Chapter 632

632.185 History History: 2003 a. 302.

632.185 Cross-reference Cross-reference: See also ch. Ins 14, Wis. adm. code.

subch. III of ch. 632 SUBCHAPTER III

LIABILITY INSURANCE IN GENERAL

632.22 632.22 Required provisions of liability insurance policies. Every liability insurance policy shall provide that the bankruptcy or insolvency of the insured shall not diminish any liability of the insurer to 3rd parties and that if execution against the insured is returned unsatisfied, an action may be maintained against the insurer to the extent that the liability is covered by the policy.

632.22 History History: 1975 c. 375.

632.23 632.23 Prohibited exclusions in aircraft insurance policies. No policy covering any liability arising out of the ownership, maintenance or use of an aircraft, may exclude or deny coverage because the aircraft is operated in violation of air regulation, whether derived from federal or state law or local ordinance.

632.23 History History: 1975 c. 375.

632.23 Annotation This section applies only to third-party claims. Jadair International, Inc. v. American National Property & Casualty Co., 635 F. Supp. 3d 667 (2022).

632.24 632.24 Direct action against insurer. Any bond or policy of insurance covering liability to others for negligence makes the insurer liable, up to the amounts stated in the bond or policy, to the persons entitled to recover against the insured for the death of any person or for injury to persons or property, irrespective of whether the liability is presently established or is contingent and to become fixed or certain by final judgment against the insured.

632.24 History History: 1975 c. 375.

632.24 Annotation An excess-of-policy coverage clause in a reinsurance agreement constituted a liability insurance contract insuring against tortious failure to settle a claim. Ott v. All-Star Insurance Corp., 99 Wis. 2d 635, 299 N.W.2d 839 (1981).

632.24 Annotation Recovery limitations applicable to an insured municipality likewise applied to its insurer, notwithstanding higher policy limits and this section. Gonzalez v. City of Franklin, 137 Wis. 2d 109, 403 N.W.2d 747 (1987).

632.24 Annotation Insurers must plead and prove their policy limits prior to a verdict in order to restrict the judgment to the policy limits. Price v. Hart, 166 Wis. 2d 182, 480 N.W.2d 249 (Ct. App. 1991).

632.24 Annotation This section does not apply to actions in which the principal on a bond under s. 344.36 causes injury. That section requires obtaining a judgment against the principal before an action may be brought against the surety. Vangsguard v. Progressive Northern Insurance Co., 188 Wis. 2d 584, 525 N.W.2d 146 (Ct. App. 1994).

632.24 Annotation There is neither a statutory nor a constitutional right to have all parties identified to a jury, but as a procedural rule, the court should in all cases apprise the jurors of the names of all the parties. Stoppleworth v. Refuse Hideaway, Inc., 200 Wis. 2d 512, 546 N.W.2d 870 (1996), 93-3182.

632.24 Annotation The insured stands in privity with the insurer under this section. There is but one wrong and but one cause of action. When liability cannot be imposed upon one, none can be imposed upon the other. Plaintiff’s cashing of the defendant’s insurer’s settlement check demonstrated an accord and satisfaction of claims against the insured although the insured had not been named in the action. Parsons v. American Family Insurance Co., 2007 WI App 211, 305 Wis. 2d 630, 740 N.W.2d 399, 06-2481.

632.24 Annotation This section allows direct actions against a negligence insurer for negligence claims. It does not allow a plaintiff in a contract action to sue the defendant’s insurer. Rogers v. Saunders, 2008 WI App 53, 309 Wis. 2d 238, 750 N.W.2d 477, 07-0306. See also Dhein v. Frankenmuth Mutual Insurance Co., 2020 WI App 62, 394 Wis. 2d 470, 950 N.W.2d 861, 19-0531.

632.24 Annotation This section does not speak to whether the timely answer of an insured denying liability may inure to the benefit of a defaulting insurance company so as to preclude a judgment by default against it for the plaintiff’s damages. The timely answer of the codefendant insureds denying the liability of all defendants did not preclude default judgment against the insurer on the issue of liability and damages upon the insurer’s acknowledged default. Estate of Otto v. Physicians Insurance Co. of Wisconsin, 2008 WI 78, 311 Wis. 2d 84, 751 N.W.2d 805, 06-1566.

