Chapter 631

GENERAL RULES

631.01 631.01 Application of statutes.

631.01(1) (1) General. This chapter and ch. 632 apply to all insurance policies and group certificates delivered or issued for delivery in this state, on property ordinarily located in this state, on persons residing in this state when the policy or group certificate is issued, or on business operations in this state, except:

631.01(1)(a) (a) As provided in ss. 600.01 and 618.42;

631.01(1)(b) (b) On business operations in this state if the contract is negotiated outside this state and if the operations in this state are incidental or subordinate to operations outside this state, unless the contract is for a policy of insurance to cover a warranty, as defined in s. 100.205 (1) (g), in which case the provisions set forth in sub. (4m) apply; and

631.01(1)(c) (c) As otherwise provided in the statutes.

631.01(2) (2) Reinsurance. Sections 631.05, 631.15 (1), 631.41, 631.45 and 631.81 apply to contracts used in reinsurance; the commissioner may specify by rule that reinsurance contracts are subject to other provisions of this chapter and ch. 632 upon a finding that the interests of Wisconsin insureds, of ceding insurers domiciled in this state or of the public in this state so require.

631.01(3) (3) Ocean marine insurance. Sections 631.03 to 631.09, 631.15 (1) and (4), 631.20 (1), 631.27, 631.41 to 631.51, 631.64 to 631.81 and 631.85 apply to ocean marine insurance; the commissioner may specify by rule that ocean marine contracts are subject to other provisions of this chapter upon a finding that the interests of Wisconsin insureds or creditors or of the public in this state so require.

631.01(4) (4) Annuities and group policies for eleemosynary institutions. This chapter and ch. 632 do not apply to annuities or group policies that are provided on a basis as uniform nationally as state statutes permit to educational, scientific research, religious or charitable institutions organized without profit to any person, for the benefit of employees of such institutions. The commissioner may by order subject such contracts issued by a particular insurer to this chapter or ch. 632 or any portion of those provisions upon a finding, after a hearing, that the interests of Wisconsin insureds or creditors or the public of this state so require.

631.01(4m) (4m) Rustproofing warranties insurance. An insurer issuing a policy of insurance to cover a warranty, as defined in s. 100.205 (1) (g), shall comply with s. 632.18 and the policy shall be on a form approved by the commissioner under s. 631.20.

631.01(5) (5) Other exceptions. The commissioner may by rule exempt any class of insurance contract or insurer from any or all of the provisions of this chapter and ch. 632 if the interests of Wisconsin insureds or creditors or of the public of this state do not require such regulation.

631.01 History History: 1975 c. 375, 421; 1985 a. 29; 1987 a. 247; 1991 a. 250; 1995 a. 242; 1997 a. 27; 2007 a. 168; 2011 a. 224.

631.01 Annotation A stop-loss policy that provided that, in case of a catastrophic medical case, the employer would only be responsible for paying covered medical costs on an individual case up to the stop-loss amount with the insurer paying the costs above that amount, was not a contract of reinsurance exempt from this section. Edstrom Industries, Inc. v. Companion Life Insurance Co., 516 F.3d 546 (2008).

631.02 631.02 Definition. “Interest of the insured,” when used in an insurance policy, includes the interest of the named insured and of any other person with whom the named insured holds the insured property in joint tenancy or as marital property.

631.02 History History: 1979 c. 102; 1983 a. 186; 2015 a. 196.

631.03 631.03 Insurance in mutuals. Any mutual under ch. 611 or 612 and any service corporation under ch. 613 may issue policies to any public or private corporation, board or association or to any unit of government, in any place in this state or elsewhere where it is authorized to do an insurance business. Any public or private corporation, board or association or unit of government in this state that is authorized to acquire insurance may make applications, enter into agreements for and hold policies in any mutual insurer or service corporation authorized under ch. 611, 612, 613 or 618.

631.03 History History: 1975 c. 375.

631.05 631.05 Oral contracts of insurance and binders. No provision of chs. 600 to 646 and 655 may be interpreted to forbid an oral contract of insurance or issuance of a written binder. The insurer shall issue a policy as soon as reasonably possible after issuance of any binder or negotiation of an oral contract.

