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Jipyong successfully represented KEPCO in the litigation seeking for confirmation of non-existence of debt raised by KEPCO against the government and local governments in connection with payment of disaster subsidies to the victims of a forest fire at Goseong, Gangwon-do

2024.01.19

On April 4, 2019, the Korean Government, the Gangwon provincial office, the Goseong-gun office, and the Sokcho office provided disaster subsidies to victims of a fire that occurred in the Goseong and Sokcho areas, and then notified KEPCO that they would exercise the right to demand an indemnity with respect to the full amount of the disaster subsidies in accordance with Article 66(6) of the Framework Act on the Management of Disasters and Safety, claiming that KEPCO was the cause of the fire. In response, the plaintiff KEPCO filed a legal action seeking for the confirmation of the non-existence of the debt, and the state and local governments filed a counterclaim seeking for a reimbursement. 
 
Jipyong Corporate Finance & Litigation Group represented KEPCO as the plaintiff and argued that 1) the forest fires in this case were caused by inevitable natural forces such as strong winds and dry climate, as well as the negligence of the state and local governments, and KEPCO could not be considered the sole cause of the fires; 2) the right to reimbursement of expenses is not a claim under the new statute, but rather a right to indemnity, 3) it would be contrary to the constitutional principle of self-responsibility to impose additional liability on the plaintiff by filing a claim for reimbursement, in light of the fact that the plaintiff had reached a separate settlement with the victims and was fulfilling its compensation obligations in a related civil lawsuit; and 4) since the defendants had granted the subsidies to the victims in order to fulfill their social security obligations under the Constitution and laws, they should be considered to have fulfilled their obligations in principle and thus, the party who caused the subsidies cannot claim an indemnity against the plaintiff. 
 
The first instance court disagreed that the legal nature of the right to claim for reimbursement of expenses is limited to the right to indemnity, but noted that, considering the facts that 1) natural forces contributed to the escalation of this incident, including the impact of unusually high winds and the fact that this incident occurred at night, which made initial response difficult; 2) because the plaintiff paid compensation to the victims based on their damage assessed through damage assessment after the fire, there is no risk of moral hazard if the scope of the plaintiffs’ indemnity amount is reduced; 3) the defendants did not conduct a separate damage assessment and that the disaster subsidies may include portions that are not causally related to the forest fire, as a matter of equity, the plaintiff's liability must be significantly limited to 20% of the remaining funds, excluding items that should be excluded from the reimbursement claim, such as the cost of installing temporary housing facilities. 
 
On appeal, Jipyong Corporate Finance & Litigation Group argued that the right to reimbursement should be viewed as a “right to indemnity” when interpreting the provisions of the Framework Act on the Management of Disasters and Safety and the Disaster Relief Act in a purposive, systematic and constitutional manner, and that, in light of the attitude of relevant civil decisions that do not deduct disaster subsidies from the plaintiff's damages, a claim for additional reimbursement of expenses would be tantamount to imposing punitive damages on the plaintiff. The appellate court accepted Jipyong Corporate Finance Litigation Group's arguments, finding that the right to reimbursement beyond the "subrogation portion" to the "social security portion" was impermissible under the principle of self-responsibility, the state's obligation to promote social security, and the state and local governments' obligation to protect people from disasters, and that the defendants had failed to prove the scope and amount of the subrogation portion of the disaster subsidies, so the right to reimbursement was unenforceable, and therefore the court reversed the first instance judgment and dismissed the defendants' claims in their entirety.

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