[Case law commentary] Insurer's obligation to explain classification provisions based on primary site

- Supreme Court decision 2025da209662, sentenced on May 15, 2025 -

1. Classification provisions and explanation obligations based on primary site

The most common cancer in Korea is thyroid cancer (as of 2022). Thyroid cancer often metastasizes to other organs or tissues. In order to prevent the insurer (insurance company) from paying ‘general cancer diagnosis insurance money’ separately from the ‘thyroid cancer diagnosis insurance money’ when metastatic cancer of thyroid cancer occurs to the policyholder, the so-called ‘primary site-based classification clause’ is stipulated in the terms and conditions of the cancer insurance contract, which states that ‘in the case of secondary and unspecified site malignant neoplasms (cancers), if primary malignant neoplasms (cancers) are confirmed, they are classified based on the primary site (site of first occurrence).’ In other words, if thyroid cancer has metastasized to the lymph nodes, the thyroid cancer is regarded as the primary cancer and the lymph node metastatic cancer is considered a secondary malignant neoplasm, so only insurance payments are made based on the thyroid cancer site and no insurance payments are made for lymph node metastatic cancer.

However, there has been a long-standing dispute as to whether this classification clause based on the primary site constitutes an important matter of an insurance contract and is therefore subject to an obligation to explain. There was no Supreme Court precedent on this issue until recently, and there was a sharp conflict between lower court precedents, which held that the duty to explain was subject and those that did not.

2. Facts

The plaintiff, the insurer, and the defendant, the policyholder, entered into a cancer insurance contract in 2013.

The insurance contract in this case stipulates that 30 million won in cancer diagnosis fees will be paid when a cancer diagnosis is confirmed after the coverage start date, and 40 million won in cancer diagnosis fees other than minor cancers will be paid if a cancer diagnosis other than minor cancer is confirmed after the coverage start date. The special terms and conditions for cancer diagnosis expenses in the insurance contract in this case stipulate classification provisions based on the primary site.

The defendant was diagnosed with thyroid cancer (morbidity code C73) and lymph node metastasis (morbidity code C77) at the hospital in 2023, and underwent thyroidectomy and central lymph node dissection. The defendant charged the plaintiff with standard cancer diagnosis fees due to lymph node metastasis of thyroid cancer.

However, the plaintiff filed a lawsuit against the defendant to confirm the non-existence of debt, claiming that ‘the classification clause based on the primary site is general and common in transactions and is something that policyholders can expect, so it is not subject to an obligation to explain. Therefore, the plaintiff is not obligated to pay the defendant 70 million won in insurance money due to lymph node metastasis (C77).’

3. Judgment of the first trial and the original trial

The first trial said, "① It can be said that the classification clause based on the primary site is generally common in transactions, and ② it is reasonable to view the classification clause based on the primary site as a term and condition that the policyholder can fully anticipate even without separate explanation. Therefore, the defendant cannot claim a violation of the plaintiff's obligation to explain the classification standard in this case," and even if the plaintiff did not fulfill the obligation to explain the classification clause based on the primary site to the defendant, the insurance contract in this case The plaintiff's claim was accepted, stating that the plaintiff's insurance payment obligation to the defendant did not exist. The defendant appealed, but the lower court also dismissed the defendant's appeal, saying that the first trial's findings of fact and judgment were recognized as fair.

4. Supreme Court decision

The Supreme Court presented the following two reasons and concluded that there was an error in the original trial's judgment that influenced the decision due to a misunderstanding of the legal principles regarding the obligation to explain insurance terms and conditions, and then ruled to overturn the original trial's judgment and remand the case to the original court.

go. The classification clause based on the primary site is an important part of the insurance contract.

“The classification clause based on the primary site is a core matter of the insurance contract that is directly related to the presence or absence of the obligation to pay insurance money, the scope of coverage, or the amount of insurance money paid. It should be considered an important content of the insurance contract in this case because it can directly affect whether or not to conclude an insurance contract or determine the price.”

me. General insurance policy holders cannot expect that metastatic cancer will not be covered as cancer.

