If the insurer already knew, it cannot claim cancellation

If the insurer knew of the fact at the time of contracting, or failed to know it through gross negligence, its right to cancel under Commercial Act Article 651 (상법 제651조) is restricted. If you submitted health checkup results to the insurer or had it review your medical records at enrollment, this is an important ground for defense.

You can still receive benefits even if the policy is cancelled

If lack of causation is proven, the insurer must pay

The proviso to Commercial Act Article 655 (상법 제655조 단서) provides that "if there is no causal relationship between the undisclosed fact and the insured event, the benefits must be paid." For example, if someone enrolled without disclosing hypertension and later died in a traffic accident, the causal relationship between the hypertension and the death in the traffic accident must be examined. Rather than assuming there is no causation simply because the type of event differs, it is important to confirm this concretely through medical evidence.

However, the absence of causation must in principle be proven by the policyholder's side. Courts tend to uphold the insurer's cancellation if there is "even the slightest indication" of causation (Seoul Southern District Court 2016Gahap109315, Nov. 17, 2017), so to argue that there is no causation, you need concrete evidence such as medical records and medical opinions. That said, if the applicable policy terms place the burden of proving causation on the insurer, that provision prevails, so the policy terms should be checked first.

Grounds for cancellation are limited to the violations the insurer specified

When an insurer gives notice of cancellation based on a specific item (for example, occupation), the effect of that cancellation is limited to the violation it specified. In Seoul Central District Court 2021Na51326 (Oct. 26, 2022, final after the Supreme Court dismissed the appeal), the deceased had been declared a "full-time homemaker" at enrollment but died in an accident while driving a cargo truck. The insurer cancelled the policy, claiming the deceased had "concealed waste-paper collection work and cargo truck driving," but the court held that "at the time the policy was concluded, the deceased was receiving inpatient and outpatient treatment for a traffic accident, so it is hard to find that the deceased was engaged in waste-paper collection," and ordered payment of the KRW 100 million death benefit. When you receive a cancellation notice, you should request in writing exactly which question and which answer are at issue.

Limitation period on the right to cancel – when the insurer cancelled too late

A cancellation under Commercial Act Article 651 (상법 제651조) must be made within one month from the day the insurer learned of the violation and within three years from the date the contract was concluded. If either period has passed, the right to cancel can no longer be exercised. A cancellation notified after these periods is void.

The issue is when the insurer "learned" of the violation. The clock starts not at the point of mere suspicion, but when the insurer came to know the violation with certainty, including having confirmed that there were no grounds restricting cancellation (Seoul Central District Court 2021Gadan5022582, Sept. 8, 2021, final after dismissal of the appeal). However, if the insurer had already identified the violation through an interim investigation report, the period may run from that point even before the final report was received. You need to compare the date of the cancellation notice with when the insurer obtained its materials and when the investigation report was received.

Agent misguidance and breach of the duty of disclosure

Where an agent advised at enrollment that "this does not need to be disclosed" and the information was therefore omitted, courts take the view that the insurer's exercise of its right to cancel may be restricted. Where the agent obstructed disclosure or encouraged a false answer, the cancellation-restriction clause in the policy terms may apply.

However, merely telling the agent about your medical history orally is not recognized as fulfilling the duty of disclosure to the insurer. Ordinary insurance planners often lack the authority to receive disclosures on behalf of the insurer, so you must check whether the information was actually reflected in the application or in the procedure set by the insurer. Recordings, text messages, and electronic application revision histories from the time of enrollment become important evidence.

Five things to check when you receive a cancellation or denial notice

• ① Confirm the specific grounds for cancellation – request in writing the question and answer at issue and the applicable policy clause

• ② Review intent or gross negligence – check the circumstances of whether you knew of the condition or occupation at the time of application

• ③ Whether the limitation period has lapsed – compare the contract date, when the insurer obtained its materials, and when the cancellation notice arrived

• ④ Review causation – the medical link between the undisclosed condition and the actual insured event + check the burden-of-proof clause in the policy terms

• ⑤ Secure the agent's guidance – collect recordings, text messages, and electronic application revision histories from enrollment

Closing

A dispute over breach of the duty of disclosure is not decided simply because something was left out of the application. Intent or gross negligence, the limitation period, causation with the insured event, the circumstances of the agent's guidance, and the policy terms must all be examined together. If you have received notice of cancellation and denial of benefits, do not give up and apply for a free consultation with Cheongchul Law Firm.

Thank you.