CONTENTS
- 1. Insurance Fraud, What Were the Detailed Circumstances?
- - Insurance Fraud, What Are the Relevant Statutes?
- 2. Insurance Fraud, What Was the Court's Determination?
- 3. Insurance Fraud, What Was Daeryun's Strategy?
1. Insurance Fraud, What Were the Detailed Circumstances?
Plaintiff A, who faced an insurance fraud charge and filed the lawsuit, was an insurance solicitor.
A had taken out an insurance policy that, upon achieving a hole-in-one* while playing golf, would reimburse the "hole-in-one costs," such as purchasing commemorative gifts, hosting a celebratory dinner, and a celebratory round, incurred within one month.
This insurance was a product that reimbursed the amount paid, up to a limit of 5 million won, when the policyholder submitted a receipt.
A later actually achieved a hole-in-one at a golf course, and the next day paid 5 million won by credit card at a golf equipment store and then immediately canceled the payment. A then submitted the receipt for the canceled payment to the insurer and received insurance proceeds of 5 million won.
The Financial Supervisory Commission (hereinafter the "FSC"), upon learning of these facts, determined that A had committed insurance fraud and issued a disposition canceling A's registration as an insurance solicitor.
In response, A filed a lawsuit, arguing that "I was going to spend more than 5 million won on hole-in-one costs anyway, and because submitting a receipt for each individual payment was cumbersome, I first paid 5 million won, canceled it, and then submitted that receipt."
A was in fact found to have spent about 8 million won on related costs within one month after the hole-in-one. A also argued that "even if this is recognized as insurance fraud, it was not a premeditated act, and the harm caused to the insurer has been remedied," and that the FSC's disposition amounted to a deviation from and an abuse of discretionary power.
*Hole-in-one: in golf, when a ball struck from the tee goes directly into the hole in a single stroke
Insurance Fraud, What Are the Relevant Statutes?
🔗Insurance fraud is established when a person intentionally submits or fabricates false facts in order to receive insurance proceeds.
There are three representative types of conduct that establish insurance fraud.
① Conclusion of a Fraudulent Insurance Contract
This is conduct that distorts the risk at the time of taking out insurance by falsely reporting matters such as sex, age, or medical history, or by concealing important facts through means such as a proxy medical examination.
② Intentional Inducement of an Insured Event
This is conduct that improperly claims insurance proceeds by intentionally staging an act such as homicide or self-harm in order to receive insurance proceeds.
③ Disguise, Fabrication, and Exaggeration of an Insured Event
Insurance fraud is also established where a person disguises or fabricates the insured event itself to obtain insurance proceeds, or where a person exaggerates the harm actually suffered.
A person who commits insurance fraud is subject to imprisonment for up to 10 years or a fine not exceeding 50 million won.
If the amount of profit obtained through insurance fraud is 500 million won or more, the person is subject to aggravated punishment under the Act on Aggravated Punishment of Specific Economic Crimes (a Korean statute imposing aggravated punishment for economic crimes based on the amount involved, with no direct common-law equivalent). (Imprisonment for a definite term of three years or more)
2. Insurance Fraud, What Was the Court's Determination?
The District Court, which heard the lawsuit concerning insurance fraud, did not accept any of A's arguments.
The court held that "even if it is true that A incurred hole-in-one-related costs immediately after canceling the credit card payment, submitting a false receipt to claim insurance proceeds is an act of deceiving the insurance company."
The court also did not find that the FSC's disposition was an abuse of discretionary power. The court added that "although A, as an insurance solicitor, must have known better than anyone that this conduct constituted insurance fraud, A nonetheless engaged in conduct such as submitting a false receipt, which carries a high degree of blameworthiness," and that "it is suspected that A may have committed insurance fraud in a premeditated manner by exploiting the vulnerability of the indemnity insurance system that A had learned while working in the insurance business."
As to A's partial repayment of the harm amount, the court determined that "it appears to have been done unavoidably once the insurance fraud was detected by the investigative authorities and the investigation began," and dismissed A's lawsuit challenging the disposition and rendered a judgment against A.
3. Insurance Fraud, What Was Daeryun's Strategy?
We analyzed the District Court judgment that, in a matter concerning insurance fraud, recognized insurance fraud even where the insured received insurance proceeds by attaching a receipt for a canceled payment and then actually paid that amount.
When a person becomes involved in insurance fraud, they may be subject to close investigation by the insurer, the Financial Supervisory Service, and the investigative authorities, and if an accusation is filed, criminal punishment can be difficult to avoid. Civil liability may also follow, requiring repayment of the full amount of insurance proceeds improperly received.
Accordingly, when facing related charges, it is important to obtain the assistance of an attorney experienced in such matters from the early stages of the investigation and to prepare an accurate response strategy.
The 🔗Financial Legal Group of Daeryun Law Firm LLP forms its teams with attorneys experienced in insurance fraud matters and works diligently to assist clients in seeking mitigation of sentence.
If you are at risk of punishment on an insurance fraud charge, you are welcome to request a 🔗legal consultation with an attorney of Daeryun's financial legal practice at any time.