631.05 History History: 1975 c. 375; 1979 c. 89; 1989 a. 187 s. 29.

631.05 Annotation The insurer’s delay in issuing the title insurance policy did not preclude the insurer from denying coverage per the policy’s terms. Columb v. Cox, 2022 WI App 32, 404 Wis. 2d 50, 978 N.W.2d 481, 20-1593.

631.07 631.07 Insurable interest and consent.

631.07(1) (1) Insurable interest. No insurer may knowingly issue a policy to a person without an insurable interest in the subject of the insurance.

631.07(2) (2) Consent in life and disability insurance. Except under sub. (3), no insurer may knowingly issue an individual life or disability insurance policy to a person other than the one whose life or health is at risk unless the latter has given written consent to the issuance of the policy. Consent may be expressed by knowingly signing the application for the insurance with knowledge of the nature of the document, or in any other reasonable way.

631.07(3) (3) Cases where consent is unnecessary or may be given by another.

631.07(3)(a) (a) Consent unnecessary. A life or disability insurance policy may be taken out without consent in any of the following cases:

631.07(3)(a)1. 1. A person may obtain insurance on a dependent who does not have legal capacity.

631.07(3)(a)2. 2. A creditor may at the expense of the creditor obtain life or disability insurance on the debtor in an amount reasonably related to the amount of the debt.

631.07(3)(a)3. 3. A person may obtain a life or disability insurance policy on members of the person’s family living with or dependent on the person.

631.07(3)(a)3m. 3m. A person may obtain a disability insurance policy on a child placed for adoption, as defined in s. 632.896 (1) (c), with the person.

631.07(3)(a)4. 4. A person may obtain a disability insurance policy on others that would merely indemnify against expenses the policyholder would be legally or morally obligated to pay.

631.07(3)(am) (am) Insurance for persons in international public service. The commissioner may promulgate rules permitting issuance of insurance for a limited term on the life or health of a person serving outside the continental United States in the public service of the United States, provided the policyholder is closely related by blood, marriage or adoption to the person whose life or health is insured.

631.07(3)(b) (b) Consent given by another. Consent may be given by another in the following cases:

631.07(3)(b)1. 1. A parent, a guardian of the person, or a person having legal custody as defined in s. 48.02 (12) may consent to the issuance of a policy on a dependent child.

631.07(3)(b)2. 2. A grandparent may consent to the issuance of life or disability insurance on a grandchild.

631.07(3)(b)3. 3. A court of general jurisdiction may give consent on ex parte application on the showing of any facts the court considers sufficient to justify such insurance.

631.07(4) (4) Effect of lack of insurable interest or consent. No insurance policy is invalid merely because the policyholder lacks insurable interest or because consent has not been given, but a court with appropriate jurisdiction may order the proceeds to be paid to someone other than the person to whom the policy is designated to be payable, who is equitably entitled thereto, or may create a constructive trust in the proceeds or a part thereof, subject to terms and conditions of the policy other than those relating to insurable interest or consent.

631.07 History History: 1975 c. 373, 375, 422; 1977 c. 354 s. 101; 1989 a. 336; 1999 a. 85; 1999 a. 162 s. 23; 2001 a. 38.

631.07 Cross-reference Cross-reference: See also s. Ins 2.45, Wis. adm. code.

631.07 Annotation The proceeds of a casualty insurance policy purchased by a land contract vendee that named the vendor as mortgagee were properly awarded to the vendor under sub. (4) when, following confirmation of a strict foreclosure judgment against the vendee, the insured premises were destroyed by fire. Disrud v. Arnold, 167 Wis. 2d 177, 482 N.W.2d 114 (Ct. App. 1992).

631.07 Annotation A stockholder may have an insurable interest in corporate property. Heyden v. Safeco Title Insurance Co., 175 Wis. 2d 508, 498 N.W.2d 905 (Ct. App. 1993).

