Chapter 614

614.51 614.51 Board of directors.

614.51(1) (1) General. Sections 181.0801 (1) and (2) and 181.0802 apply to fraternals, except that the supreme governing body may act as the board of directors if it meets at least quarterly. Section 611.51 (2) to (9) applies to fraternals, except that the word “mutual” shall be read “fraternal” and the references to other sections of ch. 611 shall be to the corresponding sections of this chapter.

614.51(2) (2) Terms of directors and officers. The terms of directors and officers may not exceed 4 years.

614.51 History History: 1975 c. 373; 1997 a. 79.

614.53 614.53 Removal of directors and officers and filling of vacancies. A director may be removed from office for cause by an affirmative vote of a majority of the full board at a meeting of the board called for that purpose or may be removed under ss. 181.0843 (2) and 181.0844. Any vacancy occurring in the board, including a vacancy created by an increase in the number of directors, may be filled until the next succeeding regular election by the affirmative vote of a majority of the directors then in office, although less than a quorum. If the laws of the fraternal provide that at least two-thirds of the directors are elected by the members, elected director vacancies may be filled for the remainder of the terms for which there is a vacancy. If the vacancy is one to be filled in some manner other than by a regular election, the election by the board is effective only until a reasonable time has elapsed for choosing the director in that other manner. In the event that the board of directors ceases to exist and there are no members having voting rights, the members without voting rights shall thereupon have power to elect a new board. A director elected under this section to fill the unexpired term of an elected director is an elected director within the meaning of s. 614.42 (1) (a).

614.53 History History: 1975 c. 373; 1979 c. 102; 1997 a. 79.

614.54 614.54 Supervision of management changes. Section 611.54 applies to fraternals.

614.54 History History: 1975 c. 373.

614.55 614.55 Continuity of management in emergencies. Section 611.55 applies to fraternals.

614.55 History History: 1975 c. 373.

614.56 614.56 Committees of directors. Section 611.56 applies to fraternals, except that reference therein to other sections of ch. 611 shall be to the corresponding sections of this chapter.

614.56 History History: 1975 c. 373.

614.57 614.57 Interlocking directorates and other relationships. Section 611.57 applies to fraternals.

614.57 History History: 1975 c. 373.

614.60 614.60 Transactions with affiliates and in which directors and others are interested. Sections 611.60 and 611.61 apply to fraternals except that local lodges are not required to keep detailed records under s. 611.61 (1) (b) if the fraternal does so.

614.60 History History: 1975 c. 373; 1979 c. 102.

614.62 614.62 Directors’ liability and indemnification. Section 611.62 applies to fraternals, except that the word “mutual” shall be read “fraternal”.

614.62 History History: 1975 c. 373.

614.63 614.63 Executive compensation. Section 611.63 applies to fraternals, except that the word “mutual” shall be read “fraternal”.

614.63 History History: 1975 c. 373.

614.66 614.66 Exclusive agency contracts and management contracts. Sections 611.66 and 611.67 apply to fraternals, except that the reference to s. 611.26 (1) contained in s. 611.66 is to that section as incorporated by s. 614.24.

614.66 History History: 1975 c. 373; 1997 a. 252.

subch. V of ch. 614 SUBCHAPTER V

CORPORATE REORGANIZATION

614.73 614.73 Merger and consolidation of fraternals.

614.73(1) (1) Authorization, domestic fraternals. Any 2 or more domestic fraternals may merge or consolidate under the provisions of subs. (3) and (4).

614.73(2) (2) Authorization, domestic and nondomestic fraternals. Any 2 or more domestic and nondomestic fraternals may merge or consolidate under the provisions of sub. (5).

614.73(3) (3) Procedure for domestic fraternals. The supreme governing body of each domestic fraternal proposing to merge or consolidate shall:

614.73(3)(a) (a) At least 60 days prior to the proposed action submit the text of the proposed contract to its members in the manner provided by s. 614.29 (4);

614.73(3)(b) (b) Approve the proposed consolidation or merger by a two-thirds vote; and

614.73(3)(c) (c) File with the commissioner a certified copy of the written contract containing in full the terms and conditions of the consolidation or merger, a sworn statement by the president and secretary or corresponding officers of each fraternal showing the financial condition of each on a date to be fixed by the commissioner but no earlier than the December 31 of the year preceding the proposed contract, and evidence of compliance with pars. (a) and (b).