“The main contract terms and conditions of the insurance contract in this case, ‘Appendix 14’, specify ‘unclear, secondary and unspecified malignant neoplasms with classification numbers ‘C76~C80’’ as an independent cancer. Then, as an ordinary person, without an explanation from the insurer regarding the classification clause based on the primary site, ‘if secondary cancer that has metastasized from thyroid cancer is diagnosed, the cancer will not be covered based on the exclusion clause for thyroid cancer, etc. and the classification clause based on the primary site. In fact, it does not seem easy to predict that the primary site-based classification clause was introduced in accordance with the insurance policy improvement plan prepared by the Financial Supervisory Service to resolve confusion in insurance payment practices due to the lack of established standards for categorizing cases of metastasis from so-called ‘small cancers’ such as thyroid cancer. “It is difficult to say that the policyholder was able to fully anticipate this matter because it was a general and common matter in transactions.”

5. Pyeongseok

The classification clause based on the primary site results in the cancer patient metastasizing from a site recognized as a small cancer to a site recognized as a general cancer having no choice but to receive compensation only for the small cancer insurance money based on the primary site according to the classification special agreement based on the primary site. This is equivalent to a ‘reduction provision or exemption provision limiting general cancer insurance payments.’ According to the classification provisions based on the primary site, as in this case, secondary and unspecified malignant neoplasms are classified based on the thyroid gland, which is the site where the cancer first occurred, so general cancer diagnosis fees cannot be paid. Even if the defendant was informed of the above special provisions, it cannot be assumed that he would have entered into each insurance contract in this case. Therefore, the classification clause based on the primary site is an important content of the insurance contract as it corresponds to the standard for determining whether or not to pay insurance money or the amount, and the classification clause based on the primary site cannot be viewed as simply a confirmation provision regarding the definition or classification standard of cancer. In insurance contracts that did not have a classification clause based on the primary site, the standard for classifying cancer that has spread from the thyroid to lymph nodes or other areas was not established, and confusion arose over whether or not to pay general cancer insurance, and the Financial Supervisory Service Around April 2011, guidelines were issued to improve insurance policy regulations so that insurance premiums would be paid based on the primary cancer in the case of metastatic cancer where the primary site is confirmed. Accordingly, most insurance companies began including classification provisions based on the primary site in their cancer insurance policies. In light of the fact that there have been frequent disputes between policyholders and insurance companies regarding whether cancer that has metastasized from the thyroid gland to other parts of the body is classified as general cancer, and that the classification clause based on the primary site reduces the scope of insurance payment by considering metastatic cancer that could be recognized as general cancer in the absence of a special contract, as primary site cancer, secondary and unspecified malignant neoplasms were classified based on the primary site and excluded from general cancer at the time of signing the insurance contract in this case. It cannot be said to be a matter that the policyholder was aware of, a matter that was common and common in transactions, and could have been fully expected even without separate explanation, or a matter that merely amplifies the standards for medical judgment. Rather, since there was a lot of confusion about the method of classifying metastatic cancer, it should be seen that there was an even more urgent need to explain the contents in detail to avoid a situation where policyholders enter into an insurance contract without knowing this and suffer unexpected disadvantages.

In addition, the classification provisions based on the primary site include technical terms, so the content is not simple, and it is difficult to understand without separate explanation that even though malignant neoplasms exist in the thyroid gland and other sites other than the thyroid gland, they are treated only as thyroid cancer. In particular, if the meaning of the terms and conditions is unclear, such as because the insurance contract provisions can be interpreted multiple times and each interpretation is reasonable, they must be interpreted in a way that is favorable to the customer (see Supreme Court decision 2008 Da81633).

Considering the above, it is reasonable that the target judgment determined that the classification clause based on the primary site is an important content of the insurance contract and is subject to the obligation to explain.

Until recently, there was no Supreme Court precedent on whether the classification clause based on the primary site was subject to the obligation to explain, and the judgments of the lower courts were mixed. However, the Supreme Court started with the 2023Da250746 ruling on March 13, 2025, followed by the 2022Da263813, 2023Da273633, and 2023Da245058 rulings. The 2025Da209662 ruling made it clear that the classification provisions based on the primary site are subject to the obligation to explain.

The ruling is considered to be of great significance in that it presents unified standards for statutory interpretation related to the above issues. In addition, it is expected that the ruling will significantly reduce future disputes over whether classification provisions based on the primary site are subject to the obligation to explain.

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[Case precedent review] Insurer's duty of explanation regarding classification provisions based on primary site (link)