632.24 Annotation This section applies to any policy of insurance covering liability, irrespective of whether that policy was delivered or issued for delivery in Wisconsin, so long as the accident or injury occurs in this state. Casper v. American International South Insurance Co., 2011 WI 81, 336 Wis. 2d 267, 800 N.W.2d 880, 06-1229.

632.24 Annotation This section does not mandate a pro rata distribution of the policy limits among all claimants. This section is silent as to how the policy limit is to be distributed. Until such time as there was a verdict in this case, policy limits paid into court were not subject to the circuit court’s control and neither the direct action statute nor Wisconsin case law required the court to distribute the policy limits in settlement on a pro rata basis. Lovelien v. Austin Mutual Insurance Co., 2018 WI App 4, 379 Wis. 2d 733, 906 N.W.2d 728, 16-1679.

632.24 Annotation The direct action statute generally endeavors to save litigation and reduce expense by determining the rights of all parties in a single action involving the insurance carrier, to expedite the final settlement of litigation and payment to the injured person, and to place the burden on the insurer to pay damages sustained by a person as a result of the insured’s causal negligence. However, when an injured party pursues claims for damages arising out of an accident directly against an insured’s liability insurer under this section without the insured being made a party to that action, claim preclusion does not bar the insured from pursuing a negligence claim in a subsequent lawsuit against the injured party. Hull v. Glewwe, 2019 WI App 27, 388 Wis. 2d 90, 931 N.W.2d 266, 17-2485.

632.24 Annotation The federal compulsory counterclaim rule precluded an action against an insurer under the state direct action statute when an action directly against the insured was barred by rule. Fagnan v. Great Central Insurance Co., 577 F.2d 418 (1978).

632.24 Annotation A breach of fiduciary duty was negligence for purposes of Wisconsin’s direct action and direct liability statutes. Federal Deposit Insurance Corp. v. MGIC Indemnity Corp., 462 F. Supp. 759 (1978).

632.24 Annotation An insurer’s failure to join in an insured motorist’s petition to remove the case to federal court necessitated a remand to state court. Padden v. Gallaher, 513 F. Supp. 770 (1981).

632.25 632.25 Limited effect of conditions in employer’s liability policies. Any condition in an employer’s liability policy requiring compliance by the insured with rules concerning the safety of persons shall be limited in its effect in such a way that in the event of breach by the insured the insurer shall nevertheless be responsible to the injured person under s. 632.24 as if the condition has not been breached, but shall be subrogated to the injured person’s claim against the insured and be entitled to reimbursement by the latter.

632.25 History History: 1975 c. 375.

632.25 Annotation “Condition” as used in this section does not refer to exclusion. Bortz v. Merrimac Mutual Insurance Co., 92 Wis. 2d 865, 286 N.W.2d 16 (Ct. App. 1979).

632.26 632.26 Notice provisions.

632.26(1) (1) Required provisions. Every liability insurance policy shall provide:

632.26(1)(a) (a) That notice given by or on behalf of the insured to any authorized agent of the insurer within this state, with particulars sufficient to identify the insured, is notice to the insurer.

632.26(1)(b) (b) That failure to give any notice required by the policy within the time specified does not invalidate a claim made by the insured if the insured shows that it was not reasonably possible to give the notice within the prescribed time and that notice was given as soon as reasonably possible.

632.26(2) (2) Effect of failure to give notice. Failure to give notice as required by the policy as modified by sub. (1) (b) does not bar liability under the policy if the insurer was not prejudiced by the failure, but the risk of nonpersuasion is upon the person claiming there was no prejudice.

632.26 History History: 1979 c. 102.

632.26 Annotation Legislative Council Note, 1979: Subsection (1) is former s. 632.32 (1), altered in 2 ways: (1) to extend its coverage to all liability policies; and (2) to change “may” to “shall”. The subsection is divided into 2 paragraphs for clarity.

