A Criteria for Judging the Performance of the Duty to notify Increase in Risk prescribed in Article 652 of the Commercial Act

The contents of the case of the Supreme Court decision, which is the subject of this study's commentary, are as follows. On June 26, 2006, the plaintiff (the policyholder) entered into a “Accident Insurance Contract” with the defendant (the insurer) with the insured's occupation set as ‘general police officer’. On October 2015, the insured's occupation was changed to ‘truck driver’, but the defendant was not notified of this fact. On October 13, 2017, the plaintiff entered into a “Driver's Insurance Contract” with the same insured with the defendant. Afterwards, on October 24, 2017, the plaintiff confirmed that the insured's occupation was listed as ‘general police officer’ on the newly issued driver's insurance policy, and notified the insurance planner who brokered the “Driver's Insurance Contract” that the insured's occupation had been changed to ‘truck driver’. In this case, the Supreme Court judged whether this notification could be considered as notification of the increased risk to the insured in relation to the “Accident Insurance Contract”. In conclusion, the Supreme Court presented the criteria for judging whether the policyholder had fulfilled the duty to notify of increased risk in relation to each of the insurance contracts when the policyholder entered into multiple insurance contracts for the same insured with one insurance company, and acknowledged that since the notification had been made in relation to the “Driver’s Insurance Contract”, the same notification had also been made in relation to the “Accident Insurance Contract” in this case. However, since there are issues to be reconsidered regarding the standard for judging the duty to notify of increased risk presented by the Supreme Court, this paper examined the validity of the subject judgment by comparing and analyzing the content and basis of the appellate judgment focusing on the following issues. First, in cases where the insurance policy stipulates that the insurer may cancel the insurance contract if the insured party does not notify the fact of a significant increase in risk, we examined whether the insurer may cancel the insurance contract even if it did not explain this to the insured party in advance. Second, when the policyholder notifies the insured of a significant increase in risk, such as a change in the insured's occupation, we examined how and to what extent the policyholder must inform the insurer of this fact. Third, when the insurer becomes aware of the insured's increased risk in a roundabout and indirect manner, we analyzed whether the policyholder's duty to notify the increased risk can be considered fulfilled through this recognition. This paper specifically examined the following issues: i) the scope of the insurer's duty to specify and explain the terms and conditions, ii) whether the theory of indication under Civil Act applies to the notification of the increased risk, iii) the possibility of moral hazard due to the insured's bad faith, iv) whether the calculation of insurance premiums in proportion to the insurance money is balanced, v) the difference in effect according to the intention to effect contained in the insured's notification, vi) the incompleteness of the notification procedure for increased risk change in practice. Based on this, we analyzed the legal issues based on the general theory of Civil Act and the interpretation of provisions in Commercial Act, and presented the criteria of judgment for reasonable resolution.