Case in which the issue was whether a duty to explain is recognized with respect to the primary-site-based classification clause in cancer insurance terms and conditions〉

【Holding】

[1] Cases in which the Supreme Court may rule on errors in the interpretation and application of substantive law even where the requirement of ‘having made a determination contrary to Supreme Court precedents,’ which may serve as a ground for appeal in a small claims case, is not satisfied

[2] The meaning of ‘important content’ subject to the duty to specify and explain insurance terms and conditions, and the standard for determining it / Cases in which the duty to specify and explain insurance terms and conditions is exempted / Where the duty to specify and explain insurance terms and conditions is violated, whether the content of those terms and conditions may be asserted as the content of the contract (negative)

[3] In a case where the special disease terms and conditions of an insurance contract that A concluded with insurance company B, designating C as the insured and the beneficiary, provided that ‘100% of the insured amount shall be paid upon a confirmed diagnosis of cancer, and 20% of the insured amount shall be paid upon a confirmed diagnosis of thyroid cancer,’ and under those insurance terms and conditions ‘cancer’ was defined as ‘a disease specified in the classification table of malignant neoplasms (cancer) in the Korean Standard Classification of Diseases,’ so that ‘malignant neoplasms of ill-defined, secondary and unspecified sites’ under classification codes C76-C80 were also included therein; C was thereafter diagnosed with thyroid cancer (C73), lymph node metastasis (C77.9), and the like and filed a claim for payment of insurance proceeds, in response to which Company B paid the insurance proceeds on the basis of thyroid cancer pursuant to the ‘thyroid cancer, etc. exclusion clause,’ which provided that ‘classification codes C44 [other malignant neoplasms (cancer) of skin] and C73 [malignant neoplasm (cancer) of thyroid gland] and precancerous conditions (conditions prior to becoming cancer) are excluded from cancer,’ and the ‘primary-site-based classification clause,’ which provided that ‘in the case of C77~C80 [malignant neoplasms (cancer) of ill-defined, secondary and unspecified sites], where a primary malignant neoplasm (cancer) is identified, the classification shall be based on the primary site (the site where it first occurred)’; and C sought payment of the ‘cancer’ insurance proceeds under the insurance contract, asserting that Company B could not assert the ‘primary-site-based classification clause’ as the content of the insurance contract because it had not explained that clause at the time of concluding the insurance contract, the Court held that the ‘primary-site-based classification clause,’ which sets the classification standard for ‘cancer’ under the insurance contract, is an important content of the insurance contract in respect of which Company B bears the duty to explain specifically and in detail, and that the lower court's judgment, which held otherwise and dismissed C's claim, erred in misapprehending the relevant legal principles

[4] The principle of objective interpretation in the interpretation of insurance terms and conditions

【Summary of Decision】

[1] In a situation where there is not yet any Supreme Court precedent on the interpretation of a statute to be applied to a specific small claims case, and a large number of small claims cases in which the interpretation of the same statute is at issue are pending in the lower courts, and moreover instances of conflicting determinations by different panels are appearing, if the Supreme Court were to close the case without ruling on the interpretation of that statute merely because it is a small claims case, there is concern that the legal stability of the people's lives would be undermined. Where such special circumstances exist, it must be held that the Supreme Court may rule on errors in the interpretation and application of substantive law, in the course of performing its essential function of unifying the interpretation of statutes, even if the requirement of ‘having made a determination contrary to Supreme Court precedents,’ which may serve as a ground for appeal in a small claims case, is not satisfied.

[2] In general, an insurer and persons engaged in the conclusion or solicitation of insurance contracts bear, when concluding an insurance contract, a specific and detailed duty to specify and explain to the policyholder or the insured the important contents of the insurance contract, such as the content of the insurance product stated in the insurance terms and conditions, the structure of premium rates, and changes to the matters stated in the insurance application. Here, ‘important content’ subject to the duty to explain means matters that, in light of common social norms, may directly affect a customer's decision on whether to conclude the contract or on the consideration therefor, or on what action to take after concluding the contract; what constitutes important content among the clauses of the terms and conditions cannot be stated uniformly and must be determined in consideration of the individual circumstances of the specific case.