631.07 Annotation A contract of insurance upon a life in which the insured has no interest is a pure wager. Nevertheless, sub. (4) makes clear that the beneficiary of the policy is entitled to the policy proceeds. Section 895.055, with immaterial exceptions, voids all gambling contracts, but s. 600.12 (2) provides that, if a section in chs. 600 to 655 conflicts with another statutory provision, the section in chs. 600 to 655 governs. Sun Life Assurance Co. of Canada v. U.S. Bank National Ass’n, 839 F.3d 654 (2016).

631.07 Annotation While article IV, section 24, of the Wisconsin Constitution states that “except as provided in this section, the legislature may not authorize gambling in any form,” the legislature has not authorized gambling in sub. (4). Gambling contracts, including life insurance policies that lack an insurable interest, are still forbidden. The statute changed only the remedy for violation, from invalidation of the policy to requiring the insurer to cough up the proceeds rather than being allowed to keep all the premiums and pay nothing to the policy holder because the latter had no insurable interest in the policy. Sun Life Assurance Co. of Canada v. U.S. Bank National Ass’n, 839 F.3d 654 (2016).

631.08 631.08 Mistakes in contracts.

631.08(1) (1) General. Except as otherwise provided in chs. 600 to 646 and 655, general contract law applies to mistakes in insurance contracts.

631.08(2) (2) Person to whom proceeds payable in property insurance. Mistake in designating the person to whom the insurance is payable in a policy of property insurance does not void the policy nor constitute a defense for the insurer unless the mistake was due to misrepresentation or concealment by the owner of the property or someone representing the owner in procuring the policy, or unless the company would not have issued or continued the policy if it had known the truth.

631.08 History History: 1975 c. 375, 421; 1979 c. 89; 1989 a. 187 s. 29.

631.09 631.09 Knowledge and acts of agents.

631.09(1) (1) Imputation of knowledge. An insurer is deemed to know any fact material to the risk or which breaches a condition of the policy, if the agent who bound the insurer or issued the policy or transmitted the application to the insurer knew it at the time the agent acted, or if thereafter any of the insurer’s agents with whom the policyholder is then dealing as agent of the insurer learns it in the course of the agent’s dealing with the policyholder, and knows that it pertains to a policy written by the insurer.

631.09(2) (2) Acts of agent. A failure by any policyholder or insured to perform an act required to perfect his or her rights under the policy, or failure to perform the act in the time and manner prescribed, does not affect the insurer’s obligations under the policy if the failure was caused by an act, statement or representation or omission to perform a duty by an agent of the insurer who has apparent authority, whether or not the agent was within the actual scope of the agent’s authority.

631.09(3) (3) Effect of notice to agent. Notice given by or on behalf of the policyholder or insured to any authorized agent of the insurer with particulars sufficient to identify the policy is notice to the insurer.

631.09(4) (4) Collusion. Subsections (1) and (2) do not apply if the agent and the policyholder or insured acted in collusion to deceive or defraud the insurer, or if the policyholder or insured knew the agent was acting beyond the scope of the agent’s authority.

631.09(5) (5) Group policyholder not agent. No person is an agent of an insurer merely because the person is a policyholder of a group insurance policy.

631.09(6) (6) Liability under common law. This section does not diminish any liability of the insurer that would exist under common law.

631.09 History History: 1975 c. 375, 421.

631.09 Annotation Absent proof that an agent knew, or should have known, of financial problems of a reinsurer from whom the agent procured insurance, the agent is not liable when the reinsurer later becomes insolvent. Master Plumbers Ltd. Mutual Liability Co. v. Cormany & Bird, Inc., 79 Wis. 2d 308, 255 N.W.2d 533 (1977).

631.09 Annotation When an insured elected to have open heart surgery after an agent indicated that the insurer would probably pay the bills, that action was sufficient reliance to estop the insurer from denying coverage. Nolden v. Mutual Benefit Life Insurance Co., 80 Wis. 2d 353, 259 N.W.2d 75 (1977).

631.11 631.11 Representations, warranties and conditions.

631.11(1) (1) Effect of negotiations for contract.

631.11(1)(a) (a) Statement or warranty. No statement, representation or warranty made by a person other than the insurer or an agent of the insurer in the negotiation for an insurance contract affects the insurer’s obligations under the policy unless it is stated in any of the following:

631.11(1)(a)1. 1. The policy.

