South Korea's Supreme Court has ruled that auto insurance policy terms requiring unlicensed drivers to pay up to 100 million won ($70,000) in liability charges to insurers are valid, in a decision that reinforces accountability for serious traffic violations.
According to legal sources on the 18th, the Supreme Court's First Division (Justice Noh Tae-ak presiding) overturned a lower court ruling that had favored policyholder A in a subrogation claim filed by an insurance company, remanding the case to Suwon District Court.
In January 2022, A fell asleep in a vehicle while driving without a license. When a responding police officer knocked on the driver's side window to wake A, the vehicle moved and struck the officer, causing injuries requiring six weeks of treatment.
The insurer paid approximately 22.8 million won in claims to the injured officer, then sought reimbursement from A under the policy's liability provisions.
Auto insurance personal injury coverage in Korea consists of two tiers. Personal Injury Coverage I is mandatory insurance that compensates up to 150 million won for fatal accidents under the Automobile Damage Compensation Guarantee Act Enforcement Decree. Personal Injury Coverage II is optional insurance covering damages exceeding this limit, with no compensation cap.
A's policy stipulated that in unlicensed driving accidents, the policyholder must pay 3 million won per accident for Coverage I claims and 100 million won per accident for Coverage II claims.
A filed suit arguing these terms were excessively unfavorable and therefore void. Both the first and second instance courts ruled in A's favor, calling the provisions "unfairly disadvantageous to customers." The lower courts reasoned that since enforcement rules cap insurer subrogation rights at 3 million won for unlicensed driving accidents, liability charges should not exceed this amount either.
The Supreme Court disagreed. Considering the legislative purpose and regulatory framework of the automobile compensation law, the court found that subrogation limits apply only to mandatory Coverage I, not to optional Coverage II.
The court also noted the need to consider the evolution of related laws and standard insurance terms, which have progressively increased liability charges for serious violations such as unlicensed and drunk driving. Standard policy terms revised since June 2020 now impose liability charges on optional insurance as well, and the policy in this case followed those terms exactly.
"The increase in liability charges reflects social demands to strengthen accountability for those who cause accidents through serious legal violations," the Supreme Court stated. "It is difficult to conclude that policy terms directly reflecting the revised standard provisions are unfairly disadvantageous to customers or so unusual as to be unforeseeable."
