Study on scope of damage prevention costs in water leak accidents: Focusing on the 2021Da201085 and 201092 rulings of the Supreme Court on March 31, 2022

Abstract

The Commercial Act Article 680, Paragraph 1, stipulates that the policyholder and the insured must make efforts to prevent and reduce damage. In addition, it is stipulated that even if necessary or beneficial costs and compensation exceed the insurance amount, the insurer shall bear them. There is an increasing number of cases where insured persons who have signed up for daily life liability insurance replace pipes or perform waterproofing work when a water leak occurs and then claim insurance money as damage prevention costs. The rulings on this all come to different conclusions. However, the 2021Da201085 and 201092 rulings of the Supreme Court on March 31, 2022 states that water leak detection costs, costs related to prevent damage to third parties directly caused by water leaks and construction costs related to work to prevent the expansion of damage that has already occurred to third parties may be considered damage prevention costs. But the 2021Da201085 and 201092 rulings of the Supreme Court on March 31, 2022 also pointed out that the scope of damage prevention costs caused by water leakage accidents needs to be judged individually for each specific case. Basically, damage prevention costs are the costs required for the policyholder to fulfill the damage prevention obligation, so the scope of damage prevention costs needs to be reviewed in connection with how far the policyholder's damage prevention obligation will be extended. In addition, it must be permitted within the limits of not being contrary to relevant legal principles, such as the requirements for damage prevention obligations, the nature of liability insurance and the relationship with the Commercial Act Article 678. In that case, if the insured detects the point and the cause of the water leak, turns off the water and temporarily installs a water tank on the ceiling, the risk of further water damage disappears, and the damage prevention obligation ends at that point. Afterwards, the insurer is not obligated to compensate for pipe replacement or waterproofing layer repair work to prevent future water damage to the house below, as these are repair costs for the insured's own property or future accident prevention costs and cannot be considered damage prevention costs.