[23] A Case of Abuse of Superior Position by Eight Non-Life Insurance Companies
KFTC Decision No. 2008-013
Byung-Joon Lee (Professor, Hankuk University of Foreign Studies)
In handling property damage associated with car accidents, eight non-life insurance companies did not pay compensation for car rentals and insurance payouts for indirect loss from automobile depreciation even though this was their obligation under the automobile insurance contracts. Regarding such conduct, the KFTC decided that these insurers provided disadvantages to the victims of the car accidents by unreasonably abusing their superior position on the grounds that the victims had to accept insurance payouts as calculated and paid by the insurers because the victims did not know well about the provision on damage compensation (standards of payouts) under the contracts (information imbalance) as well as indirect damage insurance payments, and that it was not possible for the victims to choose another insurance company for their compensation.
With respect to the KFTC’s decision, the meaning of “trade” was in dispute. The Seoul High
Court accepted a narrow meaning of “existence of a contractual relationship” while the Supreme Court sided with the KFTC. Like most of legal experts, the KFTC and the Supreme Court understand that, in terms of legal principles, “trade” has a wider meaning of general means of business activities or trade order, rather than referring to individual contracts. Based on this understanding, an unfair trade practice can be recognized in a case where the insurance companies are supposed to perform the obligations in their transaction relationships by law even when there is no direct transaction relationship between the insurers and the victims. In filing a claim for damages with respect to an unlawful act, if the insurance companies determine the items of compensation for damaged cars in order to perform their obligations under the insurance contracts, it is recognized that there exists a transaction relationship between the insurance companies and the damaged cars’ owners. This ruling is meaningful because a transaction relationship is recognized as long as the insurance companies’ obligation to compensate the victims for the damaged cars pursuant to the insurance contracts exists even though the relationship between the insurance companies and the victims is based on a direct insurance claim, a right granted to the victims by law.
I. Overview
1. Market Conditions
In this case, the respondents were non-life insurance companies that were liable for damage to other person’s car in an accident which occurred in the process of owning, using and managing a policyholder’s car. In particular, when the insured were legally liable to compensate the victim for the damage in an accident, the person having a claim for damages could directly file an insurance claim with the insurance company.
Under the insurance policy, non-life insurance companies had to pay to the damaged car’s owner the cost of car rental if the owner had rented a car, or 20% of the cost if the owner had not rented a car (compensation for non-operation) while the damaged car was repaired. They also had to compensate the owner for being unable to use his or her commercial vehicle during the repair. In most cases, the victims who rent a car during the period made a request for the cost payment to the insurer. However, the victims who used public transportation, instead of a rental car, mostly did not request for the payment since such amount was relatively low compared to the rental cost, and the victims did not know well about the insurance clauses.
In addition, if the repair cost of a damaged car (aged two years or less after delivery) had exceeded 20% of its price prior to the accident, the insurance companies should have paid 15% of the repair cost for the car aged one year or less and 10% for the car aged between one and two years as an automobile depreciation insurance payout.
2. Findings
1) Non-payment of compensation for non-operation (car rental)
According to the automobile insurance policies, the respondents had to pay compensation for non-operation (car rentals) in 5,509,786 cases out of 6,280,515 accidents of property damage insurance that occurred between January 1, 2003 and December 31, 2006. However, they made payments only for 2,347,400 cases until March 2007, with KRW 22,876,116,000 unpaid for the remaining 3,162,386 cases, entitled to insurance payouts for non-operation (car rentals).
2) Non-payment of automobile depreciation insurance
According to the automobile insurance policies, the respondents should have paid automobile depreciation insurance payouts in 11,330 cases out of 6,280,515 accidents of property damage insurance that occurred between January 1, 2003 and December 31, 2006. However, they made payments only for 10,766 cases until March 2007, with KRW 237,910,000 unpaid for the remaining 564 cases, entitled to automobile depreciation insurance payouts.
