The purpose of this chapter is the protection of the interests of insureds, creditors, and the public generally, with minimum interference with the normal prerogatives of proprietors, through:
Early detection of any potentially dangerous condition in an insurer, and prompt application of appropriate corrective measures, neither unduly harsh nor subject to the kind of publicity that would needlessly damage or destroy the insurer;
Improved methods for rehabilitating insurers, by enlisting the advice and management expertise of the insurance industry;
Enhanced efficiency and economy of liquidation, through clarification and specification of the law, to minimize legal uncertainty and litigation;
Equitable apportionment of any unavoidable loss;
Lessening the problems of interstate rehabilitation and liquidation by facilitating cooperation between states in the liquidation process, and by extension of the scope of personal jurisdiction over debtors of the insurer outside this state; and
Regulation of the insurance business by the impact of the law relating to delinquency procedures and substantive rules on the entire insurance business.
History: 1979 c. 89
Although the circuit court had subject matter jurisdiction, because New Jersey has adopted insurance rehabilitation legislation similar to ch. 645 that seeks to satisfy the same policy objectives as ch. 645, the principal of comity required the court to yield to the rehabilitation court in New Jersey and dismiss the claim of a Wisconsin resident against the insurer. Isermann v. MBL Life Assurance Corp. 231 Wis. 2d 136
, 605 N.W.2d 210
(Ct. App. 1999), 98-2846
The proceedings authorized by this chapter may be applied to all of the following:
All insurers who are doing, or have done, an insurance business in this state, and against whom claims arising from that business may exist now or in the future.
All insurers who purport to do an insurance business in this state.
All insurers who have insureds resident in this state.
All other persons organized or in the process of organizing with the intent to do an insurance business in this state.
All service insurance corporations under ch. 613
and all fraternals as defined in s. 614.01
All health maintenance organizations, limited service health organizations and preferred provider plans organized under ss. 185.981
For the purposes of this chapter:
“Ancillary state" means any state other than a domiciliary state.
“Delinquency proceeding" means any proceeding commenced against an insurer for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer, and any summary proceeding under ss. 645.21
“Domiciliary state" means the state in which an insurer is incorporated or organized or, in the case of an alien insurer, the state in which the insurer has, at the commencement of delinquency proceedings, the largest amount of its assets held in trust and on deposit for the benefit of policyholders and creditors in the United States.
“Fair consideration" is given for property or an obligation:
When in exchange for such property or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or services are rendered or obligation is incurred or an antecedent debt is satisfied; or
When such property or obligation is received in good faith to secure a present advance or antecedent debt in amount not disproportionately small as compared to the value of the property or obligation obtained.
“General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or limited classes of persons, and as to specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the sums secured thereby. Assets held in trust and on deposit for the security or benefit of all policyholders or all policyholders and creditors, in more than a single state, shall be treated as general assets.
“Insurer" means any person who is doing, has done, purports to do or is licensed to do an insurance business and is or has been subject to the authority of, or to liquidation, rehabilitation, reorganization or conservation by, a commissioner. For purposes of this chapter, all other persons included under s. 645.02
shall be deemed to be insurers.
“Preferred claim" means any claim with respect to which the law accords priority of payment from the general assets of the insurer.
“Receiver" means receiver, liquidator, rehabilitator or conservator, as the context requires.
“Reciprocal state" means any state other than this state in which in substance and effect ss. 645.42 (1)
, 645.83 (1)
are in force, and in which provisions are in force requiring that the commissioner be the receiver of a delinquent insurer, and in which some provision exists for the avoidance of fraudulent conveyances and preferential transfers.
“Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow or otherwise, but not including special deposit claims or claims against general assets. The term also includes claims which have become liens upon specific assets by reason of judicial process, except where they have been invalidated.
“Special deposit claim" means any claim secured by a deposit made pursuant to law for the security or benefit of one or more limited classes of persons, but not including any claim secured by general assets.
