Advice from experts.
The rehabilitator may consult with and obtain formal or informal advice and aid of insurance experts.
Pursuit of insurer's claims against insiders.
If the rehabilitator finds that there has been criminal or tortious conduct or breach of any contractual or fiduciary obligation detrimental to the insurer by any person, the rehabilitator may pursue all appropriate legal remedies on behalf of the insurer.
The rehabilitator may prepare a plan for the reorganization, consolidation, conversion, reinsurance, merger or other transformation of the insurer. Upon application of the rehabilitator for approval of the plan, and after such notice and hearing as the court prescribes, the court may either approve or disapprove the plan proposed, or may modify it and approve it as modified. If it is approved, the rehabilitator shall carry out the plan. In the case of a life insurer, the plan proposed may include the imposition of liens upon the equities of policyholders of the company, if all rights of shareholders are first relinquished. A plan for a life insurer may also propose imposition of a moratorium upon loan and cash surrender rights under policies, for such period and to such an extent as are necessary.
The rehabilitator shall have the power to avoid fraudulent transfers under ss. 645.52
History: 1979 c. 93
; 2009 a. 342
In the context of insurance rehabilitations, a circuit court erroneously exercises its discretion when the circuit court exceeds its statutory authority or the court unreasonably substitutes a rehabilitator's beliefs for its own beliefs. The court upholds the determinations made by the rehabilitator unless the rehabilitator abused his or her discretion. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
The legislature intended for rehabilitation proceedings to be informal and without cumbersome procedures. There is no statutory requirement in ch. 645 providing that a court must specify the facts upon which it relied in approving a rehabilitation plan. Upon submission of a plan for approval, a court “may either approve or disapprove the plan proposed, or may modify it and approve it as modified." Nothing more is required. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
Wisconsin's rehabilitation statutory scheme does not require that policyholders fare as well in rehabilitation as they would in liquidation. The statutory scheme provides the commissioner with minimal guidance as to how to structure a rehabilitation plan and certainly no requirement that each plan must provide policyholders the liquidation value of their claims or the right to opt out and receive the liquidation value of their claims. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
The rules of civil procedure, including the rules pertaining to discovery, do not apply to rehabilitation proceedings. Chapter 645 prescribes its own rules of procedure in insurer delinquency proceedings. The legislature did not intend to bind the court to the rules of civil procedure when applying these rules would transform an informal management task into a formal and cumbersome legal task. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
Sub. (5) provides in broad and liberal terms that after a rehabilitation plan is filed with the circuit court for approval, the court may approve or disapprove the proposed plan, or modify it and approve it as modified after providing “notice and hearing as the court prescribes." This language permits the circuit court to establish procedures that are tailored to the procedural necessities presented by the circumstances of each rehabilitation proceeding. That means that the rehabilitation court has the discretion to grant or deny a motion to intervene. Nickel v. Wells Fargo Bank, 2013 WI App 129
, 351 Wis. 2d 539
, 841 N.W.2d 482
Actions by and against rehabilitator. 645.34(1)(1)
Stays in pending litigation.
On request of the rehabilitator, any court in this state before which any action or proceeding by or against an insurer is pending when a rehabilitation order against the insurer is entered shall stay the action or proceeding for such time as is necessary for the rehabilitator to obtain proper representation and prepare for further proceedings. The court that entered the rehabilitation order shall order the rehabilitator to take such action respecting the pending litigation as the court deems necessary in the interests of justice and for the protection of creditors, policyholders and the public. The rehabilitator shall immediately consider all litigation pending outside this state and shall petition the courts having jurisdiction over that litigation for stays whenever necessary to protect the estate of the insurer.
Statutes of limitations on claims by insurer.
The time between the filing of a petition for rehabilitation against an insurer and denial of the petition or an order of rehabilitation shall not be considered to be a part of the time within which any action may be commenced by the insurer. Any action by the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order of rehabilitation is entered.
Statutes of limitations on claims against insurer.
The time between the filing of a petition for rehabilitation against an insurer and the denial of the petition or an order of rehabilitation shall not be considered to be a part of the time within which any action may be commenced against the insurer. Any action against the insurer that might have been commenced when the petition was filed may be commenced for at least 60 days after the order of rehabilitation is entered or the petition is denied.
Termination of rehabilitation. 645.35(1)(1)
Transformation to liquidation.
