Chapter 632

632.05 632.05 Indemnity amounts.

632.05(1) (1) Replacement cost of coverage. An insurer may agree in a property insurance policy to indemnify the insured for the amount it would cost to repair, rebuild or replace the damaged or destroyed insured property with new materials of like size, kind and quality.

632.05(2) (2) Total loss. Whenever any policy insures real property that is owned and occupied by the insured primarily as a dwelling and the property is wholly destroyed, without criminal fault on the part of the insured or the insured’s assigns, the amount of the loss shall be taken conclusively to be the policy limits of the policy insuring the property.

632.05 History History: 1975 c. 375; 1979 c. 73, 177; 2001 a. 65.

632.05 Cross-reference Cross-reference: See also ch. Ins 4, Wis. adm. code.

632.05 Annotation The intentional act of an insured joint owner of property does not, as a matter of law, bar an innocent insured joint owner of property from recovering under a fire insurance policy. In this case, the policy did not state whether the obligations of the insured were joint or several. Therefore, the court interpreted the language in the policy as not barring an innocent insured from recovering under the policy merely by virtue of the fact that another insured intentionally caused the damage to the insured property. Hedtcke v. Sentry Insurance Co., 109 Wis. 2d 461, 326 N.W.2d 727 (1982). But see Kemper Independence Insurance Co. v. Islami, 2021 WI 53, 397 Wis. 2d 394, 959 N.W.2d 912, 19-0488.

632.05 Annotation An administrative rule interpretation of sub. (2) that denies benefits solely on the basis of a past rental of the property would be unreasonable. Kohnen v. Wisconsin Mutual Insurance Co., 111 Wis. 2d 584, 331 N.W.2d 598 (Ct. App. 1983).

632.05 Annotation To have “occupied” a dwelling under sub. (2) requires actual and physical control. An inanimate entity such as an estate is incapable of occupying a dwelling under sub. (2). Drangstviet v. Auto-Owners Insurance Co., 195 Wis. 2d 592, 536 N.W.2d 189 (Ct. App. 1995), 95-0053.

632.05 Annotation Sub. (2) does not exclude any dwellings that are owned and occupied by the insured. A building need not be exclusively residential. Seider v. O’Connell, 2000 WI 76, 236 Wis. 2d 211, 612 N.W.2d 659, 98-1223.

632.05 Annotation Sub. (2), the valued policy law, does not provide that an insured is entitled to the limits of all policies insuring a dwelling. Instead, s. 631.43 (1), the pro rata statute, specifically governs situations when two or more policies indemnify against the same loss. Absent the consent of the insurers, insureds are entitled to the full amount of their loss but not to the full amount of both policies if the combined limits exceed the actual loss. Wegner v. West Bend Mutual Insurance Co., 2007 WI App 18, 298 Wis. 2d 420, 728 N.W.2d 30, 05-3193.

632.05 Annotation Sub. (2) does not exclude real property that is owned and occupied by the insured primarily as a dwelling solely because it is not the insured’s primary residence, but to be covered under the statute the property must be occupied by the insured primarily as a dwelling. Use is the core meaning of occupy in the context of this statute. The building must be used by the insured primarily as a residence. When the primary use of a building for at least 14 months before a fire had been renting it to others, sub. (2) did not apply. Cambier v. Integrity Mutual Insurance Co., 2007 WI App 200, 305 Wis. 2d 337, 738 N.W.2d 181, 06-3112.

632.05 Annotation Sub. (2) requires the insured building be occupied by the insured primarily as a dwelling. The insured’s use must bear a relationship to actually living in the dwelling. The fact that the building is being renovated and refurbished does not affect its status as a dwelling. Whether or not a person ever slept in a house is not dispositive of whether the person occupied it. A dwelling does not cease to be occupied as a dwelling if the people living there temporarily vacate the dwelling for renovations or if a purchaser engages in renovations before moving in. Johnson v. Mt. Morris Mutual Insurance Co., 2012 WI App 3, 338 Wis. 2d 327, 809 N.W.2d 53, 10-2468.

