Chapter 646

646.01(1)(a)2.i. i. Service insurance corporations that offer only dental or vision care.

646.01(1)(a)2.j. j. Nondomestic insurers that have not obtained a certificate of authority to do business in this state and that are doing business under s. 618.41 or 618.42.

646.01(1)(a)2.k. k. Risk-sharing plans under ch. 619.

646.01(1)(a)2.L. L. The patients compensation fund under s. 655.27.

646.01(1)(b) (b) Exceptions. This chapter does not apply to any of the following:

646.01(1)(b)1. 1. Any portion of a life insurance policy or annuity contract that is not guaranteed by the insurer or under which the risk is borne by the policy or policyholder.

646.01(1)(b)2. 2. Title insurance.

646.01(1)(b)3. 3. Surety bonds, fidelity bonds and any other bonding obligations.

646.01(1)(b)4. 4. Bail bonds.

646.01(1)(b)5. 5. Mortgage guaranty, financial guaranty and other forms of insurance offering protection against investment risks.

646.01(1)(b)6. 6. Ocean marine insurance.

646.01(1)(b)7. 7. Credit insurance.

646.01(1)(b)8. 8. Product liability or completed operations liability insurance, and comprehensive general liability including either of these coverages, provided to a risk purchasing group or a member of a risk purchasing group.

646.01(1)(b)9. 9. Any self-funded, self-insured, or partially or wholly uninsured plan of an employer or other person to provide life insurance, annuity, or disability benefits to its employees or members to the extent that the plan is self-funded, self-insured, or uninsured.

646.01(1)(b)10. 10. Any liability for dividends or experience rating credits payable after the date of entry of the order of liquidation under an insurance or annuity contract, and any fees or allowances due any person, including the policyholder, in connection with service to or administration of the contract.

646.01(1)(b)11. 11. Any warranty or service contract.

646.01(1)(b)11m. 11m. Any contractual liability policy that is issued to a warrantor, warranty plan, warranty plan administrator, or service contract provider and that provides coverage of any liability or performance arising out of or in connection with a warranty or service contract.

646.01(1)(b)12. 12. Municipal bond insurance.

646.01(1)(b)13. 13. Any transaction or combination of transactions between a person, including affiliates of such person, and an insurer, including affiliates of such insurer, which involves the transfer of investment or credit risk unaccompanied by transfer of insurance risk.

646.01(1)(b)14. 14. A policy issued by an insurer to, or a contract entered into by an insurer with, a care management organization, as defined in s. 46.2805 (1), or the department of health services or any other governmental entity under any state law to provide prepaid health care to medical assistance recipients.

646.01(1)(b)15. 15. An unallocated annuity contract.

646.01(1)(b)16. 16. A contractual agreement that obligates an insurer to provide a book value accounting guarantee for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, neither of which is an affiliate of the insurer.

646.01(1)(b)17. 17. Any liability under a policy or contract to the extent that it provides for interest or other changes in value that are to be determined by the use of an index or other external reference stated in the policy or contract and to the extent that the interest or other changes in value have not been credited to the policy or contract as of the date of the entry of the order of liquidation and are subject to forfeiture. If a policy’s or contract’s interest or other changes in value are credited less frequently than annually, for purposes of determining the values that have been credited and that are not subject to forfeiture, the interest or change in value determined by using the procedures specified in the policy or contract will be credited as if the contractual date of crediting interest or other changes in value was the date of entry of the order of liquidation and will not be subject to forfeiture.

646.01(1)(b)18. 18. The deductible, self-funded, or self-insured portion of a claim under a liability or worker’s compensation insurance policy, regardless of the timing or method provided in the policy, endorsement, or any other agreement for payment of the deductible, self-funded, or self-insured amount by the insured. This subdivision does not apply to a worker’s compensation insurance policy if the insured under the policy is a debtor under 11 USC 701, et seq., as of the deadline set by the liquidator for filing claims against the insolvent insurer.

646.01(1)(b)19. 19. A policy issued by an insurer to an enrollee under Title XVIII of the federal social security act, 42 USC 1395 to 1395ccc, or Title XIX of the federal social security act, 42 USC 1396 to 1396v, or a contract entered into by an insurer with the federal government or an agency of the federal government under Title XVIII or Title XIX of the federal social security act, to provide health care or prescription drug benefits to persons enrolled in Title XVIII or Title XIX programs.

646.01(1)(b)20. 20. A surplus lines insurance policy written by a domestic surplus lines insurer under s. 618.41 (1).

646.01(1)(b)21. 21. A policy issued by an insurer to the federal government or an agency of the federal government for the purpose of providing health insurance coverage to enrollees under the federal employee health benefit plan program under 5 USC 8901 et seq.

646.01(1)(b)22. 22. Funding agreements authorized under s. 632.66.