Whenever the rehabilitator believes that further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policyholders, or the public, or would be futile, the rehabilitator may petition the court for an order of liquidation. A petition under this subsection shall have the same effect as a petition under s. 645.41
. The court shall permit the directors to defend against the petition and shall order payment from the estate of the insurer of such costs and other expenses of defense as justice requires.
Order to return to company.
The rehabilitator may at any time petition the court for an order terminating rehabilitation of an insurer. If the court finds that rehabilitation has been accomplished and that grounds for rehabilitation under s. 645.31
no longer exist, it shall order that the insurer be restored to possession of its property and the control of its business. The court may also make that finding and issue that order at any time upon its own motion.
History: 1979 c. 102
s. 236 (10)
Grounds for liquidation.
The commissioner may apply by verified petition to the circuit court for Dane County or for the county in which the principal office of the insurer is located for an order directing him or her to liquidate a domestic insurer or an alien insurer domiciled in this state on any one or more of the following grounds:
Any ground on which the commissioner may apply for an order of rehabilitation under s. 645.31
, whenever the commissioner believes that attempts to rehabilitate the insurer would substantially increase the risk of loss to its creditors, its policyholders or the public, or would be futile, or that rehabilitation would serve no useful purpose;
That the insurer is or is about to become insolvent;
That the insurer is engaging in a systematic practice of reaching settlements with and obtaining releases from policyholders or 3rd-party claimants and then unreasonably delaying payment of or failing to pay the agreed upon settlements;
That the insurer is in such condition that the further transaction of business would be hazardous, financially or otherwise, to its policyholders, its creditors or the public;
That the insurer has not transacted the business of insurance during the previous 12 months or has transacted only a token insurance business during that period, although authorized to do so throughout that period, or that more than 12 months after incorporation it has failed to become authorized to do an insurance business;
That within any part of the previous 12 months the insurer has systematically attempted to compromise with its creditors on the ground that it is financially unable to pay its claims in full;
That the insurer has commenced, or within the previous year has attempted to commence, voluntary liquidation otherwise than under chs. 600
That the insurer has concealed records or assets from the commissioner or improperly removed them from the jurisdiction;
That the insurer does not satisfy the requirements that would be applicable if it were seeking initial authorization to do an insurance business in this state, except for:
Requirements that are intended to apply only at the time the initial authorization to do business is obtained, and not thereafter; and
Requirements that are expressly made inapplicable by the laws establishing the requirements;
That the holders of two-thirds of the shares entitled to vote, or two-thirds of the members or policyholders entitled to vote in an insurer controlled by its members or policyholders, have consented to a petition.
Liquidation orders. 645.42(1)(1)
Order to liquidate.
An order to liquidate the business of a domestic insurer shall appoint the commissioner and his or her successors in office liquidator and shall direct the liquidator to take possession of the assets of the insurer and to administer them under the orders of the court. The liquidator is vested by operation of law with the title to all of the property, contracts, rights of action and books and records, wherever located, of the insurer ordered liquidated, and with all of the stock issued by the insurer and any cause of action that has or subsequently accrues to the holder of the stock, as of the date of the filing of the petition for liquidation. The liquidator may recover and reduce the same to possession except that ancillary receivers in reciprocal states shall have, as to assets located in their respective states, the rights and powers which are prescribed in s. 645.84 (3)
for ancillary receivers appointed in this state as to assets located in this state. The recording of the order with any register of deeds in this state imparts the same notice as a deed, bill of sale or other evidence of title recorded with that register of deeds.
Fixing of rights.
Upon issuance of the order, the rights and liabilities of any such insurer and of its creditors, policyholders, shareholders, members and all other persons interested in its estate are fixed as of the date of filing of the petition for liquidation, except as provided in ss. 645.43
An order to liquidate the business of an alien insurer domiciled in this state shall be in the same terms and have the same legal effect as an order to liquidate a domestic insurer, except that the assets and the business in the United States shall be the only assets and business included under the order.
Declaration of insolvency.
At the time of petitioning for an order of liquidation, or at any time thereafter, the commissioner may petition the court to declare the insurer insolvent, and after such notice and hearing as it deems proper, the court may make the declaration.
Continuance of coverage. 645.43(1)(1)
All insurance policies issued by the insurer shall continue in force:
For a period of 15 days from the date of entry of the liquidation order;
Until the normal expiration of the policy coverage;
Until the insured has replaced the insurance coverage with equivalent insurance in another insurer; or
Until the liquidator has effected a transfer of the policy obligation pursuant to s. 645.46 (8)
; whichever time is less.