3. The KFTC’s Decision
The KFTC decided that such non-payment had constituted an act of providing disadvantages to the victims by abusing their superior position, on the grounds that the victims could not but accepted the insurance payments, calculated and paid by the insurance companies because they were not aware of the indirect damage insurance and the provisions on damage compensation (standard of payment) under the insurance policy (information imbalance), and that the victims could not choose another insurer for compensation. The KFTC’s remedial measures were as follows:
1) A corrective order to discontinue violation: The respondents should not do an act of unreasonably providing disadvantages to the victims who are the transaction partners by failing to provide compensation for non-operation and automobile depreciation insurance payouts in violation of their obligations.
2) A corrective order to announce receipt of remedial order: The respondents should announce in two national daily newspapers the fact that a corrective order was imposed on them.
3) Surcharge: The respondents should pay a total of KRW 2,193 million of surcharge.
Surcharge on insurance companies
( Unit : KRW million )
Company name Samsung
Fire &
Marine
Insurance Dongbu Insurance Hyundai
Marine & Fire
Insurance LIG
Insurance
Meritz
Fire &
Marine
Insurance First Fire
&
Marine
Insurance Heungkuk
Fire &
Marine
Insurance Green
Fire &
Marine
Insurance Total
Amount
of surcharge 733
351 349 317 189 110 95 49 2,193
4. The Seoul High Court’s Judgment
The Seoul High Court held that the KFTC’s decisions made on the premise that there was a transaction relationship between the plaintiffs and the victims were unlawful, and thus should be revoked.
The grounds are as follows: The plaintiffs in this case had a relationship with the insured only through the insurance contracts and did not do any legal conduct to the victims. The victims only had the right to file a claim for the damage, caused in an accident for which the insured were liable, directly to the plaintiffs in accordance with Article 724(2) of the Commercial Act. Such direct claim is not a modified right of insurance claim nor a similar right the insured have against the plaintiffs, but just a claim for damages the victims can file with the insurers regarding the unlawful act of property damage. Therefore, the relationship between the plaintiffs and the victims was simply based on an unlawful act, and it was difficult to view that there had been a direct transaction relationship between the two parties. In addition, the relationship between the victims and the insured was only based on the same unlawful act, and it was not possible to acknowledge that there was a transaction relationship between the plaintiffs and the victims, which was established through the insured.
5. The Supreme Court’s Judgment
The Supreme Court adopted a wider meaning of the trading relationship that trade is the general means for business activities or trading order. With this understanding, the Court ruled that it was reasonable to view that there had existed a trading relationship, formed through the insured, between the plaintiffs and the victims, considering that the insurers’ obligation to compensate the victims for the property damage was based on the insurance contracts, and that there was much room for unfair trade practices the obligors may engage in, while performing their obligation of damage compensation (for example, the insurers might pay the repair cost on a long-term installment basis, instead of lump sum payment, or pay the amount after a long time). The Court reversed the judgment of the Seoul High Court and remanded the case to the lower court, stating that the lower court showed a lapse in judgment by misunderstanding the legal principles about the concept of trade in connection with unfair trade practices, which affected the judgment. After a retrial, the High Court held that the plaintiffs had violated the MRFTA and the measures made by the KFTC against them were reasonable.
II. Relevant Provisions and Systems
1. Provisions on abuse of position in transaction
「Monopoly Regulation and Fair Trade Act」
Article 23 (Prohibition on Unfair Trade Practices)
① No enterpriser shall commit any of the following acts that are likely to impede fair trade (referred to as “unfair trade practices” hereinafter) or make an affiliated company or other enterprisers perform such acts:
4. Act of engaging in a trade with a transacting partner by unfairly taking advantage of its own position in the transaction
(omitted)
② The categories or standards for unfair trade practices shall be prescribed by the
Presidential Decree.