632.26 Annotation The first change would strengthen the law. It is entirely new and seems a desirable extension.

632.26 Annotation The second change corrects an error. The word “shall” was used in the fourth draft of the bill that ultimately became ch. 375, laws of 1975, and was not changed in the addendum to the fourth draft, dated July 14, 1975. Those documents went to the insurance laws revision committee and then to the legislative council for action. Nothing appears in the minutes of the committee’s meeting of July 14, 1975 to indicate that a change was made. But in LRB-6218/1 of 1975, “may” appears instead of “shall”. That error, which was probably inadvertent and the source of which we have not been able to trace, was carried on into the final enactment.

632.26 Annotation Sub. (2) continues the second sentence of former s. 632.34 (4). Shifting it to s. 632.26, which is applicable to all liability insurance, broadens its application, but that seems desirable. The term “burden of proof” is changed to “risk of nonpersuasion” to tighten up the meaning. “Burden of proof” is a broad term that comprehends 2 separate concepts: (1) the burden of going forward with the evidence and (2) the burden of persuading the trier of fact, better termed the “risk of nonpersuasion”. See McCormick, Evidence, (2nd ed.), at 784 n. 4 (1972). The statute is concerned with determining who wins when the totality of evidence is inconclusive, not with the burden of going forward, which ought to be settled on the basis of general principles. Indeed, since the insurer will have best (or the only) access to information about prejudice, it may be quite unfair to put the burden of going forward on the claimant.

632.26 Annotation Subs. (1) (b) and (2) are related. The first is a required provision in the policy. The 2nd is a rule of law. It is preferable not to go too far in inserting excuses into the policy. Sub. (1) (b) encourages the insured not to give up automatically if notice is not timely given, but insertion of sub. (2) into the policy would arguably encourage an unduly long delay that might prejudice both parties. [Bill 146-S]

632.26 Annotation When the insurer denied coverage within the time that the insured could have submitted the insured’s proofs in response to the insurer’s request for more information, the insurer waived the defense of lack of notice. Ehlers v. Colonial Penn Insurance Co., 81 Wis. 2d 64, 259 N.W.2d 718 (1977).

632.26 Annotation The failure of policyholders to give notice to an underinsurer of a settlement between the insured and the tortfeasor does not bar underinsured motorist coverage in the absence of prejudice to the insurer. There is a rebuttable presumption of prejudice when there is a lack of notice, with the burden on the insured to prove by the greater weight of the evidence that the insurer was not prejudiced. Ranes v. American Family Mutual Insurance Co., 219 Wis. 2d 49, 580 N.W.2d 197 (1998), 97-0441.

632.26 Annotation Wisconsin’s notice-prejudice statutes, this section and s. 631.81, do not supersede the reporting requirement specific to claims-made-and-reported policies. Anderson v. Aul, 2015 WI 19, 361 Wis. 2d 63, 862 N.W.2d 304, 13-0500.

subch. IV of ch. 632 SUBCHAPTER IV

AUTOMOBILE AND MOTOR VEHICLE INSURANCE

632.32 632.32 Provisions of motor vehicle insurance policies.

632.32(1) (1) Scope. Except as otherwise provided, this section applies to every policy of insurance issued or delivered in this state against the insured’s liability for loss or damage resulting from accident caused by any motor vehicle, whether the loss or damage is to property or to a person.

632.32(2) (2) Definitions. In this section:

632.32(2)(ab) (ab) “Commercial automobile liability policy” means a liability insurance policy that is intended principally to provide primary coverage for the insured’s liability arising out of the ownership, maintenance, or use of a motor vehicle in the insured’s business or other commercial activities.

632.32(2)(ac) (ac) “Commercial liability policy” means any form of liability insurance policy, including a commercial or business package policy or a policy written on farm and agricultural operations, that is intended principally to provide primary coverage for the insured’s general liability arising out of its business or other commercial activities, and that includes coverage for the insured’s liability arising out of the ownership, maintenance, or use of a motor vehicle as only one component of the policy or as coverage that is only incidental to the principal purpose of the policy. “Commercial liability policy” does not include a worker’s compensation policy or a commercial automobile liability policy.

