Personal liability for violation.
Any person who violates sub. (1)
is personally liable to any claimant under the policy for any damage proximately caused by the person's violation. That damage may include damage resulting from the necessity of replacing the insurance in an authorized insurer or the failure of the unauthorized insurer to perform the insurance contract.
The office may by rule promulgate standards for any of the following:
Establishing that a person should know that the result of insurance business is or might be the illegal placement of insurance with an unauthorized insurer or the subsequent servicing of an insurance policy illegally placed with an unauthorized insurer.
Imposing requirements under s. 601.42
or sanctions or remedial measures under sub. (2)
or s. 601.64
, or any other applicable penalty or remedial provision of chs. 600
, for a violation of this section.
Notwithstanding par. (a) 1.
, it is not necessary for the office to promulgate a rule under par. (a) 1.
to establish that a person violated sub. (1)
Legislative Council Note, 1975: Sub. (2) is added as an effective sanction to suppress knowing placement of insurance with unauthorized insurers. It is adapted from Conn. Insurance Laws, Sec. 38-90. Insurance agents and others should guarantee performance of insurance contracts they negotiate knowingly with unlicensed insurers, unless legally negotiated under the surplus lines law. In addition, the sanctions of s. 601.64 apply to violators of this provision. [Bill 16-S]
PERMISSIBLE BUSINESS BY
In this subchapter, unless the context requires otherwise:
“Affiliated group" means all persons that control, are controlled by, or are under common control with, an insured.
“Authorized insurer" means an insurer that is licensed, or authorized, to transact the business of insurance under the law of the home state.
“Control" means, with respect to a person having control over another person, that the person does any of the following:
Directly or indirectly, or acting through one or more other persons, owns, controls, or has the power to vote 25 percent or more of any class of voting securities of a person.
Controls in any manner the election of a majority of the directors or trustees of a person.
“Domestic surplus lines insurer" means an insurer that has a certificate to do business as a domestic surplus lines insurer under s. 618.41 (13)
Except as provided in par. (b)
, “home state" means, with respect to an insured, one of the following:
The state in which the insured maintains its principal place of business or, in the case of an insured who is an individual, the individual's principal residence.
If 100 percent of the insured risk is located outside of the state referred to in subd. 1.
, the state to which the greatest percentage of the insured's taxable premium for that insurance contract is allocated.
If more than one insured from an affiliated group are named insureds on a single surplus lines insurance contract, “home state" means the state, as determined under par. (a)
, of the member of the affiliated group that has the largest percentage of premium attributed to it under the insurance contract.
“Premium tax" means, with respect to unauthorized insurance, any tax, fee, assessment, or other charge imposed by this state directly or indirectly based on any payment made as consideration for an insurance contract for such insurance, including premium deposits, assessments, registration fees, and any other compensation given in consideration for a contract of insurance.
“Principal place of business" means, with respect to determining the home state of an insured, the state where the insured maintains its headquarters and where the insured's high-level officers direct, control, and coordinate the business activities of the insured.
“Principal residence" means, with respect to determining the home state of an insured who is an individual, the state where the individual resides for the greatest number of days during a calendar year.
“State" includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, the Virgin Islands, and American Samoa.
“Surplus lines broker" means a person that is licensed in a state to sell, solicit, or negotiate insurance on properties, risks, or exposures located or to be performed in that state with unauthorized insurers.
“Surplus lines insurance" means any insurance to which all of the following apply:
The insurance is permitted under this subchapter to be placed through a surplus lines agent or broker with an unauthorized insurer eligible to accept the insurance.
“Unauthorized insurance" means any insurance permitted in a state to be placed directly or through a surplus lines broker with an unauthorized insurer eligible to accept such insurance.
History: 2011 a. 224
; 2017 a. 16
Surplus lines insurance. 618.41(1)(1)
A domestic surplus lines insurer or a nondomestic insurer which has not obtained a certificate of authority to do business in this state under s. 618.12
may negotiate for and make insurance contracts with persons in this state and on risks located in this state, subject to the limitations and requirements specified in this section.
Incidental acts permitted.
With respect to contracts made under this section, the insurer may in this state also inspect risks to be insured, collect premiums and adjust losses, and do all other acts reasonably incidental to the contract.
Nothing in subs. (1)
permits the solicitation of business in this state by or on behalf of an insurer without a certificate of authority. The commissioner may by rule prescribe the manner in which insurance agents or brokers may advertise the availability of their services in procuring, on behalf of persons seeking insurance, contracts with domestic surplus lines insurers or with insurers without a certificate of authority.
Information to policyholder.