If the coverage continued under this section is replaced by insurance that is not equivalent, the coverage continued under this section shall be excess coverage over the replacement policy to the extent of the deficiency. Claims arising during the continuation of coverage shall be treated as if they arose immediately before the petition for liquidation. Coverage under this subsection shall not satisfy any legal obligation of the insured to carry insurance protection, whether the obligation is created by law or by contract.
Dissolution of insurer.
The commissioner may petition for an order dissolving the corporate existence of a domestic insurer or the U.S. branch of an alien insurer domiciled in this state at the time of the application for a liquidation order. If the court issues a liquidation order, it also shall order dissolution if the commissioner has petitioned for it. The court shall order dissolution of the corporation upon petition by the commissioner at any time after a liquidation order has been granted. If the dissolution has not previously occurred, it shall be effected by operation of law upon the discharge of the liquidator.
History: 1979 c. 102
Federal receivership. 645.45(1)(1)
Petition for federal receiver.
Whenever in the commissioner's opinion, liquidation of a domestic insurer or an alien insurer domiciled in this state would be facilitated by a federal receivership, and when any ground exists upon which the commissioner might petition the court for an order of rehabilitation or liquidation under s. 645.31
, or if an order of rehabilitation or liquidation has already been entered, the commissioner may request another commissioner or other willing resident of another state to petition any appropriate federal district court for the appointment of a federal receiver. The commissioner may intervene in any such action to support or oppose the petition, and may accept appointment as the receiver if he or she is so designated. So much of this chapter shall apply to the receivership as can be made applicable and is appropriate. Upon motion of the commissioner, the courts of this state shall relinquish all jurisdiction over the insurer for purposes of rehabilitation or liquidation.
Compliance with federal requirements.
If the commissioner is appointed receiver under this section, the commissioner shall comply with any requirements necessary to give him or her title to and control over the assets and affairs of the insurer.
History: 1979 c. 102
, 236 (5)
Powers of liquidator.
The liquidator shall report to the court monthly, or at other intervals specified by the court, on the progress of the liquidation in whatever detail the court orders. Subject to the court's control, the liquidator may:
Appoint a special deputy to act for the liquidator under this chapter, and determine the special deputy's compensation. The special deputy shall have all powers of the liquidator granted by this section. The special deputy shall serve at the pleasure of the liquidator.
Appoint or engage employees and agents, legal counsel, actuaries, accountants, appraisers, consultants and other personnel deemed necessary to assist in the liquidation. Chapter 230
does not apply to such persons.
Fix the compensation of persons under sub. (2)
, subject to the control of the court.
Defray all expenses of taking possession of, conserving, conducting, liquidating, disposing of, or otherwise dealing with the business and property of the insurer. If the property of the insurer does not contain sufficient cash or liquid assets to defray the costs incurred, the liquidator may advance the costs so incurred out of the appropriation under s. 20.145 (1) (g) 1.
Any amounts so paid shall be deemed expense of administration and shall be repaid for the credit of the office of the commissioner of insurance out of the first available moneys of the insurer.
Hold hearings, subpoena witnesses and compel their attendance, administer oaths, examine any person under oath and compel any person to subscribe to his or her testimony after it has been correctly reduced to writing, and in connection therewith require the production of any books, papers, records or other documents which the liquidator deems relevant to the inquiry.
Collect all debts and moneys due and claims belonging to the insurer, wherever located, and for this purpose institute timely action in other jurisdictions, in order to forestall garnishment and attachment proceedings against such debts; perform any other acts necessary or expedient to collect, conserve or protect its assets or property, including sell, compound, compromise or assign for purposes of collection, upon such terms and conditions as he or she deems best, any bad or doubtful debts; and pursue any creditor's remedies available to enforce his or her claims.
Conduct public and private sales of the property of the insurer in a manner prescribed by the court.
Cooperate with the fund created under ch. 646
in using assets of the estate to transfer policy obligations to a solid assuming insurer, if the transfer can be arranged without prejudice to applicable priorities under s. 645.68
Acquire, hypothecate, encumber, lease, improve, sell, transfer, abandon or otherwise dispose of or deal with any property of the insurer at its market value or upon fair and reasonable terms and conditions, except that no transaction involving property the market value of which exceeds $10,000 shall be concluded without express permission of the court. The liquidator also may execute, acknowledge and deliver any deeds, assignments, releases and other instruments necessary or proper to effectuate any sale of property or other transaction in connection with the liquidation. In cases where real property sold by the liquidator is located other than in the county where the liquidation is pending, the liquidator shall cause to be recorded with the register of deeds for the county in which the property is located the order of appointment.