632.05 Annotation Administrative rules provide that real property owned and occupied by the insured that is partially destroyed but ordered razed under a fire ordinance or similar law shall be considered wholly destroyed for purposes of sub. (2). The test is not whether the property has been physically destroyed. Haynes v. American Family Mutual Insurance Co., 2014 WI App 128, 359 Wis. 2d 87, 857 N.W.2d 478, 14-0395.

632.07 632.07 Prohibiting requiring property insurance in excess of replacement value. A lender may not require a borrower, as a condition of receiving or maintaining a loan secured by real property, to insure the property against risks to improvements on the real property in an amount that exceeds the replacement value or market value of the improvements, whichever is greater.

632.07 History History: 2007 a. 170.

632.08 632.08 Mortgage clause. A provision for payment to a mortgagee or other owner of a security interest in property may be contained in or added by endorsement to any insurance policy protecting against loss or destruction of or damage to property. If the insurance covers real property, any loss not exceeding $500 shall be paid to the insured mortgagor despite the provision, unless the mortgagee is a named insured.

632.08 History History: 1975 c. 375; 1979 c. 102.

632.09 632.09 Choice of law. Every insurance against loss or destruction of or damage to property in this state or in the use of or income from property in this state is governed by the law of this state.

632.09 History History: 1975 c. 375.

632.10 632.10 Definitions applicable to property insurance escrow. In ss. 632.10 to 632.104:

632.10(1) (1) “Building and safety standards” means the requirements of chs. 101 and 145 and of any rule promulgated by the department of safety and professional services under ch. 101 or 145, and standards of a 1st class city relating to the health and safety of occupants of buildings.

632.10(2) (2) “Deliver” means delivery in person, or delivery by deposit with the U.S. postal service of certified or 1st class mail addressed to the recipient at the recipient’s last-known address.

632.10(3) (3) “Final settlement” means the amount that an insurer owes under a property insurance policy to the named insured and other interests named in the policy for loss to any insured building or other structure affixed to land that is caused by fire or explosion, excluding any amount payable for loss to contents or other personal property, for loss of use or business interruption and any amount payable under liability coverage under the policy, and that is determined by any of the following means:

632.10(3)(a) (a) Acceptance of a proof of loss by the insurer.

632.10(3)(b) (b) Execution of a release by the named insured.

632.10(3)(c) (c) Acceptance of an arbitration award by the insurer and named insured.

632.10(3)(d) (d) Judgment of a court of competent jurisdiction.

632.10 History History: 1989 a. 347; 1995 a. 27 ss. 7041, 9116 (5); 2011 a. 32.

632.101 632.101 Policy terms.

632.101(1) (1) Affected policies. Except as provided in sub. (2), every property insurance policy issued or delivered in this state, including property insurance policies issued under the mandatory risk-sharing plan operating under s. 619.01, that insures real property located in a 1st class city against loss caused by fire or explosion shall provide for payment of any final settlement under the policy in the manner described in ss. 632.102 to 632.104.

632.101(2) (2) Excluded policies. Sections 632.10 to 632.104 do not apply to property insurance policies issued in any of the following circumstances:

632.101(2)(a) (a) By the local government property insurance fund under ch. 605.

632.101(2)(b) (b) On a one- or 2-family dwelling that is occupied by the named insured as a principal residence, if any of the following is satisfied:

632.101(2)(b)1. 1. The named insured gives proof of occupancy to the insurer by a valid Wisconsin operator’s license.

632.101(2)(b)2. 2. If the named insured does not possess a valid Wisconsin operator’s license, the named insured gives proof of occupancy to the 1st class city by documentation approved by the 1st class city. Upon acceptance of the proof, the 1st class city shall immediately notify the insurer that a policy issued on the property is exempt from ss. 632.10 to 632.104.

632.101 History History: 1989 a. 347; 1991 a. 315.

632.102 632.102 Payment of final settlement.

632.102(1) (1) Withholding. An insurer shall withhold from payment a portion of the final settlement as determined under sub. (2), if all of the following apply:

632.102(1)(a) (a) The amount of the final settlement exceeds 50 percent of the total of all limits under all insurance policies covering the building and any other structure affixed to land that sustained the loss.

632.102(1)(b) (b) The total amount of all insurance covering the building and any other structure affixed to land that sustained the loss is at least $5,000.

632.102(2) (2) Amount withheld. The insurer shall withhold from payment of the final settlement an amount that is equal to the greater of the following:

632.102(2)(a) (a) Twenty-five percent of the final settlement.

632.102(2)(b) (b) The lesser of $7,500 or the limits under the policy for coverage of the building or other structure affixed to land that sustained the loss.

632.102(3) (3) Notice of withholding.

632.102(3)(a) (a) Within 10 days after withholding the amount determined under sub. (2), the insurer shall deliver written notice of the withholding to all of the following persons:

632.102(3)(a)1. 1. The building inspection official of the 1st class city in which the insured real property is located.

632.102(3)(a)2. 2. The named insured.

632.102(3)(a)3. 3. Any mortgagee or other lienholder who has an existing lien against the insured real property and who is named in the policy.

632.102(3)(a)4. 4. If the final settlement was determined by judgment, the court in which the judgment was entered, in addition to the persons described in subds. 1. to 3.

632.102(3)(b) (b) The notice of withholding shall include all of the following information:

632.102(3)(b)1. 1. The identity and address of the insurer.

632.102(3)(b)2. 2. The name and address of the named insured and each mortgagee or other lienholder entitled to notice under par. (a) 3.

632.102(3)(b)3. 3. The address of the insured real property.

632.102(3)(b)4. 4. The date of loss, policy number and claim number.

632.102(3)(b)5. 5. The amount of money withheld.

632.102(3)(b)6. 6. A summary of ss. 632.10 to 632.104, including a statement explaining all of the following:

632.102(3)(b)6.a. a. That for the 1st class city to qualify for reimbursement of expenses from the funds withheld under this section, the 1st class city must, after the loss occurs but within 90 days after delivery of the notice of withholding under this subsection, commence proceedings under s. 66.0413, 254.595 or 823.04 or under a local ordinance relating to demolition or abatement of nuisances or obtain a release signed by the named insured consenting to demolition with respect to the building or other structure; that if the 1st class city commences the proceedings or obtains the release within that time period, a part or all of the withheld funds may be used to defray the 1st class city’s expenses; and that the withheld funds will be released to the named insured and other interests named in the policy if the 1st class city does not commence the proceedings or obtain the release within that time period.

632.102(3)(b)6.b. b. That the withheld funds may be released to the named insured and other interests named in the policy if an official of the 1st class city determines under s. 632.103 (3) that the building or other structure has been repaired or replaced or the site restored to a dust-free and erosion-free condition.

632.102(4) (4) Insurer’s liability. In no event may an insurer be liable under a policy subject to ss. 632.10 to 632.104 for any amount greater than the lesser of the final settlement or the limits of liability set out in the policy.

632.102(5) (5) Immunity for insurer. No cause of action may arise against and no liability may be imposed upon an insurer or an agent or employee of an insurer for paying, withholding or transferring all or any portion of a final settlement as provided in ss. 632.10 to 632.104.

632.102 History History: 1989 a. 347; 1993 a. 27; 1995 a. 27; 1999 a. 150 s. 672.

632.103 632.103 Procedure for payment of withheld funds.

632.103(1) (1) Release to 1st class city.

632.103(1)(a) (a) To qualify for reimbursement of expenses under sub. (2), the 1st class city must do any of the following:

632.103(1)(a)1. 1. Commence proceedings under s. 66.0413, 254.595 or 823.04 or under a local ordinance relating to demolition or abatement of nuisances, with respect to the building or other structure for which the funds are withheld.

632.103(1)(a)2. 2. Obtain a release signed by the named insured consenting to demolition of the building or other structure with respect to which the funds are withheld.

632.103(1)(b) (b) The 1st class city shall commence proceedings under par. (a) 1. or obtain the release under par. (a) 2. after the occurrence of the loss to the building or other structure by fire or explosion but within 90 days after delivery of the notice of withholding under s. 632.102 (3).

632.103(1)(c) (c) When proceedings described in par. (a) 1. are commenced, the 1st class city shall notify, in writing, the insurer, the named insured and any mortgagee or other lienholder identified in the notice of withholding under s. 632.102 (3) (b) 2. that the proceedings are commenced.

