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Newsletter | November 2015, Issue 3
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Insurance
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Supreme Court Rules in Favor of Korea’s First Property Insurance Company, Meritz Fire, in the Ginseng Business Claim
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On July 9, 2015, Supreme Court of Korea (“Korean Supreme Court”) denied an appeal filed by Industrial Bank of Korea (“IBK”), the appellant, against the respondent, Meritz Fire & Marine Insurance Co., Ltd. (“Meritz Fire”). IBK filed a claim for KRW 7.96 billion in insurance proceeds arising under an Assurance Value Insurance Agreement (“AVI” and the “Agreement,” respectively).
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Facts
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In this case, the key issue involved the policyholder (and IBK as the insured) managing a business for the production and sale of ginseng (the “Ginseng Business”). The policyholder (and IBK as the insured) had entered into an insuring agreement for AVI with Meritz Fire, where the ginseng seeds and seedlings were the properties that were insured. Following a loss related to the Ginseng Business, the policyholder subsequently submitted an insurance claim for insurance proceeds, claiming that an insured event had occurred as specified in the insurance policy (i.e., the AVI Agreement).
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Litigation
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Over the course of the litigation, the main issue was whether an “insured event” as stipulated in the AVI Agreement had actually occurred.
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The Korean Supreme Court ruled that it is extremely important that the policyholder conducted its Ginseng Business in the normal course and manner, and in accordance with the business plan that the policyholder submitted for the AVI. In addition, the Korean Supreme Court noted that among other factors, the reduction of business expenses, seedling and seed purchase prices, abandonment of the plan to establish a processing plant are all considered to be an “event that increases the risks associated with the business plan submitted to the insurance company, or is a significant change to the foregoing business plan[,]” and an “event that changes the plan to use the sales proceeds of the seedlings or seeds[,] or cause delays” as stipulated in the AVI Agreement.
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Therefore, since the appellant failed to notify Meritz Fire when the above-mentioned events occurred, and did not make a request for a written consent pursuant to the AVI Agreement, the Korean Supreme Court ruled that the “reasonable cause” condition for an insured event was not established.
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Representation
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Kim & Chang defended Meritz Fire in all stages of the litigation1, which resulted in the Supreme Court’s decision denying the appellant’s final appeal.
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At the District Court, Appellate Court, and the Supreme Court.
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Back to Main Page
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For more information, please visit our website:
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