Such a duty to specify and explain is recognized on the ground of avoiding a situation in which important matters of the terms and conditions become part of the contract without the policyholder's knowledge, so that the policyholder suffers an unforeseen disadvantage. Therefore, even matters set forth in the terms and conditions are not subject to the insurer's duty to specify and explain if they are general and common in transactions such that the policyholder already knows them well or could sufficiently anticipate them without a separate explanation, or if they merely repeat or elaborate on what is already prescribed by statute. However, unless it is a case in which the insurer is thus exempted from the duty to specify and explain, where the insurer concludes an insurance contract in violation of this duty to specify and explain the insurance terms and conditions, the insurer cannot assert the content of those terms and conditions as the content of the insurance contract.

[3] In a case where the special disease terms and conditions of an insurance contract that A concluded with insurance company B, designating C as the insured and the beneficiary, provided that ‘100% of the insured amount shall be paid upon a confirmed diagnosis of cancer, and 20% of the insured amount shall be paid upon a confirmed diagnosis of thyroid cancer,’ and under those insurance terms and conditions ‘cancer’ was defined as ‘a disease specified in the classification table of malignant neoplasms (cancer) in the Korean Standard Classification of Diseases (KCD, 6th revision, Statistics Korea Notice No. 2010-246),’ so that ‘malignant neoplasms of ill-defined, secondary and unspecified sites’ under classification codes C76-C80 were also included therein; C was thereafter diagnosed with thyroid cancer (C73), lymph node metastasis (C77.9), and the like and filed a claim for payment of insurance proceeds, in response to which Company B paid the insurance proceeds on the basis of thyroid cancer pursuant to the ‘thyroid cancer, etc. exclusion clause,’ which provided that ‘classification codes C44 [other malignant neoplasms (cancer) of skin] and C73 [malignant neoplasm (cancer) of thyroid gland] and precancerous conditions (conditions prior to becoming cancer) are excluded from cancer,’ and the ‘primary-site-based classification clause,’ which provided that ‘in the case of C77~C80 [malignant neoplasms (cancer) of ill-defined, secondary and unspecified sites], where a primary malignant neoplasm (cancer) is identified, the classification shall be based on the primary site (the site where it first occurred)’; and C sought payment of the ‘cancer’ insurance proceeds under the insurance contract, asserting that Company B could not assert the ‘primary-site-based classification clause’ as the content of the insurance contract because it had not explained that clause at the time of concluding the insurance contract, the Court held that the lower court's judgment, which held otherwise and dismissed C's claim, erred in misapprehending the relevant legal principles, on the following grounds: the ‘primary-site-based classification clause,’ which sets the classification standard for ‘cancer’ under the insurance contract, concerns what is to constitute the insured event under the insurance contract and thus constitutes a core matter of the insurance contract directly linked in substance to the existence of the obligation to pay insurance proceeds, the scope of coverage, or the amount of insurance proceeds to be paid; accordingly, the above clause of the terms and conditions is a matter that may directly affect the decision on whether to conclude the insurance contract or on the consideration therefor and is an important content of the insurance contract; and it cannot be found that the above clause was a matter so general and common in transactions that the policyholder could have sufficiently anticipated it without a separate explanation, or that the policyholder knew it sufficiently well at the time of concluding the insurance contract; therefore, Company B bore the duty to explain the above clause specifically and in detail to the policyholder or the insured at the time of concluding the insurance contract.

[4] Insurance terms and conditions must be interpreted fairly and reasonably in accordance with the principle of good faith, taking into account the purpose and purport of the terms and conditions concerned, and must be interpreted objectively on the basis of the understanding of an average customer and in consideration of the interests of the insured group as a whole, without regard to the purpose or intent contemplated by individual contracting parties.

【Referenced Statutes】

[1] Article 3 subparagraph 2 of the Trial of Small Claims Act [2] Article 638-3(1) of the Commercial Act, Article 3 of the Act on the Regulation of Terms and Conditions [3] Articles 638-3(1) and 739-2 of the Commercial Act, Article 3 of the Act on the Regulation of Terms and Conditions [4] Article 5(1) of the Act on the Regulation of Terms and Conditions

【Referenced Precedents】

[1] Supreme Court Decision 2003Da1878, August 20, 2004 (Gong 2004Ha, 1571)
Supreme Court Decision 2020Da207444, January 14, 2021 (Gong 2021Sang, 370)
Supreme Court Decision 2023Da290485, March 12, 2024 (Gong 2024Sang, 648)
[2] Supreme Court Decision 2009Da91316, 91323, March 25, 2010
Supreme Court Decision 2010Da19990, July 15, 2010
[4] Supreme Court Decision 2010Da45777, November 25, 2010 (Gong 2011Sang, 13)

(Source : Supreme Court Decision 2023Da250746, March 13, 2025 | Judicial Information Disclosure Portal, Precedents)