Group InsuranceCase

(11-2 KCCR 228, 98Hun-Ka6, September 16, 1999)

A.Background of the Case

In this case, the Court upheld Article 735-3 (1) of the Commer-cial Act that did not require individual consent in formation of agroup insurance plan when the individual consent is generally requiredfor formation of all life insurance policies.

The provision states that, when a group enters into a life insur- ance contract for all or part of its members pursuant to agreement1),the Article 731 requirement of individual written consent, normally ap-plied to a life insurance contract for a third person, does not apply.According to the separate Article 739, the provision about life insur-ance is extended to casualty insurance as well. Therefore, a groupcasualty insurance also does not require the insured's individual con-sent.

The defendant is an employer of several employees who are in-sured by a group plan in which the employer is the beneficiary. The

complainant is one of the insured employees. When the employee wasinjured, the employer applied for benefits and paid only part of thebenefits to the employee. The employee filed a civil suit against theemployer for the remaining amount. The presiding court requestedconstitutional review of the provisionsua sponteon a suspicion thatit may violate human dignity and worth and the right to pursuit ofhappiness in Article 10 of the Constitution.

B.Summary of the Decision

The Court upheld Article 735-3 (1) of the Commercial Act in the following majority opinion of six justices:

In not requiring individual consent for formation of a group lifeinsurance contract, the provision replaces it with collective consent on the premise that individual opinions were reflected during the processof framing the agreement among the group members.2)The moralhazard associated with a group plan, which is essentially a life in-surance for a third person, can be prevented by such group-basedcontrol. It is through the process of forming the agreement that the group members' interests are reflected. The instant provisions con-tribute to promotion of group members' welfare. In light of the spe- cial nature of a group insurance, it is reasonable to replace the usualconsent requirement with collective consent. Hence no violation ofhuman dignity and worth, or of the right of pursuit of happiness.Neither is there a violation of the state's duty to protect basic rights.

Justices Kim Yong-joon, Kim Moon-hee, and Shin Chang-on dis-sented.

They observed that a group life insurance is not different froman individual policy in that both take one's death as the insured event.Therefore, foregoing the requirement of individual consent advancesonly economic considerations while ignoring an individual's will andright to decide. The moral hazard vis-à-vis group life insurancewill increase, and various industrial workplaces will be more lenientin their disaster prevention measures. The instant provision vio-lates Article 10 of the Constitution.