646.01(2) (2) Purposes. The purposes of this chapter are:

646.01(2)(a) (a) To maintain public confidence in the promises of insurers by providing a mechanism for protecting insureds from excessive delay and loss in the event of liquidation of insurers and by assessing the cost of such protection among insurers; and

646.01(2)(b) (b) To provide where appropriate for the continuation of protection under policies and supplementary contracts of life insurance, disability insurance and annuities.

646.01 History History: 1971 c. 260; 1975 c. 373, 374, 422; 1979 c. 102, 109, 355; 1981 c. 20 s. 2202 (26) (c); 1983 a. 120; 1985 a. 216; 1987 a. 247, 325; 1989 a. 23; 1995 a. 27 s. 9130 (4); 1995 a. 236, 396; 1997 a. 35; 2003 a. 261; 2007 a. 20 s. 9121 (6) (a); 2007 a. 170; 2009 a. 342; 2011 a. 224; 2013 a. 20, 271; 2017 a. 16; 2021 a. 114.

646.01 Annotation The purpose of this chapter is to protect insureds against losses caused by insolvent insurers. Insureds of insolvent insurers are protected against subrogation claims to the extent of their policy limits. Fireman’s Fund v. Pitco Frialator, 145 Wis. 2d 526, 427 N.W.2d 417 (Ct. App. 1988).

646.03 646.03 Definitions. In this chapter, unless the context indicates otherwise:

646.03(1) (1) “Board” means the board of directors of the insurance security fund created by s. 646.12.

646.03(1m) (1m) “Direct insurance” does not include a policy or contract of reinsurance, except for the following:

646.03(1m)(a) (a) Reinsurance for which the reinsurer has issued assumption certificates under the reinsurance policy or contract.

646.03(1m)(b) (b) Reinsurance ceded by an assessable town mutual company.

646.03(2) (2) “Fund” means the insurance security fund created by s. 646.11.

646.03(2m) (2m) “Health maintenance organization” has the meaning given under s. 609.01 (2).

646.03(2p) (2p) “Insolvent insurer” means an insurer subject to this chapter that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

646.03(2r) (2r) “Limited service health organization” has the meaning given in s. 609.01 (3).

646.03(3) (3) “Liquidator” includes receiver or conservator.

646.03(4) (4) With respect to a life or disability insurance policy or an annuity contract, “owner” or “policyholder” means the person who is identified as the legal owner under the terms of the policy or contract or who is otherwise vested with legal title to the policy or contract through a valid assignment completed in accordance with the terms of the policy or contract and properly recorded as the owner on the books of the insurer. “Owner” or “policyholder” does not include a person with only a beneficial interest in a policy or contract.

646.03(4m) (4m) “Retained asset account” means any mechanism in which the settlement of proceeds payable under a life insurance policy is accomplished by the insurer or an entity acting on behalf of the insurer depositing the proceeds into an account with check or draft writing privileges, where those proceeds are retained by the insurer, under a written supplementary contract not involving annuity benefits.

646.03(5) (5) “Unallocated annuity contract” means an annuity contract or group annuity certificate that is not issued to and owned by an individual, except to the extent of any annuity benefits guaranteed to an individual by an insurer under the contract or certificate.

646.03 History History: 1979 c. 109, 110, 355; 1985 a. 29; 1995 a. 236; 2003 a. 261; 2009 a. 342; 2011 a. 224.

646.11 646.11 Organization and administration of fund.

646.11(1) (1) Organization. There is created an organization to be known as the “insurance security fund.” All insurers subject to this chapter are contributors to the fund as a result of their authority to transact business in this state. The fund shall consist of all of the following:

646.11(1)(a) (a) All payments made by insurers under s. 646.51.

646.11(1)(b) (b) The earnings resulting from investments under s. 646.21 (2).

646.11(1)(c) (c) The amounts recovered under s. 645.72 (2) or a substantially similar law in the state of domicile of the insolvent insurer.

646.11(1)(d) (d) Amounts reimbursed to the fund through its subrogation and assignment rights.

646.11(1)(e) (e) Any other moneys received by the fund from time to time.

646.11(2) (2) Accounts. The fund shall be composed of 5 segregated accounts, one for life insurance and annuities, one for disability insurance other than policies issued or coverage provided by a health maintenance organization insurer, one for health maintenance organization insurers, one for all other kinds of insurance subject to this chapter, and an administrative account.

646.11(3) (3) Expenses of fund. Necessary expenses of administration of the fund incurred in connection with actual liquidations or with continuation of contracts under s. 646.35 shall be charged to the appropriate account of the fund. All other expenses shall be charged to the administrative account.

646.11(4) (4) Liability. No contributor to the fund, person acting on the fund’s behalf, insurer representative on the board, or alternate representative designated under s. 646.12 (1) (a) 3. is personally liable for any obligations of the fund. The rights of creditors are solely against the assets of the fund.