632.32(2)(ag) (ag) “Governmental unit” has the meaning given in s. 50.33 (1r).

632.32(2)(am) (am) “Medical payments coverage” means coverage to indemnify for medical payments or chiropractic payments or both for the protection of all persons using the insured motor vehicle from losses resulting from bodily injury or death.

632.32(2)(at) (at) “Motor vehicle” means a self-propelled land motor vehicle designed for travel on public roads and subject to motor vehicle registration under ch. 341. A trailer or semitrailer that is designed for use with and connected to a motor vehicle shall be considered a single unit with the motor vehicle. “Motor vehicle” does not include farm tractors, well drillers, road machinery, or snowmobiles.

632.32(2)(b) (b) “Motor vehicle handler” means any of the following:

632.32(2)(b)1. 1. A motor vehicle dealer, as defined in s. 218.0101 (23) (a).

632.32(2)(b)2. 2. A lessor, as defined in s. 344.51 (1g) (a), or a rental company, as defined in s. 344.51 (1g) (c).

632.32(2)(b)3. 3. A repair shop, service station, storage garage or public parking place.

632.32(2)(be) (be) “Owned motor vehicle” means a motor vehicle that is owned by the insured or that is leased by the insured for a term of 6 months or longer.

632.32(2)(bh) (bh) “Phantom motor vehicle” means a motor vehicle to which all of the following apply:

632.32(2)(bh)1. 1. The motor vehicle is involved in an accident with a person who has uninsured motorist coverage.

632.32(2)(bh)2. 2. In the accident, the motor vehicle makes no physical contact with the insured or with a vehicle the insured is occupying.

632.32(2)(bh)3. 3. The identity of neither the operator nor the owner of the motor vehicle can be ascertained.

632.32(2)(cm) (cm) “Umbrella or excess liability policy” means an insurance contract providing at least $1,000,000 of liability coverage per person or per occurrence in excess of certain required underlying liability insurance coverage or a specified amount of self-insured retention.

632.32(2)(d) (d) “Underinsured motorist coverage” means coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of underinsured motor vehicles.

632.32(2)(f) (f) “Uninsured motorist coverage” means coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of uninsured motor vehicles.

632.32(2)(g) (g) “Uninsured motor vehicle” means a motor vehicle, other than a motor vehicle owned by a governmental unit, that is involved in an accident with a person who has uninsured motorist coverage and with respect to which, at the time of the accident, a bodily injury liability insurance policy is not in effect and the owner or operator has not furnished proof of financial responsibility for the future under subch. III of ch. 344 and is not a self-insurer under any other applicable motor vehicle law. “Uninsured motor vehicle” also includes any of the following motor vehicles, other than a motor vehicle owned by a governmental unit, involved in an accident with a person who has uninsured motorist coverage:

632.32(2)(g)1. 1. An insured motor vehicle, or a motor vehicle with respect to which the owner or operator is a self-insurer under any applicable motor vehicle law, if before or after the accident the liability insurer of the motor vehicle, or the self-insurer, is declared insolvent by a court of competent jurisdiction.

632.32(2)(g)2. 2. A phantom motor vehicle, if all of the following apply:

632.32(2)(g)2.a. a. The facts of the accident are corroborated by competent evidence that is provided by someone other than the insured or any other person who makes a claim against the uninsured motorist coverage as a result of the accident.

632.32(2)(g)2.b. b. Within 72 hours after the accident, the insured or someone on behalf of the insured reports the accident to a police, peace, or judicial officer or to the department of transportation or, if the accident occurs outside of Wisconsin, the equivalent agency in the state where the accident occurs.

632.32(2)(g)2.c. c. Within 30 days after the accident occurs, the insured or someone on behalf of the insured files with the insurer a statement under oath that the insured or a legal representative of the insured has a cause of action arising out of the accident for damages against a person whose identity is not ascertainable and setting forth the facts in support of the statement.

