Supreme Court: "Korea Workers' Compensation & Welfare Service can subrogate only the amount after deducting the worker's fault portion from insurance benefits"… Precedent Change

Changing Position from 'Deduction after Comparative Negligence' to 'Comparative Negligence after Deduction'
Expanding the Compensation Scope for Injured Workers

Supreme Court Grand Bench.
Photo by Supreme Court

[Asia Economy Reporter Choi Seok-jin, Legal Affairs Specialist] The Supreme Court has ruled that the amount of damages that the Korea Workers' Compensation and Welfare Service (KCOMWEL) can claim from the perpetrator after paying insurance benefits or survivor benefits to a worker injured in an industrial accident or their bereaved family is limited to the amount of insurance benefits paid minus the portion corresponding to the worker's degree of fault.

When calculating the amount of subrogation that the Service can claim, it has changed its position from the 'deduction after fault apportionment theory', which viewed the remaining claim amount after deducting the worker's fault portion through fault apportionment as the damage claim amount the worker can claim from the perpetrator, to the 'fault apportionment after deduction theory', which allows the worker who received insurance benefits from the Service to claim the entire remaining claim amount from the perpetrator. This change increases the Service's burden but expands the scope of compensation for the injured worker's damages.

The intention is to allow the worker to be fully compensated for damages by having the Service bear the amount corresponding to the injured worker's degree of fault in the insurance benefits when the worker's damages from the industrial accident are not fully compensated.

The Supreme Court Full Bench (Presiding Justice Min Yoo-sook) on the 24th unanimously overturned the part of the lower court ruling that ruled against the defendants regarding passive damages in the appeal case where KCOMWEL sued Korea Electric Power Corporation and electrical contractor Company A for subrogation claims, and remanded the case to the Seoul High Court.

The court stated, "In calculating the scope of the plaintiff (Service)'s subrogation rights for damages claims against the defendants for the injured worker, the lower court erred in law by not deducting the portion corresponding to the injured worker's fault from the survivor's pension related to passive damages, and instead deducted the portion corresponding to the fault ratio of B Telecom, the insured, from the entire survivor's pension and allowed subrogation of the difference. This misinterpretation of the scope of the Service's subrogation rights under Article 87, Paragraph 1 of the Industrial Accident Compensation Insurance Act affected the judgment."

Company A was subcontracted by Korea Electric Power Corporation in 2017 to carry out distribution work related to road construction. The process involved removing power lines and dismantling utility poles.

Employees of Company A removed the bands that connected the main utility pole and the supporting pole (the pole supporting the main pole) while taking down the wires.

The dismantling of optical fiber cables on the utility poles was subcontracted by C Telecom to B Telecom. The B Telecom team leader warned team members not to approach due to the risk of the utility pole falling without the supporting bands, but later, an employee who arrived at the site approached the pole, suddenly fell, and was fatally injured by the falling pole.

KCOMWEL recognized this accident as a work-related injury and paid 199.89 million KRW in benefits to the bereaved family, then filed a lawsuit against Korea Electric Power Corporation and Company A claiming about 210 million KRW in subrogation.

The first trial mostly accepted the Service's claims and ordered Korea Electric Power Corporation and Company A to pay about 208 million KRW.

The second trial limited the Service's subrogation rights and reduced the subrogation amount to about 97 million KRW.

The court cited previous Supreme Court precedents, stating, "When an industrial accident occurs due to joint illegal acts by the insured and a third party, in light of the principle of litigation economy to prevent cyclical subrogation lawsuits and good faith, KCOMWEL cannot claim subrogation against the third party for the portion corresponding to the insured's fault ratio. Specifically, the Service can only subrogate the difference obtained by deducting the portion corresponding to the insured's fault ratio from the insurance benefits amount within the damage amount the injured worker is compensated for, if there is a difference."

Further, "Based on the above principle, the plaintiff (Service) can subrogate the defendants within the range of the lesser amount between the damages suffered by the deceased due to this accident and the insurance benefits paid by the plaintiff, after deducting 30% corresponding to the deceased's fault ratio from the damage amount."

Meanwhile, the trial focused on which method to choose in industrial accident cases where the worker is also at fault: ▲ deducting the fault ratio from the bereaved family's damages first and then deducting the benefits paid by KCOMWEL (deduction after fault apportionment), or ▲ deducting the benefits paid by KCOMWEL from the bereaved family's damages first and then calculating the fault ratio (fault apportionment after deduction).

For example, if an injured worker with 30% fault suffers damages of 10 million KRW and KCOMWEL pays 8 million KRW in survivor benefits, applying the 'deduction after fault apportionment' method means the worker can claim 7 million KRW (10 million KRW minus 30% fault, i.e., 3 million KRW) from the perpetrator. Since the worker has already received 8 million KRW from the Service, which exceeds the claimable damage amount, the remaining claim against the perpetrator is zero. This method first determines the damage claim amount the worker can claim after fault apportionment, then deducts the insurance benefits received from the Service.

However, the Service can subrogate the entire insurance benefits paid to the worker within the damage amount the perpetrator must bear after fault apportionment (7 million KRW), so in this case, it can claim 7 million KRW.

On the other hand, under the 'fault apportionment after deduction' method, even if the worker received 8 million KRW in insurance benefits from the Service, since 2 million KRW of the total 10 million KRW damages remain uncompensated, the portion corresponding to the perpetrator's fault ratio of 70% (1.4 million KRW, i.e., 2 million KRW x 70%) can still be claimed from the perpetrator. This method first deducts the insurance benefits from the total damages, then applies fault apportionment to the remaining damages.

The scope of subrogation the Service can claim from the perpetrator is limited to the perpetrator's damage amount (7 million KRW), and the amount corresponding to the perpetrator's responsibility within the insurance benefits paid (8 million KRW), i.e., 5.6 million KRW after deducting the worker's fault portion (8 million KRW x 30% = 2.4 million KRW).

Last year, the Supreme Court Full Bench overturned previous precedents in a case involving the National Health Insurance Service and adopted the 'fault apportionment after deduction' principle.

The reason was that prioritizing the Service's subrogation rights over the victim's rights effectively shifts the portion the Service originally had to bear for the victim onto the victim.

However, since last year's Full Bench ruling was limited to the National Health Insurance Service case, the lower court (second trial) in this case involving KCOMWEL applied the previous Supreme Court position of the 'deduction after fault apportionment' method.

On this day, the Supreme Court Full Bench applied the 'fault apportionment after deduction' principle derived last year to KCOMWEL's industrial accident compensation as well.

The court explained, "The purpose of providing insurance benefits regardless of the injured worker's fault is to promptly and fairly compensate for work-related injuries and promote rehabilitation and social reintegration. Departing from the traditional 'deduction after fault apportionment' method focused on the liability insurance nature of industrial accident insurance, following the 'fault apportionment after deduction' method declared in the Full Bench ruling on health insurance is a unified interpretation within the legal order."

Additionally, "Even considering that employers pay the full industrial accident insurance premiums, it is necessary to comprehensively consider that employers expose workers to risks to pursue profits and that the presence of some fault on the worker's part does not mean the worker is solely responsible," the court added.

This content was produced with the assistance of AI translation services.