646.11(5) (5) Immunity. No cause of action of any nature may arise against and no liability may be imposed upon the fund or its agents, employees, directors, including alternate representatives designated under s. 646.12 (1) (a) 3., or contributor insurers, or the commissioner or the commissioner’s agents, employees, or representatives, for any act or omission by any of them in the performance of their powers and duties under this chapter.

646.11 History History: 1979 c. 109, 221; 1983 a. 120; 1985 a. 216, 332; 1989 a. 23; 2003 a. 261; 2007 a. 170; 2023 a. 212.

646.12 646.12 Administration of the fund.

646.12(1) (1) Composition of board.

646.12(1)(a) (a) Members.

646.12(1)(a)1. 1. The fund shall be administered by a board of directors that shall consist of the attorney general, the state treasurer, and the commissioner, each of whom shall have full voting rights, and at least 9 but not more than 11 insurer representatives of domestic, foreign, and alien insurers subject to this chapter.

646.12(1)(a)2. 2. The commissioner shall appoint the insurer representative members for 3-year terms, after considering recommendations of the other board members currently serving terms. In recommending candidates to fill the positions, the board shall consider whether all insurers subject to this chapter are fairly represented, including property and casualty insurers, life and health insurers, health maintenance organizations and service insurance corporations, and domestic and nondomestic insurers.

646.12(1)(a)3. 3. Each appointed insurer representative may designate an alternate representative to represent the insurer at any meeting of the board. Any person serving as an alternate representative shall, while serving, have all of the powers and responsibilities of the appointed insurer representative.

646.12(1)(b) (b) Chairperson. The person to chair the board shall be elected by the members of the board annually at the first meeting after June 1.

646.12(2) (2) General powers and duties. The board shall:

646.12(2)(a) (a) Adopt rules for the administration of this chapter, including delegation of any part of its powers and its own procedures.

646.12(2)(b) (b) Create standing or special committees as needed. A minority of the members of any committee may be persons not members of the board.

646.12(2)(c) (c) Delegate to the committees any of its powers and duties under this chapter, subject to review and reconsideration by the board.

646.12(2)(d) (d) Employ or retain the personnel necessary to carry out the fund’s duties and set compensation for the personnel. Personnel employed under this paragraph are not employees of the state and are not subject to s. 20.922 or ch. 230.

646.12(2)(e) (e) Advise and make recommendations to the commissioner on any matter related to the possible insolvency of an insurer covered by this chapter, and respond to any reasonable questions presented by the commissioner. Information, recommendations and advice under this subsection are privileged and confidential and are not open to public inspection under s. 19.35 (1).

646.12(2)(f) (f)

646.12(2)(f)1. 1. Keep records of all meetings of the fund and of its subcommittees that involve discussions of the activities of the fund in carrying out its powers and duties under this chapter.

646.12(2)(f)2. 2. Keep confidential the records under subd. 1. pertaining to specific liquidation proceedings involving an insurer until the termination of the liquidation proceedings or until sooner ordered to make the records public by a court of competent jurisdiction.

646.12(2)(f)3. 3. Keep confidential the records under subd. 1. pertaining to specific rehabilitation proceedings involving an insurer unless ordered to make the records public by a court of competent jurisdiction.

646.12(2)(g) (g) Negotiate and contract with any liquidator to achieve the purposes of this chapter.

646.12(2)(h) (h) Perform other acts necessary to achieve the purposes of this chapter.

646.12(3) (3) Compensation. Members of the board and other committee members shall receive no compensation for services but may receive reimbursement for all reasonable and necessary expenses incurred in the performance of their respective duties as directors or as committee members.

646.12(4) (4) Other powers. The fund may join an organization consisting of one or more entities of other states performing comparable functions, in order to assist the fund in carrying out its powers and duties under this chapter and otherwise further the purposes of this chapter.

646.12 History History: 1979 c. 109, 355; 1985 a. 216; 1987 a. 325; 1989 a. 332; 1995 a. 236; 2003 a. 261; 2007 a. 170.

646.12 Cross-reference Cross-reference: See also ch. Ins 11, Wis. adm. code.

646.13 646.13 Special duties and powers of the fund related to loss claims.

646.13(1) (1) Duties. The fund shall:

646.13(1)(a) (a) Establish procedures and acceptable forms of proof for eligible claims, which shall correspond as closely as practicable with the corresponding rules under ch. 645.

646.13(1)(b) (b) Stand in the position of the insurer in the investigation, compromise, settlement, denial, and payment of claims under s. 646.31 and the defense of 3rd-party claims against insureds, subject to the limitations of s. 645.43. The fund shall consult and cooperate with the liquidator in carrying out these duties.

646.13(2) (2) Powers. The fund may:

646.13(2)(a) (a) Review settlements, releases and judgments to which the insurer or its insureds were parties to determine the extent to which they may be properly contested.

646.13(2)(b) (b) Exercise with respect to loss claims the powers that the liquidator has with respect to other claims under ch. 645 or a substantially similar law in the state of domicile of the insolvent insurer.