An insurer must pay traffic accident death benefits even when the policyholder dies after the policy expires, provided the traffic accident occurred during the coverage period, the Supreme Court has ruled. The court applied the "contra proferentem" rule, which holds that ambiguous insurance policy terms must be interpreted in favor of the customer.
According to legal sources on Wednesday, the Supreme Court's First Division (presided over by Justice Ma Yong-joo) recently overturned a lower court ruling that had dismissed a lawsuit filed by a plaintiff identified as A against Shinhan Life Insurance, and remanded the case to the Seoul Central District Court.
A had signed a life insurance contract with Shinhan Life in April 2003, naming her husband B as the insured, with a coverage period ending April 16, 2023. On January 11, 2023, approximately three months before the policy's expiration, B was struck by a car on a road. He received treatment in a hospital intensive care unit, but his condition deteriorated, and he ultimately died on June 20, 2023 — after the coverage period had ended — from an electrolyte imbalance caused by acute kidney injury.
A, as B's spouse, requested payment of the insurance benefits on the grounds that her husband's death was directly caused by an accident that occurred during the coverage period. Shinhan Life rejected the claim, citing that the death occurred after the policy expired. A then filed a lawsuit seeking a total of 35 million won (approximately $25,000), including 25 million won in traffic accident death benefits and 10 million won in rider death benefits.
The central issue was the interpretation of the phrase "when death results from a traffic accident during the coverage period" in the insurance policy. The question was whether the phrase "during the coverage period" refers only to the timing of the traffic accident or whether it also encompasses the timing of death.
The first-instance court ordered the insurer to pay A 35 million won plus interest for delayed payment. The court held that "when a policy clause can be interpreted in multiple ways and its meaning is not clear, it must be interpreted in favor of the customer." It further ruled that "even if death occurred after the coverage period, it still falls under the category of 'death resulting from a traffic accident during the coverage period,'" recognizing the obligation to pay the benefits.
The appellate court, however, sided with the insurer. The second-instance court determined that the traffic accident and the death were separate insured events, and that death occurring after the expiration of the coverage period did not meet the payment requirements under the policy clause. It reasoned that interpreting the clause as A argued would be unreasonable, as it would expose the insurer to unlimited liability for death benefits even in cases where death occurred long after the policy expired following a minor traffic accident.
The Supreme Court, however, overturned the appellate ruling, finding the bereaved family's claim to be valid. The Supreme Court ruled that "while it is objective and reasonable to interpret the phrase 'during the coverage period' in this policy clause as modifying 'when death occurred,' it is also fully possible and reasonable to interpret it as modifying only 'traffic accident,' which would make it a payable cause even if death occurred after the policy's expiration."
The Supreme Court stated that "when the meaning of a policy clause is not clear, it must be interpreted in favor of the customer in accordance with the principle of contra proferentem set forth in Article 5 of the Act on the Regulation of Terms and Conditions," and held that "it is appropriate to interpret the clause as requiring only that the traffic accident occur during the coverage period."
The court explained that "the concern of an insurer bearing the obligation to pay benefits for a considerable period after the policy expires can be resolved by limiting the direct cause of death or other outcomes to a traffic accident that occurred during the coverage period," adding that "in B's case, it is appropriate to view his death as directly caused by an accident that occurred during the coverage period."