632.103(1)(d) (d) The 1st class city shall release all interest in the amount withheld under s. 632.102 (2) and the insurer shall promptly pay that amount to the named insured and other interests named in the policy if any of the following occurs:

632.103(1)(d)1. 1. The 1st class city fails to commence proceedings described in par. (a) 1. or obtain a release described in par. (a) 2. within the period provided in par. (b).

632.103(1)(d)2. 2. The 1st class city fails to notify the insurer as provided in par. (c).

632.103(2) (2) Reimbursement of expenses.

632.103(2)(a) (a) If the 1st class city satisfies sub. (1) (a) and (b) and, if applicable, notifies the insurer as required in sub. (1) (c), the insurer shall promptly upon receiving the statement under par. (b) deliver to the 1st class city funds withheld from the named insured’s final settlement under s. 632.102 (2), to the extent necessary to reimburse the 1st class city for any of the following expenses:

632.103(2)(a)1. 1. Costs incurred in the course of enforcing ss. 66.0413 and 66.0427 or a local ordinance relating to demolition, with respect to the building or other structure for which the funds are withheld.

632.103(2)(a)2. 2. Costs incurred in acting in accordance with a release signed by the named insured consenting to demolition of the building or other structure with respect to which the funds are withheld.

632.103(2)(a)3. 3. Costs incurred in abating a public nuisance under s. 254.595 or 823.04 or under a local ordinance relating to abating a public nuisance, with respect to the building or other structure for which the funds are withheld.

632.103(2)(a)4. 4. Reasonable administrative expenses incurred in connection with activities described in subds. 1. to 3., including but not limited to expenses for inspection, clerical, supervisory and attorney services.

632.103(2)(b) (b) The insurer may not release any withheld funds to the 1st class city under par. (a) unless the 1st class city delivers to the insurer and the named insured an itemized statement of the actual costs incurred under par. (a) 1. to 4.

632.103(2)(c) (c) The insurer shall promptly deliver to the named insured and other interests named in the policy any portion of the withheld funds that are not released to the 1st class city under par. (a).

632.103(3) (3) Release to named insured. Except as provided in sub. (2), the insurer shall promptly deliver to the named insured and other interests named in the policy the funds withheld from the named insured’s final settlement under s. 632.102 (2) if the 1st class city delivers a notice to the insurer that the building inspection official of the 1st class city, or other person who is authorized by the 1st class city’s governing body to represent the 1st class city, has inspected the insured real property and verifies any of the following:

632.103(3)(a) (a) That the damaged or destroyed portions of the building or other structure with respect to which the funds are withheld have been repaired or replaced in compliance with applicable building and safety standards, except to the extent that the withheld funds are needed to complete repair or replacement.

632.103(3)(b) (b) That the damaged or destroyed building or other structure with respect to which the funds are withheld and all remnants of the building or other structure have been removed from the land on which the building or other structure was situated and the site has been restored to a dust-free and erosion-free condition in compliance with applicable building and safety standards.

632.103 History History: 1989 a. 347; 1991 a. 32; 1993 a. 27; 1999 a. 150 ss. 663, 672.

632.104 632.104 Funds released to mortgagee.

632.104(1) (1) First mortgage in default. The insurer shall release to a mortgagee funds withheld under s. 632.102, in an amount and within the period provided in sub. (2), if all of the following conditions are satisfied:

632.104(1)(a) (a) The mortgagee holds a first mortgage on the real property with respect to which the funds are being withheld, and the mortgage is in default.

632.104(1)(b) (b) The mortgage was executed before March 1, 1991.

632.104(1)(c) (c) The mortgagee delivers to the insurer a written request for release of the funds within 15 days after delivery of the notice of withholding under s. 632.102 (3).

632.104(2) (2) Amount released; timing. If sub. (1) is satisfied, the insurer shall release to the mortgagee all or any portion of the funds withheld with respect to the mortgaged property as is necessary to satisfy an outstanding first lien mortgage of the mortgagee. The insurer shall release the funds within 10 days after receiving the request under sub. (1) (c).