632.32(2)(g)3. 3. An unidentified motor vehicle involved in a hit-and-run accident with the person.

632.32(2)(h) (h) “Using” includes driving, operating, manipulating, riding in and any other use.

632.32(3) (3) Required provisions. Except as provided in sub. (5), every policy subject to this section issued to an owner shall provide that:

632.32(3)(a) (a) Coverage provided to the named insured applies in the same manner and under the same provisions to any person using any motor vehicle described in the policy when the use is for purposes and in the manner described in the policy.

632.32(3)(b) (b) Coverage extends to any person legally responsible for the use of the motor vehicle.

632.32(4) (4) Required uninsured motorist and medical payments coverages.

632.32(4)(a) (a) Except as provided in par. (d), every policy of insurance subject to this section that insures with respect to any motor vehicle registered or principally garaged in this state against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall contain therein or supplemental thereto provisions for all of the following coverages:

632.32(4)(a)1. 1. Excluding a policy written by a town mutual organized under ch. 612, uninsured motorist coverage, in limits of at least $25,000 per person and $50,000 per accident.

632.32(4)(a)2. 2. Medical payments coverage, in the amount of at least $1,000 per person. Coverage written under this subdivision may be excess coverage over any other source of reimbursement to which the insured person has a legal right.

632.32(4)(bc) (bc) Notwithstanding par. (a) 2., the named insured may reject medical payments coverage. If one named insured rejects the coverage, the coverage need not be provided in a subsequent renewal policy issued by the same insurer unless a named insured under the policy requests it in writing.

632.32(4)(c) (c) Unless an insurer waives the right to subrogation, insurers making payment under any of the coverages under this subsection shall, to the extent of the payment, be subrogated to the rights of their insureds.

632.32(4)(d) (d) This subsection does not apply to a commercial liability policy if the coverage it provides for the insured’s liability arising out of the maintenance or use of a motor vehicle is limited to coverage for motor vehicles that are not owned motor vehicles, or to an umbrella or excess liability policy. If a commercial liability policy or an umbrella or excess liability policy provides medical payments coverage or uninsured motorist coverage, however, the coverage must have limits of at least those specified in par. (a).

632.32 Cross-reference Cross-reference: See also s. Ins 6.77, Wis. adm. code.

632.32(4m) (4m) Underinsured motorist coverage.

632.32(4m)(a) (a) Except as provided in par. (e), an insurer writing policies that insure with respect to a motor vehicle registered or principally garaged in this state against loss resulting from liability imposed by law for bodily injury or death suffered by a person arising out of the ownership, maintenance, or use of a motor vehicle shall provide to one named insured under each such insurance policy that goes into effect after November 1, 2011, that is written by the insurer and that does not include underinsured motorist coverage written notice of the availability of underinsured motorist coverage, including a brief description of the coverage. An insurer is required to provide the notice required under this paragraph only one time and in conjunction with the delivery of the policy.

632.32(4m)(b) (b) Acceptance or rejection of underinsured motorist coverage by a person after being notified under par. (a) need not be in writing. The absence of a premium payment for underinsured motorist coverage is conclusive proof that the person has rejected such coverage. The rejection of such coverage by the person notified under par. (a) shall apply to all persons insured under the policy, including any renewal of the policy.

632.32(4m)(c) (c) If a person rejects underinsured motorist coverage after being notified under par. (a), the insurer is not required to provide such coverage under a policy that is renewed to the person by that insurer unless an insured under the policy subsequently requests such underinsured motorist coverage in writing.

632.32(4m)(d) (d) If an insured accepts underinsured motorist coverage, the insurer shall include the coverage in limits of at least $50,000 per person and $100,000 per accident.

632.32(4m)(e) (e) This subsection does not apply to a commercial liability policy if the coverage it provides for the insured’s liability arising out of the maintenance or use of a motor vehicle is limited to coverage for motor vehicles that are not owned motor vehicles, or to an umbrella or excess liability policy. If a commercial liability policy or an umbrella or excess liability policy provides underinsured motorist coverage, however, the coverage must have limits of at least those specified in par. (d).