[1] Where an insurance company or an insurance solicitor’s employee violates his/her duty to explain important matters of the insurance contract when entering into an insurance contract or soliciting insurance contracts, whether he/she is liable for damages (affirmative), and the degree of and standard for determining such duty

[2] Where the cancellation refund under the insurance contract is paid after the insurance contract violated the duty to explain, the amount of loss suffered by the policyholder by the violation of the duty to explain (=amount equivalent to the amount obtained by deducting the cancellation refund amount received from the aggregate of paid premiums

[3] In a case where Gap claimed damages against Eul on the ground of violation of Eul's insurance solicitor Byung's duty to explain, and Eul claimed that Eul should deduct the amount equivalent to the cancellation refund which Gap can receive upon the invalidation of the insurance contract from the amount of damages, the case holding that the cancellation refund cannot be deducted from the amount of damages unless the cancellation refund is actually paid

[1] An insurance company or an insurance solicitor has a duty to protect customers so that customers may reasonably make a decision on whether to conclude an insurance contract based on information by clearly explaining not only the payment of premiums, payment of insurance proceeds, and refund money for termination, but also the criteria for paying and calculating the amount of money when concluding an insurance contract with customers or soliciting them. In the case of an amount-variable insurance contract, an insurance company or an insurance solicitor has a duty to protect customers so that they may reasonably make a decision on whether to conclude an insurance contract based on information. In the event of a violation of such duty, the insurance company or the insurance solicitor is liable for compensating for damages incurred therefrom pursuant to Article 750 of the Civil Act or Article 102(1) of the former Insurance Business Act (amended by Act No. 10

In this context, whether an insurance company or insurance solicitation worker is required to explain to a customer certain extent the characteristics and risk level of insurance products, experience and understanding ability of the customer, etc. However, the duty of an insurance company and insurance solicitation worker as stipulated in Articles 97(1) and 95(1) of the former Insurance Business Act, Article 42 of the former Enforcement Decree of the Insurance Business Act (amended by Presidential Decree No. 22637, Jan. 24, 201); and the important matters of the insurance contract cannot be limited to those stipulated in the insurance contract. Thus, if it is difficult to explain the important matters of the insurance contract solely based on the insurance contract, the insurance company or insurance solicitation worker should explain the important matters of the insurance contract regarding the characteristics and risk of individual insurance products by means of utilizing adequate additional data, such as the product description, so that the customer can understand them.

[2] In the event of a violation of the duty to explain when an insurance contract was concluded, if the cancellation refund pursuant to the insurance policy was paid thereafter, the damage suffered by the policyholder by the violation of the duty to explain is equivalent to the amount obtained by deducting the cancellation refund amount paid from

[3] In a case where Party A claimed damages against Party B on the ground that Party B’s insurance solicitor Byung did not sufficiently explain the important contents of the insurance contract at the time of entering into the insurance contract, and Party B claimed that the amount equivalent to the refund for cancellation acknowledged as at the time of closing argument in fact-finding proceedings should be deducted from the amount of damages, the case holding that the insurer cannot be deducted from the amount of damages unless the cancellation refund is actually paid, in light of the following: (a) the extinctive prescription can be completed regarding the right to claim the refund for cancellation; (b) the amount equivalent to the damages incurred may be extinguished; (c) after the closing of argument at fact-finding proceedings in the damages lawsuit calculated by offsetting the amount of damages based on negligence on the basis that the amount equivalent to the damages incurred is the total amount of the insurance premium paid; or after such payment, the policyholder claims the amount against the insurer

[1] Article 638-3(1) of the Commercial Act; Article 750 of the Civil Act; Articles 95(1), 97(1), and 102(1) of the former Insurance Business Act (Amended by Act No. 10394, Jul. 23, 2010); Article 42 of the former Enforcement Decree of the Insurance Business Act (Amended by Presidential Decree No. 22637, Jan. 24, 201); / [2] Article 638-3(1) of the Commercial Act; Articles 393, 750, and 763 of the Civil Act; Article 95(1), 97(1), and 102(1) of the former Insurance Business Act; Article 42 of the former Enforcement Decree of the Insurance Business Act (Amended by Act No. 10394, Jul. 23, 2010; Presidential Decree No. 25138, Mar. 16, 2014>

[1] [2] Supreme Court Decision 2010Da34159 Decided June 13, 2013

Plaintiff 1 and four others

Future Life Insurance Co., Ltd. (Attorney Lee Byung-soo, Counsel for defendant-appellant)

Seoul High Court Decision 2011Na27563 decided February 1, 2012

All appeals are dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the ground of appeal against the plaintiff 1 and 2