Borrow money on the security of the insurer's assets or without security and execute and deliver all documents necessary to that transaction for the purpose of facilitating the liquidation.
Subject to par. (b)
, enter into such contracts as are necessary to carry out the order to liquidate, and affirm or disavow any contracts to which the insurer is a party.
Notwithstanding any other provision of this chapter, no liquidator has the power to disavow any federal home loan bank 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.
Continue to prosecute and institute in the name of the insurer or in his or her own name any suits and other legal proceedings, in this state or elsewhere, and abandon the prosecution of claims he or she deems unprofitable to pursue further. If the insurer is dissolved under s. 645.44
, the liquidator may apply to any court in this state or elsewhere for leave to substitute himself or herself for the insurer as plaintiff.
Prosecute any action which may exist in behalf of the creditors, members, policyholders or shareholders of the insurer against any officer of the insurer, or any other person.
Remove any records and property of the insurer to the offices of the commissioner or to such other place as is convenient for the purposes of efficient and orderly execution of the liquidation.
Deposit in one or more banks in this state such sums as are required for meeting current administration expenses and dividend distributions.
Deposit with the investment board for investment under s. 25.14
all sums not currently needed, unless the court orders otherwise.
File or record any necessary documents for record in the office of any register of deeds or record office in this state or elsewhere where property of the insurer is located.
Assert all defenses available to the insurer as against 3rd persons, including statutes of limitations, statutes of frauds and the defense of usury. A waiver of any defense by the insurer after a petition for liquidation has been filed does not bind the liquidator.
Exercise and enforce all the rights, remedies and powers of any creditor, shareholder, policyholder or member, including any power to avoid any transfer or lien that may be given by law and that is not included within ss. 645.52
Intervene in any proceeding wherever instituted that might lead to the appointment of a receiver or trustee, and act as the receiver or trustee whenever the appointment is offered.
Enter into agreements with any receiver or commissioner of any other state relating to the rehabilitation, liquidation, conservation or dissolution of an insurer doing business in both states.
Exercise all powers now held or hereafter conferred upon receivers by the laws of this state not inconsistent with this chapter.
The enumeration in this section of the powers and authority of the liquidator is not a limitation upon the liquidator, and does not exclude the right to do other acts not herein specifically enumerated or otherwise provided for which are necessary or expedient for the accomplishment of or in aid of the purpose of liquidation.
Notice to creditors and others. 645.47(1)(a)(a)
The liquidator shall give notice of the liquidation order as soon as possible by first class mail and either by telegram or telephone to the insurance commissioner of each jurisdiction in which the insurer is licensed to do business, by first class mail and by telephone to the department of workforce development of this state if the insurer is or has been an insurer of worker's compensation, by first class mail to all insurance agents having a duty under s. 645.48
, by first class mail to the director of state courts under s. 601.53 (1)
if the insurer does a surety business and by first class mail at the last-known address to all persons known or reasonably expected from the insurer's records to have claims against the insurer, including all policyholders. The liquidator also shall publish a class 3 notice, under ch. 985
, in a newspaper of general circulation in the county in which the liquidation is pending or in Dane County, the last publication to be not less than 3 months before the earliest deadline specified in the notice under sub. (2)
Notice to agents shall inform them of their duties under s. 645.48
and inform them of what information they must communicate to insureds. Notice to policyholders shall include notice of impairment and termination of coverage under s. 645.43
. When it is applicable, notice to policyholders shall include all of the following:
Notice of withdrawal of the insurer from the defense of any case in which the insured is interested.
Reports and further notice.
Within 15 days of the date of entry of the order, the liquidator shall report to the court what notice has been given. The court may order such additional notice as it deems appropriate.
Notice respecting claims filing.
Notice to potential claimants under sub. (1)
shall require claimants to file with the liquidator their claims together with proper proofs thereof under s. 645.62
, on or before a date the liquidator specifies in the notice, which shall be no less than 6 months nor more than one year after entry of the order, except that the liquidator need not require persons claiming unearned premium and persons claiming cash surrender values or other investment values in life insurance and annuities to file a claim. The liquidator may specify different dates for the filing of different kinds of claims.
If notice is given in accordance with this section, the distribution of the assets of the insurer under this chapter shall be conclusive with respect to all claimants, whether or not they received notice.