The insurer and any agent or broker are obligated promptly to furnish the policyholder a statement in a form prescribed or approved by the commissioner, informing the policyholder that the insurer has not obtained a certificate of authority to do business in this state and is not regulated in this state except as provided in this section.
With respect to contracts made under this section, nondomestic insurers and domestic surplus lines insurers are subject to s. 628.34
and rules promulgated thereunder.
Prohibited and restricted surplus lines business. 618.41(6)(a)
(a) Prohibited classes.
The commissioner may by rule prohibit the making of contracts under sub. (1)
in a specified class of insurance if authorized insurers provide an established market for the class in this state which is adequate and reasonably competitive with reputable unauthorized insurers.
The commissioner may by rule place restrictions and limitations on and create special procedures for the making of contracts under sub. (1)
for a specified class of insurance if there have been abuses of placements in the class or if the policyholders in the class, because of limited financial resources, business experience or knowledge, cannot be expected to protect their own interests adequately.
Exclusion of individual insurers.
The commissioner may prohibit an individual insurer or group policyholder, including but not limited to a risk purchasing group, from making any contracts under sub. (1)
or issuing evidence of coverage and may prohibit all insurance agents and brokers from dealing with the insurer or group policyholder, if:
The commissioner has reason to believe that the insurer, or the insurer which issued the policy to a group policyholder, is in an unsound condition or the insurer or group policyholder is operated in a fraudulent, dishonest or incompetent manner or in violation of the law of its domicile.
The commissioner may issue lists of unauthorized nondomestic insurers whose solidity he or she believes to be doubtful or whose practices he or she believes to be objectionable. The commissioner may issue lists of unauthorized nondomestic insurers he or she believes to be reliable and solid. The commissioner may also issue other relevant evaluations of unauthorized insurers. No action may lie against the commissioner or any employee of the office for anything said in the issuance of such lists and evaluations.
Rustproofing warranties insurance.
An insurer issuing a policy of insurance under this section 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
The commissioner may, pursuant to s. 628.04 (2)
, issue to any licensed agent or broker a surplus lines license granting authority to procure insurance under this section.
Risk purchasing groups; licensed agents.
A natural person may not solicit, negotiate or obtain liability insurance for a risk purchasing group from an unauthorized insurer unless the natural person is licensed as a surplus lines agent under sub. (7)
Surplus lines agents, brokers and group policyholders. 618.41(8)(a)(a)
An agent or broker may not place insurance under this section with, and a person who offers liability insurance coverage under a group policy may not solicit the purchase of coverage under a group policy issued by, an unauthorized insurer if all of the following exist:
The insurer is financially unsound, engaging in unfair practices or otherwise substandard.
The agent, broker or other person fails to give the applicant written notice of the insurer's deficiencies.
The agent, broker or other person either knows of, or fails to adequately investigate, the insurer's financial condition and general reputation.
Retention of notice.
An agent, broker or group policyholder shall keep in its office for at least 5 years any notice provided under par. (a) 2.
To be financially sound for purposes of par. (a) 1.
, an insurer must be able to satisfy standards comparable to those applied under the laws of this state to authorized insurers, unless this state is the insured's home state, in which case s. 618.416
Requirements for surplus lines policies. 618.41(9)(a)
Every new or renewal insurance policy procured and delivered under this section shall bear the name and address of the insurance agent or broker who procured it and shall have stamped or affixed upon it the following: “This insurance contract is with an insurer which has not obtained a certificate of authority to transact a regular insurance business in the state of Wisconsin, and is issued and delivered as a surplus line coverage pursuant to s. 618.41
of the Wisconsin Statutes. Section 618.43 (1)
, Wisconsin Statutes, requires payment by the policyholder of 3 percent tax on gross premium."
Additional required information.
The policy shall include a description of the subject of the insurance, and indicate the coverage, conditions and term of the insurance, the premium charged and premium taxes to be collected from the policyholder, and the name and address of the policyholder and insurer. If the direct risk is assumed by more than one insurer, the policy shall state the names and addresses of all insurers and the portion of the entire direct risk each has assumed.
Surplus lines policies issued by domestic surplus lines insurers.
Notwithstanding par. (a)
, every new or renewal insurance policy procured and delivered under this section by a domestic surplus lines insurer shall bear the name and address of the insurance agent or broker who procured it and shall have stamped or affixed upon it the following: “This insurance contract is issued and delivered as a surplus line coverage pursuant to s. 618.41
of the Wisconsin Statutes. Section 618.43 (1)
, Wisconsin Statutes, requires payment by the policyholder of 3 percent tax on gross premium. If the insurer that issued and delivered this policy becomes insolvent, insureds or claimants will not be eligible for Wisconsin Insurance Security Fund protection under chapter 646 of the Wisconsin Statutes."
