AB681: Bill Text

AB681, s. 78 Section 78. 646.15 (1) (a) 2. of the statutes is amended to read:

AB681,28,23 646.15 (1) (a) 2. The institution or further prosecution of any action or proceeding involving the insurer or in which the board fund is obligated to defend a party.

AB681, s. 79 Section 79. 646.15 (1) (a) 4. of the statutes is amended to read:

AB681,29,3 646.15 (1) (a) 4. Any other threatened or contemplated action that might prejudice the rights of policyholders or the administration of the liquidation or board fund proceedings.

AB681, s. 80 Section 80. 646.16 of the statutes is created to read:

AB681,29,15 646.16 Payment of deposits made for benefit of creditors. (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.

AB681,29,19 (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).

AB681, s. 81 Section 81. 646.21 (2) of the statutes is amended to read:

AB681,30,3 646.21 (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 board of the fund on request of the board. Assets held by the board of the fund shall be invested in a similar manner.

AB681, s. 82 Section 82. 646.31 (1) (d) 10. and 11. of the statutes are created to read:

AB681,30,6 646.31 (1) (d) 10. Based on an obligation that does not arise under the express written terms of the policy or contract, including any of the following:

AB681,30,7 a. A claim based on marketing materials.

AB681,30,8 b. A claim based on misrepresentations regarding policy benefits.

AB681,30,10 c. An extra-contractual claim, including a claim for punitive or exemplary damages.

AB681,30,11 d. A claim for statutorily imposed multiple damages.

AB681,30,12 e. A claim for penalties or consequential or incidental damages.

AB681,30,13 f. A claim for bad faith damages.

AB681,30,16 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.

AB681, s. 83 Section 83. 646.31 (2) (a) 1. of the statutes is amended to read:

AB681,30,21 646.31 (2) (a) 1. The claim of a policyholder, including a ceding assessable domestic insurer which that is organized under ch. 612 and a domestic insurer which that is a bona fide policyholder of the insurer in liquidation, who at the time of the insured event or of the liquidation order was is a resident of this state under sub. (13).

AB681, s. 84 Section 84. 646.31 (2) (a) 2. of the statutes is amended to read:

AB681,31,2 646.31 (2) (a) 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 at the time of the insured event or of the liquidation order was is a resident of this state under sub. (13).

AB681, s. 85 Section 85. 646.31 (2) (b) 1. of the statutes is repealed.

AB681, s. 86 Section 86. 646.31 (2) (b) 2. (intro.) and a. of the statutes are consolidated, renumbered 646.31 (2) (b) and amended to read:

AB681,31,12 646.31 (2) (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 if all of the following conditions are met: a. The 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.

AB681, s. 87 Section 87. 646.31 (2) (b) 2. b. of the statutes is repealed.

AB681, s. 88 Section 88. 646.31 (2) (b) 3. of the statutes is repealed.

AB681, s. 89 Section 89. 646.31 (2) (f) (title) of the statutes is amended to read:

AB681,31,17 646.31 (2) (f) (title) Beneficiaries, assignees, and payees; life or disability policy or annuity contract.

AB681, s. 90 Section 90. 646.31 (2) (f) 2. of the statutes is amended to read:

AB681,31,20 646.31 (2) (f) 2. The person is a resident of this state or could have made a claim under par. (b) 2.

AB681, s. 91 Section 91. 646.31 (2) (g) of the statutes is created to read:

AB681,32,2 646.31 (2) (g) Payees; structured settlement annuity. 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.

AB681,32,9 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:

AB681,32,10 a. The policyholder is a resident of this state.

AB681,32,13 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.

AB681, s. 92 Section 92. 646.31 (3) of the statutes is repealed.

AB681, s. 93 Section 93. 646.31 (5) of the statutes is repealed.

AB681, s. 94 Section 94. 646.31 (6) (a) of the statutes is amended to read:

AB681,32,23 646.31 (6) (a) The portion of a an otherwise eligible loss claim for which indemnification is provided by other benefits or advantages, which may not be included in the classes of claims specified in s. 645.68 (intro.), may not be claimed from the fund under this chapter or from the insured or policyholder. The claimant must exhaust such collateral sources before pursuing payment from the fund. This paragraph does not apply to the claim of an insured or payee under a structured settlement annuity.

AB681, s. 95 Section 95. 646.31 (6) (b) of the statutes is amended to read:

AB681,33,3 646.31 (6) (b) The board fund may waive the application of par. (a) to claims under contracts subject to s. 646.35 (2) or (3), to the extent that the board fund determines that application of par. (a) would be impracticable.

