Review on the Korean Supreme Court Case on Legal Interest for Confirmation in a Lawsuit for Negative Confirmation Brought by an Insurance Company: Korean Supreme Court Case No. 2018Da257958･257965 rendered on 7 June 2021

In case where there is a dispute between an insurance company and an insured as to whether an insurance company should pay insurance proceeds and/or as to how much insurance proceeds should be, a lawsuit for negative confirmation, claiming for a judgment to declare that the insurance company should not be held liable to pay any insurance proceeds, is the only possible form of a lawsuit that an insurance company can bring preemptively before a court. A plaintiff who wishes to bring such negative confirmation/declaration claim should have legal interest for such confirmation as it is legal requirement for a confirmation claim, and the Korean court has generally accepted that an insurance company has the legal interest to bring a negative confirmation/declaration claim as long as there is a dispute between an insurance company and an insured regarding insurance coverage and/or insurance proceeds. However, recently, in the above mentioned case, the Korean Supreme Court (en banc) had in-depth discussion as to whether the negative confirmation/declaration claim brought by an insurance company should be restricted or not. Especially, three supreme court judges made a dissenting opinion holding that an insurance company must show special circumstances on order to bring a negative confirmation/declaration claim, especially considering the public nature of insurance, legal obligation of an insurance company to provide protection for an insured, the equity that is required between the parties to an insurance contract and the possible abuse of negative confirmation lawsuit by an insurance company. Although it may be necessary to prevent the abuse of a lawsuit by an insurance company in order to protect an insured, it is difficult to accept the dissenting opinion because the right to bring a lawsuit is constitutional right of an insurance company, and if the court restricts the negative confirmation claim made by an insurance company by requiring additional conditions for “legal interest for confirmation” without a specific provision in a legislation, it could be considered as infringement of such constitutional right. As rightfully pointed out by the supplementary opinion to the majority opinion in this Supreme Court case, the negative confirmation/declaration lawsuit brought by an insurance company could also be beneficial to an insured as it will lead to a swift resolution of the dispute. Moreover, the special circumstance that the dissenting opinion mentioned seems very vague and abstract. So, if the Court requires the special circumstances for the negative confirmation claim, it will be too burdensome to both parties as there will be another dispute over the existence of such special circumstances. Currently, there are ways to control and suppress abusive and/or excessive litigation by an insurance company - (i) internal control system such as litigation management committee established within an insurance company and (ii) external control system such as public disclosure of litigation status of each insurance company and evaluation by the relevant authority. The recent statistics show that the number of litigation cases brought by an insurance company has gradually decreased over the years as a result of existing control systems.