Issuance of evidence of insurance.
Upon placing a new or renewal coverage under this section, the agent or broker shall promptly deliver to the policyholder or his or her agent evidence of the insurance consisting either of the policy as issued by the insurer or, if the policy is not then available, a certificate, cover note or other confirmation of insurance.
The commissioner may by rule subject policies written under this section to as much of the regulation provided by chs. 600
for comparable policies written by authorized insurers as the commissioner finds to be necessary to protect the interests of insureds and the public in this state.
Application when this state is not the insured's home state.
The placement of insurance under this section is not subject to subs. (4)
, or (10)
if this state is not the insured's home state and the placement complies with the laws of the insured's home state.
An insurer domiciled in this state may submit to the commissioner an application for a certificate that permits the insurer to provide surplus lines insurance as a domestic surplus lines insurer. The commissioner shall issue the certificate to the insurer if the insurer satisfies all of the following requirements:
The insurer's board of directors has adopted a resolution requesting to be certified as a domestic surplus lines insurer.
The insurer is eligible to provide surplus lines insurance in a state other than this state.
The insurer has capital and surplus of no less than $15,000,000.
If the insurer applying for a certificate under this subsection has issued insurance policies in this state as a domestic insurer, the insurer includes in its application a plan for the insurer's proposed treatment of those policies in compliance with chs. 600
A domestic surplus lines insurer is subject to all requirements of this subchapter and the requirements that apply to a domestic insurer organized under ch. 611
Notwithstanding subd. 1.
, a surplus lines insurance policy issued in this state by a domestic surplus lines insurer is only subject to the requirements of this section and the rules promulgated under this section and shall be exempt from all statutory requirements, including requirements relating to insurance rating plans, policy forms, policy cancellation and nonrenewal, and premium charged to the insured, in the same manner as a surplus lines insurance policy issued by a nondomestic insurer.
Nothing in this section shall be construed to affect the application of ch. 646
to insurance policies that were issued by a domestic insurer prior to that domestic insurer obtaining a certificate to do business as a domestic surplus lines insurer under this subsection.
A domestic surplus lines insurer shall be considered a nonadmitted insurer as defined in 15 USC 8206
with respect to surplus lines insurance the domestic surplus lines insurer issues in this state.
Insurance transacted by a domestic surplus lines insurer under this section is subject to taxation as specified under s. 618.43
A surplus lines insurance policy issued in this state by a domestic surplus lines insurer under this section is not subject to the Wisconsin insurance security fund under ch. 646
No domestic surplus lines insurer may offer insurance other than under this section.
A domestic surplus lines insurer, after obtaining a certificate to do business as a domestic surplus lines insurer under this section, may not apply to the commissioner to issue policies other than as a domestic surplus lines insurer.
Independent actual notice to a policyholder, in the absence of stamping or affixing the information required under sub. (9) (a) to the policy, was insufficient. Combined Investigative v. Scottsdale Ins., 165 Wis. 2d 262
, 477 N.W.2d 82
(Ct. App. 1991).
Surplus-lines insurance must be “placed" with an insurer through an agent or broker who holds a Wisconsin surplus-lines license. However, no provision requires a person to hold a surplus-lines license to negotiate a policy or perform the underwriting unless the policy is for a risk purchasing group under sub. (7m). In addition, a broker can perform the role under sub. (8) with respect to a given insurer and then allow others to place policies with that insurer under the broker's license. Midwest Commercial Funding, LLC v. Cincinnati Specialty Underwriters Insurance Co., 399 F. Supp. 3d 736
The proposal requirement under sub. (4) is distinct from the stamping requirement under sub. (9) (a), and each disclosure must be made at a different time. The proposal letter must be furnished to the policyholder promptly, which means before the policy has been procured, for it informs the insured that the agent or broker intends to procure the policy on a surplus-lines basis and instructs the insured to contact the agent or broker if the proposal is not satisfactory. In contrast, the information required to be stamped on the policy must be disclosed at the time the policy is procured and delivered. Midwest Commercial Funding, LLC v. Cincinnati Specialty Underwriters Insurance Co., 399 F. Supp. 3d 736
Group liability insurance issued by an unauthorized insurer. 618.415(1)(1)
Notice before taking application.
A person may not take an application for liability insurance coverage under a group liability insurance policy which is issued by an unauthorized insurer and which is for a risk that resides or is otherwise located in this state, unless before taking the application the person gives the applicant clear and prominent written notice of all of the following:
That the insurer has not obtained a certificate of authority in this state and is not regulated in this state.
That the risk is not protected by the Wisconsin insurance security fund.