AB681, s. 96 Section 96. 646.31 (7) of the statutes is amended to read:

AB681,33,8 646.31 (7) Setoffs and counterclaims. Section 645.56 applies to the settlement of loss claims. The board fund shall give the liquidator a reasonable opportunity to inform the board fund of possible setoffs and counterclaims before paying loss claims.

AB681, s. 97 Section 97. 646.31 (8) of the statutes is amended to read:

AB681,33,12 646.31 (8) Notice to claimants. The board fund shall provide notice under s. 645.47 (2) to those potential loss claimants to whom the fund is liable under the section, if the liquidator has not done so.

AB681, s. 98 Section 98. 646.31 (9) (a) of the statutes is amended to read:

AB681,33,15 646.31 (9) (a) By any security fund with an obligation to pay all loss claims of the insurer;.

AB681, s. 99 Section 99. 646.31 (9) (b) of the statutes is amended to read:

AB681,33,18 646.31 (9) (b) If it is a first party claim for damage to property with a permanent location, by the fund of the location of the property; .

AB681, s. 100 Section 100. 646.31 (9) (c) of the statutes is amended to read:

AB681,33,21 646.31 (9) (c) If it is a workers' compensation claim, by the fund of the residence of the claimant;.

AB681, s. 101 Section 101. 646.31 (9) (cm) of the statutes is created to read:

AB681,33,24 646.31 (9) (cm) If it is a liability claim, by the fund of the residence of the policyholder.

AB681, s. 102 Section 102. 646.31 (9) (d) of the statutes is amended to read:

AB681,34,1 646.31 (9) (d) In any other case, by the fund of the residence of the insured; and.

AB681, s. 103 Section 103. 646.31 (10) of the statutes is renumbered 646.31 (10) (intro.) and amended to read:

AB681,34,6 646.31 (10) Temporary moratoriums. (intro.) Before being obligated to make payments under this chapter to holders of life insurance or annuity contracts the fund may impose, with court approval, temporary any of the following:

AB681,34,20 (a) Temporary moratoriums of not more than 90 days on payments of cash values and policy loans in addition to any deferrals of cash or policy loan value by contractual provision. A temporary moratorium may be renewed for successive periods of not more than 90 days with court approval or liens on payments of cash values and policy loans, or on any other right to withdraw funds held in conjunction with those policies or contracts, in addition to any contractual provisions for deferral of cash or policy loan value. If the court imposes a temporary moratorium or a moratorium charge on the payment of cash values or policy loans out of the assets of the insolvent insurer, or on any other right to withdraw, out of those assets, funds held in conjunction with those policies or contracts, the fund may defer the payment of cash values and policy loans and other rights to withdraw funds for the period of the moratorium or moratorium charge imposed by the court, except for any claims covered by the fund to be paid in accordance with a hardship procedure established by the liquidator and approved by the court.

AB681, s. 104 Section 104. 646.31 (10) (b) of the statutes is created to read:

AB681,35,2 646.31 (10) (b) Permanent policy or contract liens in connection with a guarantee, assumption, or reinsurance agreement, if the board finds that the amounts that may be assessed under this chapter are insufficient to ensure full and prompt performance of the fund's duties under this chapter, or that economic or financial conditions, as they affect insurers, are such that imposing such permanent policy or contract liens is in the public interest.

AB681, s. 105 Section 105. 646.31 (11) of the statutes is amended to read:

AB681,35,11 646.31 (11) Subrogation claims. The fund is not required to pay any amount due from the insurer to any reinsurer, insurer, insurance pool or underwriting association as subrogation, contribution, or indemnification recoveries or otherwise, except as provided in sub. (2) (a). A reinsurer, insurer, insurance pool or underwriting association that has paid a claim and thereby has become subrogated or otherwise entitled to the amount of that claim may assert that claim against the liquidator of the insurer in liquidation but not against the insured of the insurer in liquidation.

AB681, s. 106 Section 106. 646.31 (13) of the statutes is renumbered 646.31 (13) (intro.) and amended to read:

AB681,35,15 646.31 (13) Residency. (intro.) For purposes of determining residency in this section, the:

AB681,35,18 (a) The residency of a claimant, insured, or policyholder that is not a natural person is the state in which the claimant's, insured's, or policyholder's principal place of business is located.

AB681, s. 107 Section 107. 646.31 (13) (b) of the statutes is created to read:

AB681,35,23 646.31 (13) (b) In the case of a life or disability insurance policy or an annuity contract, residency means residency at the time of the liquidation order. In the case of any other kind of insurance covered by this chapter, residency means residency at the time of the insured event.

AB681, s. 108 Section 108. 646.31 (13) (c) of the statutes is created to read:

AB681,35,25 646.31 (13) (c) A person's residency may be in only one state.

AB681, s. 109 Section 109. 646.31 (13) (d) of the statutes is created to read:

AB681,36,5 646.31 (13) (d) If a person who is a citizen of the United States is a resident of a foreign country, or of a possession, territory, or protectorate of the United States, that does not have an organization similar to the fund, the person's residency is the domicile of the insurer that issued the policy or contract.

AB681, s. 110 Section 110. 646.32 (1) of the statutes is amended to read:

AB681,36,11 646.32 (1) Appeal. A claimant whose claim is reduced or declared ineligible shall promptly be given notice of the determination and of the right to object under this section. The claimant may appeal to the board within 30 days after the mailing of the notice. The claimant may not pursue the claim in court except as provided in sub. (2).

AB681, s. 111 Section 111. 646.325 (1) of the statutes is amended to read:

AB681,36,21 646.325 (1) Definition. In this section, "net worth" means the amount of an insured's total assets less the insured's total liabilities at the end of the insured's fiscal year immediately preceding the date the liquidation order was entered, as shown on the insured's audited financial statement, or, if and includes the consolidated net worth of all of the corporate affiliates, subsidiaries, operating divisions, holding companies, and parent entities that are shown as insureds or additional insureds on the policy issued by the insurer. If the insured is a natural person, "net worth" means the insured's total assets less the insured's total liabilities on December 31 immediately preceding the date the liquidation order was entered.

AB681, s. 112 Section 112. 646.325 (2) (intro.) of the statutes is amended to read:

AB681,37,2 646.325 (2) Recovery from certain insureds and affiliates. (intro.) Except as provided in sub. (3), the fund may recover from a person the costs and expenses incurred in defending a claim against the person by a 3rd party and the amount of any claim paid on behalf of that the person to a 3rd party, if all of the following conditions are satisfied:

AB681, s. 113 Section 113. 646.325 (2) (a) (intro.) of the statutes is amended to read:

AB681,37,5 646.325 (2) (a) (intro.) The person on whose behalf the claim was defended or paid is any of the following:

AB681, s. 114 Section 114. 646.325 (2) (b) of the statutes is amended to read:

AB681,37,9 646.325 (2) (b) Payment Adjudication of the claim resulted in no liability obligation on the person to pay the claim of the 3rd party or payment of the claim satisfied all or part of the person's liability obligations to 3rd parties.

AB681, s. 115 Section 115. 646.33 (1) of the statutes is renumbered 646.33 (1) (a) and amended to read:

AB681,37,20 646.33 (1) (a) Upon payment to any loss claimant the fund is subrogated to the claimant's full right of recovery against the insurer, and, to the same extent the insurer would have been subrogated, against any liquidator and any 3rd person. A person receiving benefits under this chapter thereby assigns to the fund the person's rights under, and any causes of action against any person for losses arising under, resulting from, or otherwise relating to, the covered policy or contract to the extent of the benefits received, regardless of whether the benefits are payments of or on account of contractual obligations, continuation of coverage, or the provision of substitute or alternative coverages.

AB681,37,23 (2m) Recovery. (a) On recovery under this section, the fund may retain both the amount it has paid to the claimant and the amount it has expended to obtain the recovery and shall pay any balance to the claimant.

AB681, s. 116 Section 116. 646.33 (1) (b), (c) and (d) of the statutes are created to read:

AB681,38,3 646.33 (1) (b) The subrogation rights of the fund under this subsection have the same priority against the assets of the insolvent insurer as the claimant's rights with respect to the insurer.

AB681,38,11 (c) In addition to the rights specified in pars. (a) and (b), the fund has all of the common law rights of subrogation and any other equitable or legal remedy that would have been available to the insolvent insurer or the claimant with respect to the covered policy or contract including, in the case of a structured settlement annuity, any rights of the owner, beneficiary, or payee of the annuity, to the extent of the benefits received under this chapter, against a person originally or by succession responsible for the losses that arise from the personal injury and that relate to the annuity or its payment.

AB681,38,16 (d) If any provision of this subsection is invalid or ineffective for any reason with respect to any person or claim, the amount payable by the fund with respect to the related covered obligations shall be reduced by any amount realized by any other person with respect to the person or claim that is attributable to the covered policy or contract.