Hello, this is attorney Seunghyun Oh of Cheongchul Law Firm.

When buying insurance, you may have been told that something is "covered," only to have the claim denied after an accident. Typical cases include a contract that turned out to be void, key enrollment requirements that were never explained, or incorrect guidance about the beneficiary. This article reviews, through case law, whether you can claim damages for an insurance agent's mis-selling in such situations and what liability the insurer and the agent each bear.

Breach of the Duty to Explain Is Where Insurer Liability Begins

When concluding a contract, an insurance solicitor must explain specifically and in detail so that the policyholder can satisfy the key requirements. In the Supreme Court decision of September 6, 2007 (Case No. 2007Da30263), a life insurance policy on a third party became void because the solicitor failed to explain the requirement of the insured's written consent. The Court held that the insurer must compensate the policyholder for an amount equivalent to the insurance proceeds under Insurance Business Act Article 102(1) (보험업법 제102조 제1항).

The same principle applies to group insurance. In the Supreme Court decision of August 22, 2013 (Case No. 2012Da91590), the Court recognized the insurer's liability for damages where the requirements for a valid group insurance contract were not sufficiently explained, the contract became void, and the policyholder was unable to receive the insurance proceeds. Whether the policy is individual or group, the courts have consistently held that the solicitor must guide the policyholder through the requirements needed for the contract to be validly formed.

When Is the Insurance Company Directly Liable?

Insurance Business Act Article 102(1) (보험업법 제102조 제1항) provides that where an insurance agent causes loss to a policyholder in the course of solicitation, the insurer is liable for damages. Under the proviso, the insurer may be exempted if it exercised reasonable care in entrusting the solicitation and made efforts to prevent the loss, but in practice courts rarely grant such an exemption.

In the Seoul Central District Court decision of November 2, 2017 (Case No. 2017Na22673), an agent affiliated with an insurance agency gave incorrect explanations regarding a de facto spouse as beneficiary. The court rejected the insurer's exemption defense, finding insufficient evidence that the insurer had exercised reasonable care in appointing and supervising the agency. Torts committed by agents affiliated with an insurance agency also fall within the scope of Insurance Business Act Article 102(1) (보험업법 제102조 제1항).

If the Policyholder Was Also at Fault, Damages May Be Reduced

Even where an insurance agent's breach of the duty to explain is established, courts apply comparative negligence if the policyholder was also careless. In the Changwon District Court decision of February 18, 2021 (Case No. 2020Na55296), a life insurance policy on a third party became void because the written consent requirement was not explained. The court found the policyholder 30% at fault and limited the insurer's liability to 70%.

The ratio of comparative negligence varies from case to case. Courts consider comprehensively whether the policyholder had an opportunity to review the policy terms directly, whether the policyholder raised questions about the contract, and the circumstances of enrollment.

The Insurance Agent Personally May Also Face Recourse Liability

There are also cases where, after compensating the policyholder, the insurer exercises a right of recourse against the insurance agent who caused the loss. Insurance Business Act Article 102(2) (보험업법 제102조 제2항) expressly provides for this right of recourse.

In the Seoul Central District Court decision of December 11, 2019 (Case No. 2018GaDan5085774), an insurance agent failed to explain the insured's written consent requirement and personally wrote the insured's signature in their place. The insurer paid the policyholder approximately KRW 257 million in damages and then sought reimbursement from the agent in charge. The court apportioned 65% of the responsibility to the insurer for lax management and supervision and 35% to the agent, and ordered the agent to reimburse approximately KRW 90 million. Where the breach of the duty to explain is not a mere error in the course of duty but involves forgery of a signature, the agent personally may bear substantial financial liability.

Case Law Trend – From the 2000s to the 2020s

The 2007 and 2013 Supreme Court decisions established the basic principle that "a solicitor's breach of the duty to explain → the insurer compensates an amount equivalent to the insurance proceeds." Since then, lower court decisions in the 2020s have maintained this basic principle while developing it in three directions.

• ① Strict application of the exemption requirements — if the insurer cannot prove that it fully performed its supervisory duty, no exemption is granted

• ② Refinement of comparative negligence — depending on the degree of the policyholder's carelessness, courts increasingly find fault on the policyholder's part and reduce damages accordingly

• ③ Emergence of recourse claims against individual agents — insurers increasingly compensate first and then seek recourse from the agent, with a higher recourse ratio the greater the agent's direct culpability

What to Check If You Are Considering a Damages Claim

• Which explanations were omitted — secure recordings, text messages and emails from the consultation at the time of enrollment

• Obtain the written notice of claim denial — identify the provision on which the contract was found void

• Organize the differences between what you signed in the application and product description and what you were actually told

• Causation between the breach of the duty to explain and the loss — whether you would still have enrolled had you been properly informed

Closing Remarks

The principle that an insurance agent's breach of the duty to explain → insurer liability for damages was established by Supreme Court decisions in the 2000s, and recent lower court decisions continue to address detailed issues such as comparative negligence ratios, denial of exemption, and recourse against agents. If you have suffered loss from a claim denial or mis-selling, please prepare the relevant materials and apply for a free consultation with Cheongchul Law Firm.

Thank you.