Fraudulent transfers after petition. 645.53(1)(1)
Effect of petition: real property.
After a petition for rehabilitation or liquidation, a transfer of any of the real property of the insurer made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred. The recording of a copy of the petition for or order of rehabilitation or liquidation with the register of deeds in the county where any real property in question is located is constructive notice of the commencement of a proceeding in rehabilitation or liquidation. The exercise by a court of the United States or any state of jurisdiction to authorize or effect a judicial sale of real property of the insurer within any county in any state shall not be impaired by the pendency of such a proceeding unless the copy is recorded in the county prior to the consummation of the judicial sale.
Effect of petition: personal property.
After a petition for rehabilitation or liquidation and before either the receiver takes possession of the property of the insurer or an order of rehabilitation or liquidation is granted:
A transfer of any of the property of the insurer, other than real property, made to a person acting in good faith shall be valid against the receiver if made for a present fair equivalent value or, if not made for a present fair equivalent value, then to the extent of the present consideration actually paid therefor, for which amount the transferee shall have a lien on the property so transferred.
A person indebted to the insurer or holding property of the insurer may, if acting in good faith, pay the indebtedness or deliver the property or any part thereof to the insurer or upon his or her order, with the same effect as if the petition were not pending.
A person having actual knowledge of the pending rehabilitation or liquidation shall be deemed not to act in good faith unless he or she has reasonable cause to believe that the petition is not well founded.
A person asserting the validity of a transfer under this section shall have the burden of proof. Except as elsewhere provided in this section, no transfer by or in behalf of the insurer after the date of the petition for liquidation by any person other than the liquidator shall be valid against the liquidator.
Nothing in this chapter shall impair the negotiability of currency or negotiable instruments.
History: 1979 c. 102
s. 236 (5)
Voidable preferences and liens. 645.54(1)(a)(a)
A preference is a transfer of any of the property of an insurer to or for the benefit of a creditor, for or on account of an antecedent debt, made or suffered by the insurer within one year before the filing of a successful petition for liquidation under this chapter the effect of which transfer may be to enable the creditor to obtain a greater percentage of his or her debt than another creditor of the same class would receive. If a liquidation order is entered while the insurer is already subject to a rehabilitation order, transfers otherwise qualifying shall be deemed preferences if made or suffered within one year before the filing of the successful petition for rehabilitation or within 2 years before the filing of the successful petition for liquidation, whichever time is shorter.
Any preference may be avoided by the liquidator, if any of the following conditions is met:
The transfer was made within 4 months before the filing of the petition.
The creditor receiving the preference or to be benefited thereby or his or her agent acting with reference thereto had reasonable cause to believe at the time when the transfer was made that the insurer was insolvent or was about to become insolvent.
The creditor receiving the preference was an officer, employee, attorney or other person who was in fact in a position of comparable influence in the insurer to an officer whether or not he or she held such position, or any shareholder holding directly or indirectly more than 5 percent of any class of any equity security issued by the insurer, or any other person with whom the insurer did not deal at arm's length.
If a preference is voidable, the liquidator may recover the property or, if the property has been converted, the liquidator may recover its value from any person who has received or converted the property, except a bona fide purchaser from or lienor of the debtor's transferee for a present fair equivalent value. If the bona fide purchaser or lienor has given less than fair equivalent value, he or she shall have a lien upon the property to the extent of the consideration actually given by him or her. If a preference by way of lien or security title is voidable, the court may on due notice order the lien or title to be preserved for the benefit of the estate, in which event the lien or title shall pass to the liquidator.
Notwithstanding any other provision of this chapter, no liquidator may avoid any transfer of, or any obligation to transfer, money or any other property arising under or in connection with 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. However, a transfer may be avoided under this paragraph if it was made with actual intent to hinder, delay, or defraud either existing or future creditors.
Any payment to which s. 611.62 (2)
applies is a preference and is voidable under par. (b)
if made within the time period specified in par. (a)
. Payments made by insurers under s. 611.62 (3)
are not preferences.
A transfer of property other than real property is deemed to be made or suffered when it becomes so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee.
A transfer of real property is deemed to be made or suffered when it becomes so far perfected that no subsequent bona fide purchaser from the insurer could obtain rights superior to the rights of the transferee.
A transfer which creates an equitable lien is not deemed to be perfected if there are available means by which a legal lien could be created.
Transfers not perfected prior to petition.
A transfer not perfected prior to the filing of a petition for liquidation shall be deemed to be made immediately before the filing of the successful petition.
Actual creditors unnecessary.
This subsection applies whether or not there are or were creditors who might have obtained liens or persons who might have become bona fide purchasers.
Liens by legal or equitable proceedings. 645.54(3)(a)
A lien obtainable by legal or equitable proceedings upon a simple contract is one arising in the ordinary course of a legal or equitable proceeding upon the filing of a decree or entry of a judgment or decree in the judgment and lien docket, or upon attachment, garnishment, execution or like process, whether before, upon or after judgment or decree and whether before or upon levy. It does not include liens which under applicable law are given a special priority over other liens which are prior in time.
When liens are superior.
A lien obtainable by legal or equitable proceedings could become superior to the rights of a transferee, or a purchaser could obtain rights superior to the rights of a transferee within the meaning of sub. (2)
, if such consequences would follow only from the lien or purchase itself, or from the lien or purchase followed by any step wholly within the control of the respective lienholder or purchaser, with or without the aid of ministerial action by public officials. Such a lien could not, however, become superior and such a purchase could not create superior rights for the purpose of sub. (2)
through any acts subsequent to the obtaining of such a lien or subsequent to such a purchase which require the agreement or concurrence of any 3rd party or which require any further judicial action, or ruling.
Twenty-one day rule.
A transfer of property for or on account of a new and contemporaneous consideration which is deemed under sub. (2)
to be made or suffered after the transfer because of delay in perfecting it does not thereby become a transfer for or on account of an antecedent debt if any acts required by the applicable law to be performed in order to perfect the transfer as against liens or bona fide purchasers' rights are performed within 21 days or any period expressly allowed by the law, whichever is less. A transfer to secure a future loan, if such a loan is actually made, or a transfer which becomes security for a future loan shall have the same effect as a transfer for or on account of a new and contemporaneous consideration.
Indemnifying transfers also voidable.
If any lien deemed voidable under sub. (1) (b)
has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any property of an insurer before the filing of a petition under this chapter which results in a liquidation order, the indemnifying transfer or lien shall also be deemed voidable.
Avoidance of lien.
The property affected by any lien deemed voidable under subs. (1) (b)
is discharged from the lien, and that property and any of the indemnifying property transferred to or for the benefit of a surety shall pass to the liquidator, except that the court may on due notice order the lien to be preserved for the benefit of the estate and the court may direct that a conveyance be executed which is adequate to evidence the title of the liquidator.
Hearings to determine rights.
The court shall have summary jurisdiction of any proceeding by the liquidator to hear and determine the rights of any parties under this section. Reasonable notice of any hearing in the proceeding shall be given to all parties in interest, including the obligee of a releasing bond or other like obligation. Where an order is entered for the recovery of indemnifying property in kind or for the avoidance of an indemnifying lien, the court, upon application of any party in interest, shall in the same proceeding ascertain the value of the property or lien, and if the value is less than the amount for which the property is indemnity or than the amount of the lien, the transferee or lienholder may elect to retain the property or lien upon payment of its value, as ascertained by the court, to the liquidator within such reasonable times as the court fixes.
Surety's liability discharged.
The liability of a surety under a releasing bond or other like obligation shall be discharged to the extent of the value of the indemnifying property recovered or the indemnifying lien nullified and avoided or, where the property is retained under sub. (7)
to the extent of the amount paid to the liquidator.
Setoff of new advances.
If a creditor has been preferred and afterward in good faith gives the insurer further credit without security of any kind, for property which becomes a part of the insurer's estate, the amount of the new credit remaining unpaid at the time of the petition may be set off against the preference which would otherwise be recoverable from him or her.
Reexamination of attorney fees.
If an insurer, directly or indirectly, within 4 months before the filing of a successful petition for liquidation under this chapter or at any time in contemplation of a proceeding to liquidate it, pays money or transfers property to an attorney at law for services rendered or to be rendered, the transaction may be examined by the court on its own motion or shall be examined by the court on petition of the liquidator and shall be held valid only to the extent of a reasonable amount to be determined by the court, and the excess may be recovered by the liquidator for the benefit of the estate.
Every officer, manager, employee, shareholder, member, subscriber, attorney or any other person acting on behalf of the insurer who knowingly participates in giving any preference when he or she has reasonable cause to believe the insurer to be or about to become insolvent at the time of the preference shall be personally liable to the liquidator for the amount of the preference. It is permissible to infer that there is reasonable cause to so believe if the transfer was made within 4 months before the date of filing of the successful petition for liquidation.
Every person receiving any property from the insurer or the benefit thereof as a preference voidable under sub. (1) (b)
is personally liable therefor and is bound to account to the liquidator.
Nothing in this subsection prejudices any other claim by the liquidator against any person.
Claims of holders of void or voidable rights. 645.55(1)(1)
Disallowance for failure to surrender property.
No claims of a creditor who has received or acquired a preference, lien, conveyance, transfer, assignment or encumbrance, voidable under this chapter, may be allowed unless the creditor surrenders the preference, lien, conveyance, transfer, assignment or encumbrance. If the avoidance is effected by a proceeding in which a final judgment has been entered, the claim shall not be allowed unless the money is paid or the property is delivered to the liquidator within 30 days from the date of the entering of the final judgment, except that the court having jurisdiction over the liquidation may allow further time if there is an appeal or other continuation of the proceeding.
Time for filing.
A claim allowable under sub. (1)
by reason of the avoidance, whether voluntary or involuntary, of a preference, lien, conveyance, transfer, assignment or encumbrance may be filed as an excused late filing under s. 645.61
if filed within 30 days from the date of the avoidance or within the further time allowed by the court under sub. (1)
History: 1979 c. 93
Setoffs and counterclaims. 645.56(1)(1)
Setoffs allowed in general.
Mutual debts or mutual credits between the insurer and another person in connection with any action or proceeding under this chapter shall be set off and the balance only shall be allowed or paid, except as provided in sub. (2)
No setoff or counterclaim may be allowed in favor of any person where:
The obligation of the insurer to the person would not at the date of the filing of a petition for liquidation entitle the person to share as a claimant in the assets of the insurer;
The obligation of the insurer to the person was purchased by or transferred to the person with a view to its being used as a setoff;
The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution; or
The obligation of the person is to pay premiums, whether earned or unearned, to the insurer.
History: 1979 c. 93
Report to court.
As soon as practicable but not more than 2 years from the date of an order of liquidation under s. 645.42
of an insurer issuing assessable policies, including an insurer organized under ch. 612
, the liquidator shall make a report to the court setting forth:
The reasonable value of the assets of the insurer;
The insurer's probable total liabilities; and
The probable aggregate amount of the assessment necessary to pay all claims of creditors and expenses in full, including expenses of administration and costs of collecting the assessment.
Upon the basis of the report provided in sub. (1)
, including any supplements and amendments thereto, the court may levy ex parte one or more assessments against all members of the insurer who are subject to assessment.
Subject to any applicable legal limits on assessability, the aggregate assessment shall be for the amount that the sum of the probable liabilities, the expenses of administration and the estimated cost of collection of the assessment exceeds the value of existing assets, with due regard being given to assessments that cannot be collected economically.
Order to show cause.
After levy of assessment under sub. (2)
, the court shall issue an order directing each member who has not paid the assessment pursuant to the order to show cause why the liquidator shall not have a judgment therefor. If a member of the insurer also appears to be indebted to the insurer apart from the assessment, the court, upon application of the liquidator, may also direct the member to show cause why the member should not pay the other indebtedness. Liability for such indebtedness shall be determined in the same manner and at the same time as the liability to pay the assessment.
The liquidator shall give notice of the order to show cause by publication if so directed by the court and by first class mail to each member liable thereunder mailed at least 20 days before the return day of the order to show cause to the member's last-known address as it appears on the records of the insurer.
If a member does not appear and serve duly verified objections upon the liquidator upon the return day of the order to show cause under sub. (3)
, the court shall make an order adjudging the member liable to the liquidator for the amount of the assessment against the member and other indebtedness, under sub. (3)
, together with costs.