A. As to whether the duty of explanation is violated

An insurance company or insurance solicitation worker is obligated to protect its customers so that they can reasonably determine whether to conclude an insurance contract based on its information by clearly explaining the characteristics and risks of each insurance contract, such as investment type and structure, as well as payment of premiums, grounds for payment of insurance proceeds and refunds for termination of insurance contracts when concluding an insurance contract with their customers or soliciting them. In cases of variable insurance contracts, an insurance company or insurance solicitation worker is obliged to pay damages to its customers arising therefrom in accordance with Article 750 of the Civil Act or Article 102(1) of the former Insurance Business Act (amended by Act No. 10394, Jul. 23, 2010; hereinafter the same shall apply). In this context, whether an insurance company or insurance solicitation worker is required to explain to its customers about important matters of an insurance contract should be determined by comprehensively considering the characteristics and risk levels of insurance products, experience and understanding of its customers, etc. However, if it is difficult for its customers to understand such important matters in accordance with Article 97(1) and 95(1) of the former Insurance Business Act, and its Enforcement Decree No. 2420.

In full view of all the facts admitted based on the adopted evidence, the lower court determined that the Defendant was liable for compensating the damages suffered by the said Plaintiffs pursuant to Article 102(1) of the former Insurance Business Act, on the ground that the Nonparty did not fully explain the important contents of each insurance contract to Plaintiff 1 and 2 at the time of concluding the instant insurance contract.

In light of the above legal principles and records, the above determination by the court below is just, and there were no errors of exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, or of misapprehending the legal principles on customer protection obligations or duty to explain during the conclusion

B. As to the assessment of damages, etc.

(1) If the cancellation refund pursuant to the insurance policy was paid after a breach of the duty to explain occurs, the amount equivalent to the amount calculated by deducting the amount of cancellation refund received by the policyholder from the total amount of the paid insurance premium (see Supreme Court Decisions 2010Da34159, supra; 2013Da78235, Mar. 27, 2014).

(2) The lower court acknowledged the total amount of KRW 4,455,00,000 paid to Plaintiff 1 according to the instant insurance contract as damages.

The gist of the argument in the grounds of appeal on this part is that, as the above Plaintiff may receive the cancellation refund upon the lapse of an insurance contract, the amount equivalent to the cancellation refund recognized as at the time of closing argument at the fact-finding court should be deducted from the amount of damages. However, such assertion was first made in the final appeal, and thus, is not a legitimate ground of appeal. In addition, even based on such argument, the above Plaintiff’s claim for cancellation refund can be deemed as having not been actually paid the cancellation refund. However, in a case where a policyholder claims the cancellation refund against the insurer after the closure of argument at the fact-finding court in the damages lawsuit calculated by offsetting the amount of damages based on comparative negligence on the basis that the amount equivalent to the damages incurred is the total amount of the insurance premium paid, or after the payment of damages, the insurer may be deemed to have refused the payment equivalent to the ratio of fault on the part of the insurer among the cancellation refund pursuant to the terms and conditions.

The above recognition by the court below is just, and there are no errors by exceeding the bounds of the principle of free evaluation of evidence in violation of logical and empirical rules, by misapprehending the legal principles on the scope of damages.

(3) The lower court deemed that the damages suffered by Plaintiff 2 in violation of the duty to explain were the remaining amount after deducting the total amount of the withdrawn money and the refund money for cancellation in the judgment that the said Plaintiff received, from the total amount of the insurance premium paid by Plaintiff 2 pursuant to the insurance contract of this case, and determined

According to the provisions of Article 44 of the insurance contract (Evidence 6-2 of the above insurance contract) applicable to the above insurance contract, it can be known that the above mid-term withdrawal amount ("contractor's reserve") is the nature of advance payment of the cancellation refund, so such judgment of the court below is justifiable as it is in accordance with the above legal principles. There is no error in the misapprehension of legal principles as to offsetting profits and losses or in the

2. As to the ground of appeal against the plaintiff 3, 4, and 5

The court below rejected the defendant's assertion that the insurance contracts of this case, which the plaintiff 3 and 4 concluded by the plaintiff 3 and 4, constitute the case where the defendant did not deliver the copies of the terms and conditions and the subscription forms to the above plaintiffs at the time of conclusion of each contract, or did not explain important contents of the terms and conditions to the above plaintiffs. The insurance contracts of this case concluded between the plaintiff 5 and the defendant also constitute the case where the plaintiff 5 did not deliver the above plaintiff a duplicate of the terms and the subscription forms at the time of conclusion of the contract, or the plaintiff 5 did not sign the subscription forms. Since the above plaintiffs filed an objection to quality guarantee within 3 months from the subscription date of each insurance contract, the defendant has a duty to refund the insurance premiums paid by them to the above plaintiffs pursuant to the corresponding provisions of each insurance contract. And, the court below rejected the defendant's assertion that "in collusion with the non-party, the above plaintiffs concluded the insurance contracts of this case 3, 4 and 5 with the defendant for the purpose of

Examining the above legal principles and records as to the duty to explain, the above judgment of the court below is just, and there is no violation of law of free evaluation of evidence against logical and empirical rules.

3. Conclusion

Therefore, all appeals are dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee Sang-hoon (Presiding Justice)