Supreme Court: "KB Insurance Can Charge BC Card Commission for Selling Incomplete Insurance"

[Asia Economy Reporter Heo Kyung-jun] The Supreme Court has ruled that if a credit card company incompletely sells insurance products causing losses to the insurance company, the insurance company can receive partial compensation from the card company according to their respective liability ratios.

The Supreme Court's 2nd Division (Presiding Justice Cheon Dae-yeop) announced on the 30th that it overturned the lower court's ruling which dismissed KB Insurance's appeal against BC Card in a commission refund lawsuit, and remanded the case to the Seoul High Court.

KB Insurance and BC Card signed an insurance agency contract in June 2003. BC Card was entrusted to sell KB Insurance's insurance products via telephone sales.

In 2014, the Financial Supervisory Service conducted an inspection on entrusted insurance solicitation and uncovered widespread incomplete sales practices by card companies. Issues included guiding customers to bank installment savings products instead of insurance, emphasizing only tax-exempt compound interest products, and failing to inform customers about the possibility of principal loss upon early termination.

The Financial Supervisory Service issued an administrative order for KB Insurance to refund premiums to policyholders, and KB Insurance filed a lawsuit demanding BC Card return the commissions paid.

The first trial court ruled that if KB Insurance refunds all or part of the premiums received from subscribers, BC Card must pay KB Insurance an amount equivalent to the refunded premiums.

However, the second trial court interpreted that the recovery stipulated in the insurance agency contract is only possible when the defendant bears the risk or is at fault, overturning the first trial's decision.

But the Supreme Court found the second trial's judgment to be incorrect. It stated that "changes, invalidation, loss of effect, or termination of insurance contracts" cannot be interpreted as limited solely to termination due to the defendant's risk or fault.

The court ruled, "Assuming that reasonable limitation of liability under the insurance agency contract is impossible, there is no need to deny the contract's validity or to narrowly interpret the conditions for liability occurrence under the contract contrary to the wording."

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