631.11(1)(a)2. 2. A written application signed by the person, provided that a copy of the written application is made a part of the policy by attachment or endorsement.

631.11(1)(a)3. 3. A written communication provided by the insurer to the insured within 60 days after the effective date of the policy.

631.11(1)(b) (b) Misrepresentation or breach of affirmative warranty. No misrepresentation, and no breach of an affirmative warranty, that is made by a person other than the insurer or an agent of the insurer in the negotiation for or procurement of an insurance contract constitutes grounds for rescission of, or affects the insurer’s obligations under, the policy unless, if a misrepresentation, the person knew or should have known that the representation was false, and unless any of the following applies:

631.11(1)(b)1. 1. The insurer relies on the misrepresentation or affirmative warranty and the misrepresentation or affirmative warranty is either material or made with intent to deceive.

631.11(1)(b)2. 2. The fact misrepresented or falsely warranted contributes to the loss.

631.11(3) (3) Effect of failure of condition or breach of promissory warranty. No failure of a condition prior to a loss and no breach of a promissory warranty constitutes grounds for rescission of, or affects an insurer’s obligations under, an insurance policy unless it exists at the time of the loss and either increases the risk at the time of the loss or contributes to the loss. This subsection does not apply to failure to tender payment of premium.

631.11(4) (4) Effect of insurer’s knowledge.

631.11(4)(a) (a) Knowledge when policy issued. No misrepresentation made by or on behalf of a policyholder and no breach of an affirmative warranty or failure of a condition constitutes grounds for rescission of, or affects an insurer’s obligations under, an insurance policy if at the time the policy is issued the insurer has either constructive knowledge of the facts under s. 631.09 (1) or actual knowledge. If the application is in the handwriting of the applicant, the insurer does not have constructive knowledge under s. 631.09 (1) merely because of the agent’s knowledge.

631.11(4)(b) (b) Knowledge acquired after policy issued. If after issuance of an insurance policy an insurer acquires knowledge of sufficient facts to constitute grounds for rescission of the policy under this section or a general defense to all claims under the policy, the insurer may not rescind the policy and the defense is not available unless the insurer notifies the insured within 60 days after acquiring such knowledge of its intention to either rescind the policy or defend against a claim if one should arise, or within 120 days if the insurer determines that it is necessary to secure additional medical information.

631.11(4m) (4m) Life and disability contracts.

631.11(4m)(a) (a) Copy of application to be made available. The policyholder under a life or disability insurance policy and any person whose life or health is insured under the policy may request in writing a copy of the application if he or she did not receive the policy or a copy of it, or if the policy has been reinstated or renewed without attachment of a copy of the original application. If the insurer does not deliver or mail a copy as requested within 15 working days after receipt of the request by the insurer or its agent or, in the case of a group policy certificate holder, does not inform such person within the same period how he or she may inspect the policy and application during normal business hours at a place reasonably convenient to the certificate holder, nothing in the application affects the insurer’s obligations under the policy to the person making the request. A person whose life or health is insured under a group life or disability insurance policy has the same right to request a copy of any document specified in par. (b), including the certificate.

631.11(4m)(b) (b) Statement or warranty. No statement, representation or warranty made by or on behalf of a particular certificate holder under a group life or disability insurance policy affects the insurer’s obligations under the certificate unless it is stated in the certificate, or in a written document signed by the certificate holder, a copy of which is supplied to the certificate holder or the beneficiary whose rights would be affected.

631.11(5) (5) Fraternals. This section applies to fraternals, as defined in s. 614.01 (1) (a).

631.11(6) (6) Incontestability provisions. This section is subject to ss. 632.46 and 632.76.

631.11 History History: 1975 c. 375, 421; 1977 c. 339 s. 44; Stats. 1977 s. 641.11; 1983 a. 189 s. 329 (25); 1995 a. 259.

631.11 Annotation If a question on a form calls for the applicant’s judgment or opinion as a lay person, any ambiguity should be construed against the insurer. Nolden v. Mutual Benefit Life Insurance Co., 80 Wis. 2d 353, 259 N.W.2d 75 (1977).