614.73(4) (4) Issuance of certificate by commissioner. The commissioner shall issue a certificate approving the merger or consolidation, upon a finding that:

614.73(4)(a) (a) The contract conforms to the provisions of this chapter;

614.73(4)(b) (b) The parties to the proposed contract have complied with the provisions of sub. (3); and

614.73(4)(c) (c) The proposed contract is just and equitable to the members of each fraternal.

614.73(5) (5) Procedure for nondomestic fraternals. Where a nondomestic fraternal is a party to the proposed contract, the parties shall follow the procedure for domestic fraternals under subs. (3) and (4), but the commissioner may not issue a certificate of compliance until the parties file a certificate that the proposed contract has been approved in the manner provided by the laws of the jurisdiction under which the fraternal is incorporated, or, if such laws contain no procedure for approval, that the proposed contract has been approved by the commissioner of insurance for that jurisdiction.

614.73(6) (6) Effective date. The merger or consolidation is effective when the commissioner issues a certificate of approval.

614.73(7) (7) Effect of consolidation or merger. When the merger or consolidation is effective, the surviving or new fraternal shall have all the assets and be liable for all of the obligations of each of the participating fraternals.

614.73 History History: 1975 c. 373, 421; 1979 c. 102.

614.74 614.74 Voluntary dissolution of solvent domestic fraternals.

614.74(1) (1) Plan of dissolution. At least 60 days prior to the submission to the supreme governing body or the members of any proposed voluntary dissolution, the proposal shall be filed with the commissioner. The commissioner may require the submission of additional information necessary to establish the financial condition of the fraternal or other facts relevant to the proposed dissolution. If the supreme governing body or the members adopt the resolution to dissolve by a majority of those voting or such larger number as the laws of the fraternal require, the commissioner shall, within 30 days after the adoption of the resolution, begin to examine the fraternal. The commissioner shall approve the dissolution unless finding, after a hearing, that it is insolvent or may become insolvent in the process of dissolution. Upon approval, the fraternal may dissolve under ss. 181.1401 to 181.1407. Upon disapproval, the commissioner shall petition the court for liquidation under s. 645.41 (10).

614.74(2) (2) Conversion to involuntary liquidation. The fraternal may at any time during the liquidation under ss. 181.1401 to 181.1407 apply to the commissioner to have the liquidation continued under the commissioner’s supervision; thereupon the commissioner shall apply to the court for liquidation under s. 645.41 (10).

614.74(3) (3) Revocation of voluntary dissolution. If the fraternal revokes the voluntary dissolution proceedings under s. 181.1404, a copy of the revocation of voluntary dissolution proceedings shall be filed with the commissioner.

614.74 History History: 1975 c. 373, 421; 1979 c. 102; 1997 a. 79.

614.76 614.76 Voluntary conversion of fraternals to mutuals. A domestic fraternal may be converted into a mutual, as follows:

614.76(1) (1) Action by board or supreme governing body. The board or the supreme governing body shall adopt a plan of conversion stating:

614.76(1)(a) (a) The reasons for and the purposes of the proposed action;

614.76(1)(b) (b) The proposed terms, conditions and procedures and the estimated expenses of implementing the conversion;

614.76(1)(c) (c) The proposed name of the corporation; and

614.76(1)(d) (d) The proposed articles and bylaws.

614.76(2) (2) Disagreement. If the board and the supreme governing body disagree on the conversion plan, the decision of the latter shall govern.

614.76(3) (3) Approval by commissioner. The plan shall be filed with the commissioner for approval, together with so much of the information under s. 611.13 (2) as the commissioner reasonably requires. The commissioner shall approve the plan unless finding, after a hearing, that it would be contrary to the law, that the new mutual would not satisfy the requirements for a certificate of authority under s. 611.20 or that the plan would be contrary to the interests of members or the public.

614.76(4) (4) Approval by members. After being approved by the commissioner, the plan shall be submitted for approval to the persons who were voting members on the date of the commissioner’s approval under sub. (3). At least a majority of the votes cast must be in favor of the plan, or a larger number if required by the laws of the fraternal.

614.76(5) (5) Officers and directors. The officers and directors of the fraternal shall be the initial officers and directors of the mutual.

614.76(6) (6) Report to commissioner. A copy of the resolution adopted under sub. (4) shall be filed with the commissioner, stating the number of members entitled to vote, the number voting, the method of voting and the number of votes cast in favor of the plan, stating separately the mail votes and the votes cast in person.

614.76(7) (7) Certificate of authority. If the requirements of the law are met, the commissioner shall issue a certificate of authority to the new mutual. Thereupon the fraternal shall cease its legal existence and the corporate existence of the new mutual shall begin, but it shall be deemed to have been incorporated as of the date the converted fraternal was incorporated. The new mutual shall have all the assets and be liable for all of the obligations of the converted fraternal. The commissioner may grant a period not exceeding one year for adjustment to the requirements of ch. 611, specifying the extent to which particular provisions of ch. 611 shall not apply.

614.76(8) (8) Expenses. The corporation may not pay compensation of any kind to existing personnel, in connection with the proposed conversion, other than regular salaries. With the commissioner’s approval, payment may be made at reasonable rates for printing costs and for legal and other professional fees for services actually rendered. All expenses of the conversion, including the expenses incurred by the commissioner and the prorated salaries of any insurance office staff members involved, shall be borne by the corporation being converted.

614.76 History History: 1975 c. 373, 421.

614.77 614.77 Rehabilitation or involuntary conversion. If the commissioner believes that a fraternal does not satisfy the requirements of this chapter, the commissioner shall call a hearing and upon a finding that the fraternal does not satisfy the requirements, the commissioner shall petition for rehabilitation under s. 645.31, for the purpose of rehabilitating the fraternal or, if that is not possible, of converting the fraternal to a mutual.

614.77 History History: 1975 c. 373, 421.

614.78 614.78 Maintenance of solvency.

614.78(1) (1) Order declaring hazardous condition. When a domestic fraternal has an authorized control level event, as defined by the commissioner by rule, under circumstances the commissioner determines will not be promptly remedied, the commissioner, in addition to taking any other action required or allowed by law, may issue an order declaring the domestic fraternal to be in a hazardous condition and may order the fraternal to remedy the authorized control level event. This order may include authorization to the fraternal to negotiate an agreement to transfer, subject to sub. (2), all members, certificates, and other assets and liabilities of the fraternal to another fraternal or other insurer through merger, consolidation, assumption, or other means.

614.78(2) (2) Specifications regarding transfer.

614.78(2)(a) (a) Any transfer under sub. (1) shall constitute a novation of the transferring fraternal’s certificates that is effective on the date of transfer. The fraternal shall ensure the transfer is concluded within the time agreed to by the commissioner and subject to approval by the commissioner. The transfer agreement under this paragraph is considered to be fully approved by the domestic fraternal upon a majority vote of the fraternal’s board of directors, notwithstanding s. 614.73 and any other law or regulation that requires notice to or approval by the fraternal’s members or supreme governing body. Any law of a fraternal requiring notice to or approval by the fraternal’s members or supreme governing body shall be suspended by this section. The transferring fraternal shall provide notice to its members of the transfer by mail or in the manner provided by s. 614.41 (1) no later than 30 days after the transfer is approved by the commissioner.

614.78(2)(b) (b) If the fraternal seeks to make a transfer under sub. (1) to an organization that does not have a certificate of authority in this state, the commissioner may grant the organization a limited certificate of authority to service the existing certificates and fulfill all obligations owed to certificate holders following the transfer but not to otherwise transact insurance business in this state.

614.78(2)(c) (c) By order of the commissioner and notwithstanding any law or rules to the contrary and any laws of the fraternal, the board of directors of the fraternal may suspend or modify the qualifications for membership in the fraternal as necessary to facilitate a transfer under sub. (1).

614.78(2)(d) (d) Upon the effective date of a transfer to an organization that is not a fraternal and in consideration for the transfer, each member of the fraternal is considered to agree that any terms of a certificate subjecting the certificate to the laws of the fraternal or providing for the maintenance of the fraternal’s solvency, except to the extent of any outstanding lien not released by the terms of the transfer, shall be null and void and the assuming organization shall endorse the certificate accordingly.

614.78 History History: 2019 a. 66; 2021 a. 239 s. 74.

614.79 614.79 Rehabilitation and liquidation.

614.79(1) (1) Grounds for rehabilitation or liquidation. In addition to the grounds for rehabilitation under s. 645.31 and the grounds for liquidation under s. 645.41, any of the following is grounds for rehabilitation under s. 645.31 or liquidation under s. 645.41:

614.79(1)(a) (a) Failure by a domestic fraternal to comply with an order of the commissioner under s. 614.78.

614.79(1)(b) (b) Failure by a domestic fraternal to remedy within the time specified by the commissioner a hazardous condition as determined by the commissioner under s. 614.78.

614.79(2) (2) Criteria for rehabilitation. For purposes of a proceeding commenced under this section, rehabilitation under s. 645.31 is presumed to be futile and to serve no useful purpose, unless the commissioner reasonably believes that rehabilitation has a high probability of returning the fraternal to long-term viability or will facilitate a transfer to another fraternal or insurer.