“Transfer" includes the sale and every other method, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or involuntarily, by or without judicial proceedings. The retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by the debtor.
Definitions applicable to proceedings involving surety insurance.
If the subject of a rehabilitation or liquidation proceeding under this chapter is an insurer engaged in a surety business:
“Beneficiary" as used in this chapter includes an obligee of a bond.
“Insured" as used in this chapter includes both the principal and obligee of a bond.
“Policy" as used in this chapter includes a bond issued by a surety.
“Policyholder" as used in this chapter includes a principal on a bond.
Bankruptcy petition is prohibited. 645.035(2)
No insurer may commence a bankruptcy proceeding in which the insurer is a debtor.
No person, including an insurer, may commence a bankruptcy proceeding against an insurer.
No board of directors, director or officer of an insurer may authorize the commencement of a bankruptcy proceeding in which the insurer is a debtor or the commencement of a bankruptcy proceeding against an insurer. Any act, resolution, filing or other matter that purports to authorize the commencement of a bankruptcy proceeding in which the insurer is a debtor or against an insurer is void and without effect.
This section applies to all insurers, including but not limited to an insurer doing business as a health maintenance organization, as defined in s. 609.01 (2)
History: 1989 a. 23
Jurisdiction and venue. 645.04(1)(1)
Actions by commissioner.
Except as provided in sub. (2)
and s. 645.45 (1)
, no delinquency proceeding may be commenced under this chapter by anyone other than the commissioner of this state and no court has jurisdiction to entertain, hear or determine any proceeding commenced by any other person.
The judgment creditors of 3 or more unrelated judgments may commence proceedings under the conditions and in the manner prescribed in this subsection, by serving notice upon the commissioner and the insurer of intention to file a petition for liquidation under s. 645.41
. Each of the judgments must:
Have been rendered against the insurer by a court in this state having jurisdiction over the subject matter and the insurer;
Have been entered more than 60 days before the service of notice;
Not be the subject of a valid contract between the insurer and any judgment creditor for payment of the judgment, unless the contract has been breached by the insurer; and
Not be a judgment on which an appeal or review is pending.
If any one of the judgments in favor of a petitioning creditor remains unpaid for 30 days after service of the notice, and the commissioner has not then filed a petition for liquidation, the creditor may file in the name of the commissioner a verified petition for liquidation of the insurer under s. 645.41
alleging the conditions stated in this subsection. The commissioner shall be served and joined in the action.
Exclusiveness of proceedings; arbitration clauses.
No court of this state has jurisdiction to entertain, hear or determine any complaint praying for the dissolution, liquidation, rehabilitation, sequestration, conservation or receivership of any insurer, or praying for an injunction or restraining order or other relief preliminary to, incidental to or relating to such proceedings other than in accordance with this chapter. An arbitration provision of any contract with an insurer that is subject to a delinquency proceeding under subch. III
is not enforceable unless the receiver elects to accept arbitration. Only the court that has jurisdiction of the delinquency proceeding may entertain, hear or determine any matter that otherwise would be subject to an arbitration provision.
Change of venue.
Venue for proceedings arising under this chapter shall be laid initially as specified in this chapter. All other actions and proceedings initiated by the receiver may be commenced and tried where the delinquency proceedings are then pending, or where venue would be laid by ss. 801.50
or other applicable law. All other actions and proceedings against the receiver shall be commenced and tried in the county where the delinquency proceedings are pending. At any time upon motion of any party, venue may be changed by order of the court or the presiding judge thereof to any other circuit court in this state, as the convenience of the parties and witnesses and the ends of justice may require. This subsection relates only to venue and is not jurisdictional.
Personal jurisdiction, grounds for.
In addition to other grounds for jurisdiction provided by the law of this state, a court of this state having jurisdiction of the subject matter has jurisdiction over a person served pursuant to s. 801.11
in an action brought by the receiver of a domestic insurer or an alien insurer domiciled in this state:
If the person served is obligated to the insurer in any way as an incident to any agency or brokerage arrangement that may exist or has existed between the insurer and the agent or broker, in any action on or incident to the obligation;
If the person served is a reinsurer who has at any time written a policy of reinsurance for an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, or is an agent or broker of or for the reinsurer, in any action on or incident to the reinsurance contract; or
If the person served is or has been an officer, manager, trustee, organizer, promoter or person in a position of comparable authority or influence in an insurer against which a rehabilitation or liquidation order is in effect when the action is commenced, in any action resulting from the relationship with the insurer.
Change of forum.
If the court on motion of any party finds that any action commenced under sub. (5)
should as a matter of substantial justice be tried in a forum outside this state, the court may enter an order under s. 801.63
to stay further proceedings on the action in this state.
Sup. Ct. Order, 67 Wis. 2d 585, 776 (1975); 1979 c. 93
; 1979 c. 110
; 1981 c. 390
; 1989 a. 23
The exercise of jurisdiction under sub. (5) over a foreign person obligated to a domestic receiver does not violate due process. Liquidation of All-Star Insurance Corporation, 110 Wis. 2d 72
, 327 N.W.2d 648
Injunctions and orders. 645.05(1)(1)
Injunctions in this state.
Any receiver appointed in a proceeding under this chapter may at any time apply for and any court of general jurisdiction in this state may grant, under the relevant sections of ch. 813
, such restraining orders, temporary and permanent injunctions, and other orders as are deemed necessary and proper to prevent:
Interference with the receiver or with the proceedings;
The institution or further prosecution of any actions or proceedings;
The obtaining of preferences, judgments, attachments, garnishments or liens against the insurer or its assets;
The levying of execution against the insurer or its assets;
The making of any sale or deed for nonpayment of taxes or assessments that would lessen the value of the assets of the insurer;
The withholding from the receiver of books, accounts, documents or other records relating to the business of the insurer; or
Any other threatened or contemplated action that might lessen the value of the insurer's assets or prejudice the rights of policyholders, creditors or shareholders, or the administration of the proceeding.
The receiver may apply to any court outside of this state for the relief described in sub. (1)
Injunctions against a federal home loan bank. 645.05(3)(a)
In this subsection, “insurer-member” means a member of the federal home loan bank in question that is an insurer.
Notwithstanding subs. (1)
and any other provision of this chapter, a federal home loan bank may be stayed, enjoined, or prohibited from exercising or enforcing any right or cause of action regarding collateral pledged under any security agreement, or any pledge, security, collateral, or guarantee agreement, or any other similar arrangement or credit enhancement relating to a federal home loan bank security agreement, for a period not to exceed 10 days after the appointment of a receiver for an insurer-member of the federal home loan bank. If the federal home loan bank fails to comply with the provisions of pars. (c)
, the court may, within 10 days following the appointment of the receiver, extend the stay until the federal home loan bank complies with the provisions of pars. (c)
Not later than 5 days after notification to the federal home loan bank of the appointment of a receiver for an insurer-member, the federal home loan bank shall deliver to the receiver a process and timeline for all of the following:
The release of collateral held by the federal home loan bank that exceeds the amount that is required to support the outstanding secured loan obligations and that is remaining after any repayment of loans, as determined under the applicable agreements between the federal home loan bank and the insurer-member.
The release of any collateral remaining in the federal home loan bank's possession following repayment of all outstanding secured obligations in full.
The redemption or repurchase of federal home loan bank stock in excess of the minimum amount the insurer-member is required to own.
Upon the request of the receiver and not later than 5 days after notification to the federal home loan bank of the appointment of a receiver for an insurer-member, the federal home loan bank shall provide any available options for the insurer-member to renew or restructure an advance. In determining which options are available, the federal home loan bank may consider market conditions, the terms of the advance outstanding to the insurer-member, the applicable policies of the federal home loan bank, and compliance with the Federal Home Loan Bank Act and corresponding regulations.