646.31(9)
(9) Collection from other funds. A claim recoverable from more than one security fund shall be paid in the following order:
646.31(9)(a)
(a) By any security fund with an obligation to pay all loss claims of the insurer.
646.31(9)(b)
(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.
646.31(9)(c)
(c) If it is a workers' compensation claim, by the fund of the residence of the claimant.
646.31(9)(cm)
(cm) If it is a liability claim, by the fund of the residence of the policyholder.
646.31(9)(d)
(d) In any other case, by the fund of the residence of the insured.
646.31(9m)
(9m) Recovery reduction. Any recovery under this chapter shall be reduced by the amount of recovery from any other security fund.
646.31(10)
(10) Temporary moratoriums. Before being obligated to make payments under this chapter to holders of life insurance or annuity contracts the fund may impose, with court approval, any of the following:
646.31(10)(a)
(a) Temporary moratoriums 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.
646.31(10)(b)
(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.
646.31(11)
(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.
646.31(12)
(12) Net worth of insured. Except for claims under
s. 646.35, payment of a first-party claim under this chapter to an insured whose net worth, as defined in
s. 646.325 (1), exceeds $10,000,000 is limited to the amount by which the aggregate of the insured's claims that satisfy
subs. (1) to
(7),
(9) and
(9m) plus the amount, if any, recovered from the insured under
s. 646.325 exceeds 10% of the insured's net worth.
646.31(13)
(13) Residency. For purposes of determining residency in this section:
646.31(13)(a)
(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.
646.31(13)(b)
(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.
646.31(13)(d)
(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.
646.31 Annotation
An offset under sub. (6) (a) must include amounts available to the claimant and not just amounts settled for. An offset of the policy limits of an applicable policy rather than the amount settled for was correct. Belongia v. Wisconsin Insurance Security Fund,
195 Wis. 2d 835,
537 N.W.2d 51 (Ct. App. 1995),
93-2622.
646.31 Annotation
When a claim against the insured of an insolvent insurer was not filed until after the effective date of sub. (12), each of the insured's claims were subject to the sub. (12) net worth limitation. A. O. Smith Corp. v. Wisconsin Insurance Security Fund,
217 Wis. 2d 252,
580 N.W.2d 348 (Ct. App. 1998),
97-1517.
646.31 Annotation
Town mutuals may recover as policyholders of their reinsurers under sub. (2) (a). Accordingly, the Fund has the authority to assess reinsurance companies of town mutuals, an authority it must exercise to ensure the Fund's solvency. American Eagle Insurance Company v. Wisconsin Insurance Security Fund, 2005 WI App 177,
286 Wis. 2d 689,
704 N.W.2d 44,
04-0274.
646.31 Annotation
When an insurer becomes subrogated by paying medical expenses arising from injuries that are compensable under the worker's compensation statutes and the employer's worker's compensation insurance carrier is in liquidation, sub. (11) precludes LIRC from ordering the employer to reimburse the subrogated insurer for those expenses. Wisconsin Insurance Security Fund v. Labor and Industry Review Commission, 2005 WI App 242,
288 Wis. 2d 206,
707 N.W.2d 293,
04-2157.
646.32
646.32
Appeal and review. 646.32(1)(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).
646.32(2)
(2) Review. Decisions of the board under
sub. (1) are subject to judicial review.
646.32 History
History: 1979 c. 109;
2003 a. 261.
646.325
646.325
Recovery of amounts paid to 3rd parties. 646.325(1)(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, 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.
646.325(2)
(2) Recovery from certain insureds and affiliates. 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 the person to a 3rd party, if all of the following conditions are satisfied:
646.325(2)(a)
(a) The person on whose behalf the claim was defended or paid is any of the following:
646.325(2)(b)
(b) 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.
646.325(3)
(3) Limitation. The total amount recovered from an insured described in
sub. (2) (a) 1. plus the amount of the insured's claims that satisfy
s. 646.31 (1) to
(7),
(9) and
(9m) but are not eligible for payment under
s. 646.31 (12) may not exceed 10% of the insured's net worth.
646.325 History
History: 1987 a. 325;
2003 a. 261.
646.33
646.33
Subrogation and cooperation. 646.33(1)(a)(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.
646.33(1)(b)
(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.
646.33(1)(c)
(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.
646.33(1)(d)
(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.
646.33(2)
(2) Cooperation. The claimant shall cooperate with the fund in pursuing the fund's rights under
sub. (1), including executing any necessary documents. If cooperation is withheld unreasonably, the fund may recover from the claimant any amount it has paid the claimant. The fund may require a claimant to execute a written assignment to it of the claimant's rights and causes of action relating to the covered policy or contract as a condition precedent to the receipt of any right or benefits under this chapter.
