Chapter 646

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.

646.13(2)(c) (c) With respect to any action against an insurer which is in liquidation, exercise the powers of the liquidator under s. 645.49 (1) or a substantially similar law in the state of domicile of the insolvent insurer.

646.13(2)(d) (d) Have standing to appear in any liquidation proceedings in this state involving an insurer in liquidation, and have authority to appear or intervene before a court or agency of any other state having jurisdiction over an insolvent insurer, in accordance with the laws of that state, with respect to which the fund is or may become obligated or that has jurisdiction over any person or property against which the fund may have subrogation or other rights. Standing shall extend to all matters germane to the powers and duties of the fund, including proposals for reinsuring, modifying, or guaranteeing the policies or contracts of the insolvent insurer and the determination of the policies or contracts and contractual obligations.

646.13(2)(e) (e) Pursue salvage and subrogation with respect to paid covered claim obligations and retain any amounts recovered.

646.13(2)(f) (f) Appoint and direct legal counsel for the defense of covered claims under insurance policies.

646.13(2)(g) (g) Sue and be sued, make contracts, including a contract with an insured for administration and payment of claims for which the insured is responsible, and borrow money necessary to carry out its duties, including money with which to pay claims under s. 646.31 or to continue coverage under s. 646.35. The fund may offer as security for such loans its claims against the liquidator or its power to levy assessments under this chapter.

646.13(2)(h) (h) Negotiate and contract with other guaranty associations to provide and receive administrative, claims, and other services that are usual to guaranty associations.

646.13(3) (3) No duty or liability. The fund has no duty or liability with respect to any claim filed as follows:

646.13(3)(a) (a) With the liquidator under s. 645.61 after the original date for filing specified by the liquidator under s. 645.47 (2), unless the liquidator determines that the claim is considered to have been timely filed under s. 645.61 (2) and the claim participates fully in every distribution to the same extent as other timely filed claims in the same class.

646.13(3)(b) (b) With a liquidator or court under the laws of any other state after the original date for filing specified by the liquidator or court, unless the liquidator or court determines that the claim is considered to have been timely filed under a law substantially similar to s. 645.61 (2) and the claim participates fully in every distribution to the same extent as other timely filed claims in the same class.

646.13(3)(c) (c) Except for claims under life insurance policies, annuities, or noncancelable or guaranteed renewable disability insurance policies, and except for claims determined to be excused late filings as provided in pars. (a) and (b), if the original date for filing is extended by the liquidator or court, with a liquidator or court after the earlier of the following:

646.13(3)(c)1. 1. Eighteen months after the order of liquidation is entered.

646.13(3)(c)2. 2. The extended date for filing specified by the liquidator or court.

646.13(3)(d) (d) Except for claims under life insurance policies, annuities, or noncancelable or guaranteed renewable disability insurance policies, and except for claims determined to be excused late filings as provided in pars. (a) and (b), if no date for filing is set by the liquidator or court, with a liquidator or court after 18 months after the order of liquidation is entered.

646.13(4) (4) When duty to defend terminates. Any obligation of the fund to defend an insured ceases upon the fund’s payment, by settlement or on a judgment, of an amount equal to the lesser of the fund’s covered claim obligation limit or the applicable policy limit, subject to any express policy terms regarding tender of limits.

646.13 History History: 1979 c. 109; 1985 a. 216; 1987 a. 325; 1999 a. 30; 2003 a. 261; 2005 a. 253; 2007 a. 170; 2009 a. 342; 2021 a. 114; 2023 a. 212.

646.15 646.15 Proceedings involving insurers.

646.15(1) (1) Injunctions and orders.

646.15(1)(a) (a) If an insurer is in liquidation, the fund may apply to the circuit court for Dane County for, and the court may grant, restraining orders, temporary and permanent injunctions, and other orders considered necessary and proper to prevent any of the following:

646.15(1)(a)1. 1. Interference with the fund or with its administrative proceedings.

646.15(1)(a)2. 2. The institution or further prosecution of any action or proceeding involving the insurer or in which the fund is obligated to defend a party.

646.15(1)(a)3. 3. The obtaining of a preference, judgment, garnishment or lien against the insurer or its assets.

646.15(1)(a)4. 4. Any other threatened or contemplated action that might prejudice the rights of policyholders or the administration of the liquidation or fund proceedings.

646.15(1)(b) (b) Upon granting an application under par. (a), the court may retain jurisdiction of any further proceeding or relief, as the court considers necessary and proper, involving the insurer.

646.15(2) (2) Exclusive proceedings. A court of this state does not have jurisdiction to entertain, hear or determine a proceeding or to grant relief if the proceeding or relief involves or is related to a nondomestic insurer which is in liquidation unless the court is so authorized under this chapter or ch. 645.

646.15 History History: 1987 a. 325; 1999 a. 30; 2003 a. 261.

646.16 646.16 Payment of deposits made for benefit of creditors.

646.16(1) (1) The commissioner shall promptly pay to the fund any deposit held in this state that was paid, as required by law or the commissioner, by the insolvent insurer for the benefit of creditors, including policyholders, and not turned over to the domiciliary liquidator upon the entry of a final order of liquidation of an insurer domiciled in this state or in a reciprocal state, as defined in s. 645.03 (1) (i). Of the amount paid to the fund under this subsection, the fund may retain the percentage determined by dividing the aggregate amount of policyholders’ claims that are related to the insolvency and for which the fund has provided benefits under this chapter by the aggregate amount of all policyholders’ claims in this state that are related to the insolvency. The fund shall remit the balance to the domiciliary liquidator.

646.16(2) (2) Any amount retained by the fund under sub. (1) shall be treated as a distribution of estate assets under s. 645.72 or a similar provision of the state of domicile of the insolvent insurer. Deposits subject to this section shall not be treated as deposits as security, escrow, or other security under s. 645.03 (1) (j).

646.16 History History: 2003 a. 261.

646.21 646.21 Custody and investment of assets.

646.21(1) (1) Custody. Except as provided in sub. (2), the board controls the assets of the fund. The board shall select regulated financial institutions in this state which receive deposits in which to establish and maintain accounts for assets needed on a current basis. If practicable, the accounts shall earn interest.

646.21(2) (2) Investment of assets. The board may request that assets of the fund not needed currently be invested by the investment board under s. 25.17. If so requested, the investment board shall invest those assets in investments with maturities and liquidity appropriate to the probable needs of the fund for money to perform its duties. All income attributable to the investments shall be credited to the fund, and both income and principal shall be transferred to the fund on request of the board. Assets held by the fund shall be invested in a similar manner.

646.21 History History: 1979 c. 109; 1983 a. 120; 2003 a. 261.

subch. II of ch. 646 SUBCHAPTER II

CLAIMS PROCEDURES

646.31 646.31 Eligible claims.

646.31(1) (1) Conditions of eligibility. A claim is not eligible for payment from the fund unless it is an unpaid claim for a loss insured under the policy or annuity, or an unpaid claim under a supplementary contract providing for a retained asset account, and all of the following conditions are met:

646.31(1)(a) (a) Issued by authorized insurer. The claim arises out of an insurance policy or annuity issued by an insurer which was authorized to do business in this state either at the time the policy or annuity was issued or when the insured event occurred, and against which an order of liquidation, which is not stayed, has been entered by a court of competent jurisdiction in the insurer’s domiciliary state.

646.31(1)(b) (b) Assessability of insurer.

646.31(1)(b)1. 1. The claim arises out of business not exempt from assessment under s. 646.01 (1).

646.31(1)(b)2. 2. The claim does not arise out of business against which assessments are prohibited under any federal or state law.

646.31(1)(c) (c) Contact with state. The claim is a member of one of the classes of claims under sub. (2).

646.31(1)(cm) (cm) Termination of coverage. Except for claims under life insurance policies, annuities or noncancelable or guaranteed renewable disability insurance policies, the claim arises within 30 days after the order of liquidation is entered or before any of the following occur:

646.31(1)(cm)1. 1. The policy expires, if the expiration date is less than 30 days after the order of liquidation is entered.

646.31(1)(cm)2. 2. The insured replaces or cancels the policy, if either action is taken within 30 days after the order of liquidation is entered.

646.31(1)(d) (d) Exceptions. The claim is not any of the following:

646.31(1)(d)1. 1. Based solely on a judgment.

646.31(1)(d)2. 2. Made for interest on any claim.

646.31(1)(d)3. 3. Made under s. 645.63 (2).

646.31(1)(d)4. 4. Subordinated under s. 645.90.

646.31(1)(d)5. 5. An indemnification recovered as a voidable preference under s. 645.54 (1) (c).

646.31(1)(d)6. 6. Made by an affiliate of an insurer in liquidation.

646.31(1)(d)7. 7. A retrospective premium rate adjustment.

646.31(1)(d)8. 8. Made for health care costs, as defined in s. 609.01 (1j), for which an enrollee, as defined in s. 609.01 (1d), or policyholder of a health maintenance organization insurer is not liable under ss. 609.91 to 609.935.

646.31(1)(d)9. 9. Made for health care costs, as defined in s. 609.01 (1j), for which an enrollee, as defined in s. 609.01 (1d), or policyholder of a health maintenance organization is not liable for any reason.

646.31(1)(d)10. 10. Based on an obligation that does not arise under the express written terms of the policy or contract, including any of the following:

646.31(1)(d)10.a. a. A claim based on marketing materials.

646.31(1)(d)10.b. b. A claim based on misrepresentations regarding policy benefits.

646.31(1)(d)10.c. c. An extra-contractual claim, including a claim for punitive or exemplary damages.

646.31(1)(d)10.d. d. A claim for statutorily imposed multiple damages.

646.31(1)(d)10.e. e. A claim for penalties or consequential or incidental damages.

646.31(1)(d)10.f. f. A claim for bad faith damages.

646.31(1)(d)11. 11. In the case of a life or disability insurance policy or an annuity contract, based on side letters, riders, or other documents that do not meet or comply with applicable policy form filing or approval requirements.

646.31(2) (2) Classes of claims to be paid. No claim may be paid under this chapter unless the claim is in one of the following classes:

646.31(2)(a) (a) Residents.

646.31(2)(a)1. 1. The claim of a policyholder, including a ceding assessable domestic insurer that is organized under ch. 612 and a domestic insurer that is a bona fide policyholder of the insurer in liquidation, who is a resident of this state under sub. (13).

646.31(2)(a)2. 2. Except for a claim of a beneficiary, assignee, or payee under a life or disability insurance policy or annuity contract, the claim of an insured, including a certificate holder, under a policy or annuity contract who is a resident of this state under sub. (13).

646.31(2)(b) (b) Certain nonresidents. The claim is made under a life or disability insurance policy or annuity contract subject to this section and issued by a domestic insurer and the claimant is a resident of another state that provides coverage similar to the coverage provided under this chapter but does not provide coverage for the claimant because the insurer was not licensed in that state at the time specified as a requirement for coverage under that state’s guaranty association law.

646.31(2)(c) (c) Owners of property interests. The first-party claim of a person having an insurable interest in or related to property with a permanent location in this state at the time of the insured event.

646.31(2)(d) (d) Third-party claimants. A claim under a liability or workers’ compensation insurance policy, if either the insured or the 3rd-party claimant was a resident of this state at the time of the insured event.

646.31(2)(e) (e) Assignees. The claim of a direct or indirect resident assignee, other than an insurer, of a person who except for the assignment could have claimed under par. (a), (b), (c) or (d).

646.31(2)(f) (f) Beneficiaries, assignees, and payees; life or disability policy or annuity contract. Except for a claim of a nonresident certificate holder under a group policy or contract, a claim made under a life or disability insurance policy or annuity contract by a resident or nonresident beneficiary, assignee or payee of a person who fulfills all of the following criteria:

646.31(2)(f)1. 1. The person is a policyholder of, or a certificate holder under, the life or disability insurance policy or annuity contract.

646.31(2)(f)2. 2. The person is a resident of this state or could have made a claim under par. (b).

646.31(2)(g) (g) Payees; structured settlement annuity.

646.31(2)(g)1. 1. Notwithstanding par. (f), the claim of a payee, or of a beneficiary of a deceased payee, under a structured settlement annuity if the payee, or deceased payee’s beneficiary, is a resident of this state, regardless of where the policyholder of the structured settlement annuity resides.

646.31(2)(g)2. 2. Notwithstanding pars. (b) and (f), the claim of a payee, or of a beneficiary of a deceased payee, under a structured settlement annuity if the payee, or deceased payee’s beneficiary, is not a resident of this state, if neither the payee, or deceased payee’s beneficiary, nor the policyholder of the structured settlement annuity is eligible for coverage by an organization that is comparable to the fund in the state of which the payee, or deceased payee’s beneficiary, or the policyholder is a resident, and if either of the following applies:

646.31(2)(g)2.a. a. The policyholder is a resident of this state.

646.31(2)(g)2.b. b. The policyholder is not a resident of this state, but the insurer that issued the structured settlement annuity is domiciled in this state, and the state in which the policyholder resides has an organization that is comparable to the fund.

646.31(4) (4) Maximum claim.

646.31(4)(ag) (ag) For purposes of this subsection, “disability insurance” means comprehensive health insurance policies and major medical health insurance policies. “Disability insurance” does not include hospital indemnity; loss of time; accidental benefits; limited or specified benefit or other ancillary coverages; disability income insurance coverage; long-term care insurance coverage; insurance coverage that is supplemental to another insurance policy or program, including Medicare supplement insurance; or similar types of policies.

646.31(4)(ap) (ap) Except in regard to worker’s compensation insurance and except as provided in par. (b), the obligation of the fund on a single risk, loss, or life, regardless of the number of policies or contracts, may not exceed $300,000, except that the aggregate liability of the fund for a single risk, loss, or life with respect to benefits for property insurance, liability insurance, and disability insurance, regardless of the number of those policies, may not exceed $500,000.