「Enforcement Decree of the MRFTA」
(Appendix 1) Types of and Criteri
[23] A Case of Abuse of Superior Position by Eight Non-Life Insurance Companies
KFTC Decision No. 2008-013
Byung-Joon Lee (Professor, Hankuk University of Foreign Studies)
In handling property damage associated with car accidents, eight non-life insurance companies did not pay compensation for car rentals and insurance payouts for indirect loss from automobile depreciation even though this was their obligation under the automobile insurance contracts. Regarding such conduct, the KFTC decided that these insurers provided disadvantages to the victims of the car accidents by unreasonably abusing their superior position on the grounds that the victims had to accept insurance payouts as calculated and paid by the insurers because the victims did not know well about the provision on damage compensation (standards of payouts) under the contracts (information imbalance) as well as indirect damage insurance payments, and that it was not possible for the victims to choose another insurance company for their compensation.
With respect to the KFTC’s decision, the meaning of “trade” was in dispute. The Seoul High
Court accepted a narrow meaning of “existence of a contractual relationship” while the Supreme Court sided with the KFTC. Like most of legal experts, the KFTC and the Supreme Court understand that, in terms of legal principles, “trade” has a wider meaning of general means of business activities or trade order, rather than referring to individual contracts. Based on this understanding, an unfair trade practice can be recognized in a case where the insurance companies are supposed to perform the obligations in their transaction relationships by law even when there is no direct transaction relationship between the insurers and the victims. In filing a claim for damages with respect to an unlawful act, if the insurance companies determine the items of compensation for damaged cars in order to perform their obligations under the insurance contracts, it is recognized that there exists a transaction relationship between the insurance companies and the damaged cars’ owners. This ruling is meaningful because a transaction relationship is recognized as long as the insurance companies’ obligation to compensate the victims for the damaged cars pursuant to the insurance contracts exists even though the relationship between the insurance companies and the victims is based on a direct insurance claim, a right granted to the victims by law.
I. Overview
1. Market Conditions
In this case, the respondents were non-life insurance companies that were liable for damage to other person’s car in an accident which occurred in the process of owning, using and managing a policyholder’s car. In particular, when the insured were legally liable to compensate the victim for the damage in an accident, the person having a claim for damages could directly file an insurance claim with the insurance company.
Under the insurance policy, non-life insurance companies had to pay to the damaged car’s owner the cost of car rental if the owner had rented a car, or 20% of the cost if the owner had not rented a car (compensation for non-operation) while the damaged car was repaired. They also had to compensate the owner for being unable to use his or her commercial vehicle during the repair. In most cases, the victims who rent a car during the period made a request for the cost payment to the insurer. However, the victims who used public transportation, instead of a rental car, mostly did not request for the payment since such amount was relatively low compared to the rental cost, and the victims did not know well about the insurance clauses.
In addition, if the repair cost of a damaged car (aged two years or less after delivery) had exceeded 20% of its price prior to the accident, the insurance companies should have paid 15% of the repair cost for the car aged one year or less and 10% for the car aged between one and two years as an automobile depreciation insurance payout.
2. Findings
1) Non-payment of compensation for non-operation (car rental)
According to the automobile insurance policies, the respondents had to pay compensation for non-operation (car rentals) in 5,509,786 cases out of 6,280,515 accidents of property damage insurance that occurred between January 1, 2003 and December 31, 2006. However, they made payments only for 2,347,400 cases until March 2007, with KRW 22,876,116,000 unpaid for the remaining 3,162,386 cases, entitled to insurance payouts for non-operation (car rentals).
2) Non-payment of automobile depreciation insurance
According to the automobile insurance policies, the respondents should have paid automobile depreciation insurance payouts in 11,330 cases out of 6,280,515 accidents of property damage insurance that occurred between January 1, 2003 and December 31, 2006. However, they made payments only for 10,766 cases until March 2007, with KRW 237,910,000 unpaid for the remaining 564 cases, entitled to automobile depreciation insurance payouts.