If on such return day, the member appears and serves duly verified objections upon the liquidator, the court may hear and determine the matter or may appoint a referee to hear it and make such order as the facts warrant. Any order made by a referee under this paragraph shall have the same force and effect as if it were a judgment of the court, subject to review by the court upon application within 30 days.
The liquidator may enforce any order or collect any judgment under sub. (5)
by any lawful means.
Reinsurer's liability; arbitration clauses. 645.58(1)(1)
Except as provided in this subsection and in s. 646.35 (8) (e)
, the amount recoverable by the liquidator from a reinsurer shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when any of the following applies:
The reinsurance contract or other agreement specifically provides for another payee of the reinsurance in the event of delinquency proceedings, payment is made to the other payee, and the payment operates to extinguish the liability of the ceding insurer to the extent of the payment made by the reinsurer.
The reinsurer has assumed policy obligations of the ceding insurer as direct obligations of the reinsurer, payment is made to the payees under the policies, and the assumption operates to extinguish the liability of the ceding insurer to the extent assumed.
After December 31, 1989, a domestic insurer may not enter into a reinsurance contract that contains an arbitration provision permitting its reinsurer to require arbitration of an action on or related to the contract when the domestic insurer is subject to a delinquency proceeding under this subchapter.
History: 1989 a. 23
; 2003 a. 44
Uncollected, unearned premiums.
An agent or broker who is a resident of this state is not liable to the liquidator of a domestic or foreign insurer for the amount of any uncollected, unearned premium.
History: 1987 a. 325
Applicability of claims settlement provisions to loss claims.
Sections 645.46 (18)
, 645.61 (2)
, 645.63 (1)
, 645.64 (3)
and 645.87 (2)
do not apply to those loss claims that are subject to ch. 646
or to corresponding laws of other states that conform to s. 646.60 (1)
. In addition, ss. 645.61 (1)
, 645.62 (1)
, 645.63 (2)
, 645.64 (1)
, 645.83 (3)
and 645.87 (1)
do not apply to those loss claims under contracts subject to s. 646.35
or to corresponding laws of other states that conform to ss. 646.35
and 646.60 (1)
History: 1979 c. 109
; 1985 a. 216
Filing of claims. 645.61(1)(1)
Deadline for filing.
Proof of all claims must be filed with the liquidator in the form required by s. 645.62
on or before the last day for filing specified in the notice required under s. 645.47
, except that proof of claims under s. 645.68 (9)
need not be filed at all, and proof of claims for unearned premiums and claims for cash surrender values or other investment values in life insurance and annuities need not be filed unless the liquidator expressly so requires.
Excused late filings.
For a good cause shown, the liquidator shall recommend and the court shall permit a claimant making a late filing to share in dividends, whether past or future, as if the claim were not late, to the extent that any such payment will not prejudice the orderly administration of the liquidation. Good cause includes but is not limited to the following:
That existence of a claim was not known to the claimant and which the claimant filed within 30 days after learning of it;
That a claim for unearned premiums or for cash surrender values or other investment values in life insurance or annuities which was not required to be filed was omitted from the liquidator's recommendations to the court under s. 645.71
, and that it was filed within 30 days after the claimant learned of the omission;
That a transfer to a creditor was avoided under ss. 645.52
or was voluntarily surrendered under s. 645.55
, and that the filing satisfies the conditions of s. 645.55
That valuation under s. 645.67
of security held by a secured creditor shows a deficiency, which is filed within 30 days after the valuation; and
That a claim was contingent and became absolute, and was filed within 30 days after it became absolute.
Unexcused late filings.
The liquidator may consider any claim filed late which is not covered by sub. (2)
, and permit it to receive dividends, other than the first dividend, which are subsequently declared on any claims of the same or lower priority if the payment does not prejudice the orderly administration of the liquidation. The late-filing claimant shall receive, at each distribution, the same percentage of the amount allowed on the late claim as is then being paid to other claimants of the same priority plus the same percentage of the amount allowed on the late claim as is then being paid to claimants of any lower priority. This shall continue until the late claim has been paid in full.
Filing of claims by funds.
Claims by funds under s. 646.33
and corresponding provisions of funds of other jurisdictions that satisfy s. 646.60 (1) (b)
shall be filed periodically by the funds pursuant to rules promulgated by the commissioner.