614.79(3) (3) Assessments under liquidation. Notwithstanding ss. 614.19 (3) and 645.68, after a petition for liquidation of a fraternal is filed, the fraternal may not assess payment of shares of a deficiency under s. 614.19 (3) (b), unless the commissioner determines that the assessment is for the purpose of satisfying the obligations of the fraternal to creditors described in s. 645.68 (1) and (3). The fraternal may not make an assessment for the purpose of any deficiency related to other claims including those described in s. 645.68 (3c), (3m), (3r), (4), (5), (6), (7), (8), (9), (10), or (11).

614.79(4) (4) Conduct of liquidation proceedings. Liquidation proceedings under this section for a fraternal shall be conducted consistent with the purposes of s. 645.01 (4) (c) in a manner designed to conserve assets, limit liquidation expenses, and avoid any assessment of shares of a deficiency.

614.79(5) (5) Transfer by liquidator. The liquidator of a fraternal under this section shall attempt to transfer policies or certificates of the liquidating fraternal under s. 645.46 (8) by way of assignment, assumption, or other means to a qualified fraternal, either domestic or foreign, or, if no qualified fraternal will accept the transfer, to an insurer authorized to transact life insurance business in this state. In determining whether a fraternal or insurer is qualified to accept a transfer under this subsection, the liquidator shall consider the solvency of the fraternal or other insurer among other things. No fraternal shall be obligated to accept a transfer under this subsection. Upon the effective date of a transfer under this subsection to an insurer that is not a fraternal and in consideration for the transfer, each member of the fraternal and owner of a policy or certificate being transferred is considered to agree that any terms of the insurance policy or certificate that provide for the maintenance of the fraternal’s solvency or that subject the policy or certificate to the policies of the fraternal shall be null and void and to agree to any other changes to terms of the policy or certificate that are determined by the liquidator to be necessary to effectuate the transfer. The insurer accepting transfer shall endorse the policy or certificate accordingly. Any transfer under this subsection is a novation of the policy or certificate that is effective on the date of transfer.

614.79 History History: 2019 a. 66; 2021 a. 239 s. 74.

subch. VI of ch. 614 SUBCHAPTER VI

MISCELLANEOUS PROVISIONS

614.80 614.80 Tax exemption. Every domestic and nondomestic fraternal, except those that offer a health maintenance organization as defined in s. 609.01 (2) or a limited service health organization as defined in s. 609.01 (3) is exempt from all state, county, district, municipal and school taxes or fees, except the fees required by s. 601.31 (2), but is required to pay all taxes and special assessments on its real estate and office equipment, except as provided in ss. 70.11 (4) and 70.1105 (1).

614.80 History History: 1975 c. 373; 1979 c. 102 s. 237; 1995 a. 27; 1997 a. 35; 2001 a. 16.

614.82 614.82 Fraternal expenditures and activities.

614.82(1) (1) Reports. Every fraternal shall report to the commissioner such information as the commissioner requires concerning expenditures made by the fraternal and other activities and programs of the fraternal or its members in fulfillment of the purposes of s. 614.01 (1) (a) 2. b. or in maintaining its fraternal character.

614.82(2) (2) Institutions for carrying out fraternal activities. A fraternal may create, maintain and operate social, intellectual, educational, charitable, benevolent, moral, fraternal, patriotic or religious institutions for the benefit of its members or their families or dependents or for children insured by the fraternal. For that purpose, it may own, hold or lease real or personal property within or outside of this state. No funeral or undertaking establishment may be owned or operated by the fraternal. All such property shall be reported in the annual statement or an appendix thereto but shall be given only nominal value in the statement. No profit may be made on such institutions, but the income and expenditures shall be reported separately in or as an appendix to the annual statement. Any such institution may be separately incorporated under ch. 181 and ownership of its stock shall be reported at nominal value.

614.82 History History: 1975 c. 373, 421; 1983 a. 189 s. 329 (25).

614.94 614.94 Fraternals as fundholders. Sections 610.24 and 611.94 apply to fraternals.

614.94 History History: 1975 c. 373; 1979 c. 102.

614.96 614.96 Exemption of fraternal benefits. No money or other benefit, charity, relief or aid to be paid, provided or rendered by any domestic or nondomestic fraternal is liable to attachment, garnishment or other process, or to be seized, taken, appropriated or applied by any legal or equitable process or operation of law to pay any debt or liability of a member or beneficiary, or any other person who may have a right thereunder, either before or after payment by the fraternal.

614.96 History History: 1975 c. 373.