3. The KFTC’s Decision
The KFTC decided that such non-payment had constituted an act of providing disadvantages to the victims by abusing their superior position, on the grounds that the victims could not but accepted the insurance payments, calculated and paid by the insurance companies because they were not aware of the indirect damage insurance and the provisions on damage compensation (standard of payment) under the insurance policy (information imbalance), and that the victims could not choose another insurer for compensation. The KFTC’s remedial measures were as follows:
1) A corrective order to discontinue violation: The respondents should not do an act of unreasonably providing disadvantages to the victims who are the transaction partners by failing to provide compensation for non-operation and automobile depreciation insurance payouts in violation of their obligations.
2) A corrective order to announce receipt of remedial order: The respondents should announce in two national daily newspapers the fact that a corrective order was imposed on them.
3) Surcharge: The respondents should pay a total of KRW 2,193 million of surcharge.
Surcharge on insurance companies
( Unit : KRW million )
Company name Samsung
Fire &
Marine
Insurance Dongbu Insurance Hyundai
Marine & Fire
Insurance LIG
Insurance
Meritz
Fire &
Marine
Insurance First Fire
&
Marine
Insurance Heungkuk
Fire &
Marine
Insurance Green
Fire &
Marine
Insurance Total
Amount
of surcharge 733
351 349 317 189 110 95 49 2,193
4. The Seoul High Court’s Judgment
The Seoul High Court held that the KFTC’s decisions made on the premise that there was a transaction relationship between the plaintiffs and the victims were unlawful, and thus should be revoked.
The grounds are as follows: The plaintiffs in this case had a relationship with the insured only through the insurance contracts and did not do any legal conduct to the victims. The victims only had the right to file a claim for the damage, caused in an accident for which the insured were liable, directly to the plaintiffs in accordance with Article 724(2) of the Commercial Act. Such direct claim is not a modified right of insurance claim nor a similar right the insured have against the plaintiffs, but just a claim for damages the victims can file with the insurers regarding the unlawful act of property damage. Therefore, the relationship between the plaintiffs and the victims was simply based on an unlawful act, and it was difficult to view that there had been a direct transaction relationship between the two parties. In addition, the relationship between the victims and the insured was only based on the same unlawful act, and it was not possible to acknowledge that there was a transaction relationship between the plaintiffs and the victims, which was established through the insured.
5. The Supreme Court’s Judgment
The Supreme Court adopted a wider meaning of the trading relationship that trade is the general means for business activities or trading order. With this understanding, the Court ruled that it was reasonable to view that there had existed a trading relationship, formed through the insured, between the plaintiffs and the victims, considering that the insurers’ obligation to compensate the victims for the property damage was based on the insurance contracts, and that there was much room for unfair trade practices the obligors may engage in, while performing their obligation of damage compensation (for example, the insurers might pay the repair cost on a long-term installment basis, instead of lump sum payment, or pay the amount after a long time). The Court reversed the judgment of the Seoul High Court and remanded the case to the lower court, stating that the lower court showed a lapse in judgment by misunderstanding the legal principles about the concept of trade in connection with unfair trade practices, which affected the judgment. After a retrial, the High Court held that the plaintiffs had violated the MRFTA and the measures made by the KFTC against them were reasonable.
II. Relevant Provisions and Systems
1. Provisions on abuse of position in transaction
「Monopoly Regulation and Fair Trade Act」
Article 23 (Prohibition on Unfair Trade Practices)
① No enterpriser shall commit any of the following acts that are likely to impede fair trade (referred to as “unfair trade practices” hereinafter) or make an affiliated company or other enterprisers perform such acts:
4. Act of engaging in a trade with a transacting partner by unfairly taking advantage of its own position in the transaction
(omitted)
② The categories or standards for unfair trade practices shall be prescribed by the
Presidential Decree.
「Enforcement Decree of the MRFTA」
(Appendix 1) Types of and Criteri
การแปล กรุณารอสักครู่..