646.33(2m)(a)(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.
646.33(2m)(b)
(b) If a claimant to whom the fund has provided benefits under this chapter recovers amounts with respect to which the fund has rights under this section, the claimant shall pay to the fund the portion of the recovery that is attributable to the covered policy or contract.
646.33(3)
(3) Claims against liquidator. The fund shall report periodically and whenever a reasonable request is made to any liquidator against whom subrogation rights exist under
sub. (1) the claims paid and rejected together with estimates of unsettled claims made or anticipated against the fund.
646.33 History
History: 1979 c. 109;
2003 a. 261.
646.35
646.35
Continuation of coverage. 646.35(1)
(1)
Scope. This section applies to the following contracts when subject to this chapter:
646.35(3)(am)(am) If an insurer that is subject to this chapter is in liquidation, the fund shall, subject to
s. 646.31 (2), do either of the following:
646.35(3)(am)1.
1. Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies of the insolvent insurer within the scope of this section.
646.35(3)(am)2.
2. Assure performance of the contractual obligations of the insurer on such policies.
646.35(3)(bm)
(bm) Whether the fund's duties under
par. (am) are discharged by the fund under
par. (am) 1. or
2. is at the fund's discretion. The fund shall provide moneys, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the duties under
par. (am) 1. or
2.
646.35(4)(a)(a) The fund has a claim against the liquidator for reasonable payments made to discharge its duties under this section. If the fund and the liquidator disagree regarding the reasonableness of such payments, either may apply to the court to determine the question. Such payments shall have the same priority as the class of claims under
s. 645.68 (3).
646.35(4)(b)
(b) As a creditor of the insolvent insurer, the fund shall be entitled to receive disbursements of assets out of marshaled assets, consistent with
s. 645.72 and any substantially similar laws of other states, as a credit against obligations under this chapter. If, within 120 days after a final determination of an insurer's insolvency by the receivership court, the liquidator has not applied to the court for approval of a proposal for disbursement of assets out of marshaled assets to insurance guaranty associations having obligations because of the insolvency, the fund may apply to the receivership court, in accordance with the law of the insolvent insurer's domicile, for approval of its own proposal for disbursement of the assets.
646.35(5)
(5) Rate increases. The fund may increase any rates or premiums on policies during continuation of coverage under
sub. (3) (am) 2. to the extent the policies permit the insurer to increase the rates or premiums. If the fund determines that the rates or premiums on policies that do not permit an increase or the rates or premiums as increased to the extent permitted by the policies are inadequate under
s. 625.11 (3), the fund may offer the policyholders the option of terminating the coverage or continuing the coverage at adequate rates or premiums as determined by the fund.
646.35(6)
(6) Limitations. In performing its duties under this section:
646.35(6)(a)
(a) In the case of an annuity contract, the fund may limit its performance to payment of the then current value of the loss claim under
s. 645.68 (3) as of the date of the order of liquidation, with interest to the date of payment, in lieu of the requirements of
sub. (3).
646.35(6)(b)
(b) In the case of a disability insurance policy that is neither guaranteed renewable nor noncancelable, the fund is not obligated to continue the policy in force beyond the time required under
s. 645.43 or the date established in the liquidation order of another state, but may continue the coverage under any disability insurance policy for up to 180 days after the date of the liquidation order.
646.35(6)(bm)
(bm) For coverages continued pursuant to
par. (b), the fund may substitute a comprehensive health insurance policy approved by the commissioner for a health maintenance organization policy that is subject to
sub. (3), and increase rates or premiums for the substituted coverage as provided in
sub. (5).
646.35(6)(c)
(c) In the case of a life insurance or annuity contract, the fund is not obligated to perform the responsibilities set forth in
sub. (3) with respect to either of the following:
646.35(6)(c)1.
1. Any benefit payment liability, arising on or after the date of entry of the order of liquidation, to the extent that the rate of interest on which it is based or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract and employed in calculating returns or changes in value exceeds the smaller of the following:
646.35(6)(c)1.b.
b. The rate of interest, which may not be less than zero, determined by subtracting 3 percentage points from the monthly corporate bond yield average, as most recently published by Moody's investors service or its successor.
646.35(6)(c)2.
2. Any benefit payment liability, arising before the date of entry of the order of liquidation, to the extent that the payment exceeds the smaller of the following:
646.35(6)(c)2.b.
b. The rate of interest, which may not be less than zero, determined by subtracting 2 percentage points from the monthly corporate bond yield average, as published by Moody's investors service or its successor, when averaged over the 4-year period ending on the date of entry of the order of liquidation or averaged over such lesser period if the contract was issued less than 4 years before that date.
