The Supreme Court ruled that insurance companies have an obligation to explain a so-called classification clause, which states that insurance payments are made based on the first cancer that occurred when the policyholder has two cancers due to metastatic cancer. The insurance company argued that there was no obligation to explain it, but the Supreme Court did not accept this.
According to the legal community on the 7th, the Supreme Court's first division (Chief Justice Noh Taeak) overturned the lower court's ruling that had favored Mr. A in the appeal of the insurance claim lawsuit against the insurance company filed on the 13th of last month and sent the case back to the Busan District Court.
Mr. A was diagnosed with thyroid cancer and lymph node metastatic cancer (cancer that has formed a tumor by moving through the lymphatic system to the lymph nodes) in 2019. Mr. A was insured under a cancer insurance product. The product brochure stated, "Coverage of 20 million won for cancer diagnosis and 2 million won for cancer surgery." It also included a classification clause stating, "20% of the insured amount will be paid for surgery due to thyroid cancer" and "Insurance payments will be made based on the primary site (the site where cancer first occurred) for unclear secondary cancers."
When Mr. A filed an insurance claim, the insurance company paid the insurance benefit (4.4 million won) based on the first cancer, which was thyroid cancer, according to the classification clause. In response, Mr. A filed a lawsuit, claiming that the insurance company should pay the full amount of 22 million won.
Mr. A said, "Lymph node metastatic cancer is a separate diagnosis of cancer." He also stated, "The insurance company did not explain (the contents of the classification clause) at the time of contract conclusion." In response, the insurance company argued, "Lymph node metastatic cancer is merely a secondary cancer to thyroid cancer, and the classification clause is general and common content, thus not subject to explanation obligations."
The first trial favored Mr. A. The court ordered the insurance company to pay Mr. A 22 million won. However, the second trial overturned this ruling with a decision against Mr. A. The second trial court stated, "Lymph node metastatic cancer is diagnosed as having metastasized from thyroid cancer, making it difficult to consider it a separate cancer." It also stated, "The classification clause corresponds to a provision in the contract that the insured can reasonably expect, even without separate explanation."
However, the Supreme Court stated, "This clause in the terms and conditions could directly impact the determination of whether the insurance contract is concluded or the compensation amount, and thus it must be seen as a significant part of this insurance contract." It further ruled that "the insurance company has an obligation to explain this clause in detail and specifically at the time of contract conclusion."