631.11 Annotation An insured’s contradictory statements constituted a breach of the contractual duties of notice and cooperation. Dietz v. Hardware Dealers Mutual Fire Insurance Co., 88 Wis. 2d 496, 276 N.W.2d 808 (1979).

631.11 Annotation Third parties may recover against an insurer even though the insured’s fraudulent application voided the policy under this section. Rauch v. American Family Insurance Co., 115 Wis. 2d 257, 340 N.W.2d 478 (1983).

631.11 Annotation Sub. (2) [now sub. (1) (b)] applies a reliance test to misrepresentations made in the negotiation or application for insurance, and not to statements made in proof of loss forms. Tempelis v. Aetna Casualty & Surety Co., 164 Wis. 2d 17, 473 N.W.2d 549 (Ct. App. 1991).

631.11 Annotation In order to make a written application form a part of an insurance policy by endorsement, the insurer must specifically write across the application itself that it is an endorsement and part of the policy. Smith v. Dodgeville Mutual Insurance Co., 212 Wis. 2d 226, 568 N.W.2d 31 (Ct. App. 1997), 96-3352.

631.11 Annotation Sub. (3) only applies to conditions subsequent to a policy becoming effective, not conditions precedent. Conditions to the making of the contract, conditions precedent, cannot be implicated by the statute because the policy has not yet come into existence. Fox v. Catholic Knights Insurance Society, 2003 WI 87, 263 Wis. 2d 207, 665 N.W.2d 181, 01-1469.

631.11 Annotation This section does not supersede the known-loss doctrine. That doctrine may apply whether or not the requirements of subs. (1) (b) and (4) (b) are met. American Family Mutual Insurance Co. v. Bateman, 2006 WI App 251, 297 Wis. 2d 828, 726 N.W.2d 678, 05-2219.

631.11 Annotation Sub. (1) (b) establishes the elements necessary to entitle an insurance company to rescind an insurance contract. There must be an affirmative warranty or misrepresentation, which is a question of law. Whether the statement was false, and whether the person making the statement knew, or should have known, that the statement was false are questions of fact. The burden of proof on an insurer seeking to rescind an insurance contract is clear and convincing evidence as to each element of the statute. Pum v. Wisconsin Physicians Service Insurance Corp., 2007 WI App 10, 298 Wis. 2d 497, 727 N.W.2d 346, 05-3049.

631.11 Annotation The term “promissory warranty” under sub. (3) is generally understood to mean a warranty that facts will continue to be as stated throughout the policy period, such that a failure of the warranty provides the insurer with a defense to a claim under the policy or a “continuing warranty.” Promissory warranties in insurance policies generally pertain to commitments by insureds designed to minimize the risk of loss. Obviously, minimizing a risk of loss can only occur prior to the loss. It is nonsensical to suggest that provisions dealing with post-loss adjustment fall into such a category. Kemper Independence Insurance Co. v. Islami, 2020 WI App 38, 392 Wis. 2d 866, 946 N.W.2d 231, 19-0488.

631.11 Annotation Affirmed. 2021 WI 53, 397 Wis. 2d 394, 959 N.W.2d 912, 19-0488.

631.11 Annotation In this case, the business-use clause in the homeowner’s policy was written as an exclusion, not a warranty or a condition, so sub. (3) did not apply to the business-use clause. The terms “warranty” and “condition” do not necessarily encompass any use restriction on a property. Kutchera v. State Farm Fire & Casualty Co., 560 F. Supp. 3d 1242 (2021).

631.13 631.13 Incorporation by reference. No insurance contract may contain any agreement or incorporate any provision not fully set forth in the policy or in an application or other document attached to and made a part of the policy at the time of its delivery except that:

631.13(1) (1) Rates. Any policy may by reference incorporate rate schedules and classifications of risks and short-rate tables filed with the commissioner; and

631.13(2) (2) Complex contracts. By rule or order or by approval of a form the commissioner may authorize for complex contracts incorporation by reference of provisions for administrative arrangements, premium schedules and payment procedures.