646.35(7)
(7) Exclusion for coverage under another fund. 646.35(7)(a)(a) Notwithstanding
s. 646.31 (9), the fund shall not provide coverage under this section to any person who, directly or indirectly, has coverage under any other state's security fund statutes.
646.35(7)(b)
(b) In determining whether
par. (a) applies in a situation in which a person could potentially be covered by security funds of more than one state,
par. (a) shall be construed in conjunction with other states' laws in such a manner as to result in coverage for the person by only one security fund.
646.35(8)(a)(a) In this subsection, "coverage date" means the date on which the fund becomes responsible for the obligations of an insolvent insurer.
646.35(8)(b)
(b) At any time within one year after the coverage date, the fund may elect to succeed to the insolvent insurer's rights and obligations that accrue on or after the coverage date and that relate to contracts covered, in whole or in part, by the fund under one or more indemnity reinsurance agreements entered into by the insolvent insurer as a ceding insurer and selected by the fund. The election shall be effected by a notice to the liquidator and to any affected reinsurer. The fund may not exercise an election under this paragraph with respect to a reinsurance agreement that the liquidator has expressly disaffirmed.
646.35(8)(c)
(c) With respect to each indemnity reinsurance agreement for which the fund makes an election under
par. (b):
646.35(8)(c)1.
1. The fund shall be responsible for all unpaid premiums under the agreement, for periods both before and after the coverage date, and for the performance of all other obligations to be performed under the agreement after the coverage date, that relate in each case to contracts covered, in whole or in part, by the fund. The fund may charge contracts covered in part by the fund, through reasonable allocation methods, for the costs of reinsurance in excess of the obligations of the fund.
646.35(8)(c)2.
2. The fund is entitled to any amounts payable by the reinsurer under the agreement with respect to losses or events that occur in periods after the coverage date and that relate to contracts or contractual obligations covered, in whole or in part, by the fund. Upon receipt of any such amounts, the fund must pay to the beneficiary under the policy or contract on account of which the amounts were paid, the amount by which the benefits paid by the fund on account of the policy or contract less the retention of the insolvent insurer applicable to the loss or event is exceeded by the amount received by the fund.
646.35(8)(c)3.
3. Within 30 days after the election, the fund and the indemnity reinsurer must calculate the net balance due to or from the fund under the agreement as of the date of the election, giving full credit to all items paid by the insolvent insurer, the insurer's liquidator, and the indemnity reinsurer between the coverage date and the date of the election. The fund or the indemnity reinsurer shall pay the net balance due to the other within 5 days after the calculation is completed. The liquidator shall remit to the fund as promptly as practicable any amounts received by the liquidator that are due the fund under
subd. 2.
646.35(8)(c)4.
4. If, within 60 days of the election, the fund pays all premiums due for periods both before and after the coverage date that relate to contracts covered, in whole or in part, by the fund, the reinsurer may not terminate the agreement insofar as it relates to contracts covered, in whole or in part, by the fund and may not set off against amounts due the fund any unpaid premium due for periods before the coverage date.
646.35(8)(d)
(d) If the fund transfers its obligations to another insurer and the fund and other insurer agree, unless the fund has previously expressly determined in writing that it will not exercise an election under
par. (b), the other insurer succeeds to the rights and obligations of the fund under
pars. (b) and
(c), regardless of whether the fund has exercised an election under
par. (b). If the other insurer succeeds to the fund's rights and obligations under
pars. (b) and
(c):
646.35(8)(d)1.
1. The indemnity reinsurance agreements automatically terminate for new reinsurance, unless the indemnity reinsurer and the other insurer agree to the contrary.
646.35(8)(d)2.
2. On and after the date on which an indemnity reinsurance agreement is transferred to the other insurer, the fund is no longer obligated to pay beneficiaries the amounts specified in
par. (c) 2. with respect to that agreement.
646.35(8)(e)
(e) This subsection supersedes
s. 645.58 (1), any applicable rules of the commissioner, and the provisions of any affected reinsurance agreement that provide for or require payment of reinsurance proceeds to the liquidator of the insolvent insurer on account of losses or events that occur after the coverage date. The liquidator remains entitled to any amounts payable by the reinsurer under the reinsurance agreement with respect to losses or events that occur before the coverage date, subject to any applicable setoff provisions.
646.35(8)(f)
(f) Nothing in this subsection, except as expressly provided in this subsection:
