(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:
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)
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)
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.
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.
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.
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)
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:
The person is a policyholder of, or a certificate holder under, the life or disability insurance policy or annuity contract.
The person is a resident of this state or could have made a claim under par. (b)
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.
Notwithstanding pars. (b)
, 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:
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.
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.
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.
The fund is not obligated to pay a claimant an amount in excess of the loss obligation of the insurer in liquidation under the policy or coverage from which the claim arises.
(6) Collection from collateral sources. 646.31(6)(a)(a)
The portion of 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.
The fund may waive the application of par. (a)
to claims under contracts subject to s. 646.35 (3)
, to the extent that the fund determines that application of par. (a)
would be impracticable.
Any person having an eligible claim which also constitutes a claim or legal right of recovery under any governmental insurance or guaranty program shall first exhaust all rights under that program, and any amount payable on an eligible claim under this chapter shall be reduced by the amount of recovery under that program.
(7) Setoffs and counterclaims.
applies to the settlement of loss claims. The fund shall give the liquidator a reasonable opportunity to inform the fund of possible setoffs and counterclaims before paying loss claims.
(8) Notice to claimants.
The 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.
(9) Collection from other funds.
A claim recoverable from more than one security fund shall be paid in the following order:
By any security fund with an obligation to pay all loss claims of the insurer.
If it is a first party claim for damage to property with a permanent location, by the fund of the location of the property.
If it is a workers' compensation claim, by the fund of the residence of the claimant.
If it is a liability claim, by the fund of the residence of the policyholder.
In any other case, by the fund of the residence of the insured.
(9m) Recovery reduction.
Any recovery under this chapter shall be reduced by the amount of recovery from any other security fund.
(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:
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.
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.
“Insurance entity" means a reinsurer, an insurer, an insurance pool, or an underwriting association.
An insurance entity may not assert a claim against the fund for any amount due from the insurer to the insurance entity as subrogation, contribution, or indemnification recoveries or otherwise, except as provided in sub. (2) (a)
. An insurance entity 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.
Notwithstanding par. (b)
, an insurance entity may assert a claim against the fund for health care costs if all of the following conditions are met:
The insurance entity paid the claim for health care costs under a disability insurance policy issued by the insurance entity.
The insurance entity is not obligated to pay the health care costs under the express terms of the disability insurance policy because the claim arose out of, or in the course of, the claimant's employment.
The claim is covered by a worker's compensation insurance policy and would otherwise be an eligible claim under this section.
(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 $25,000,000 is limited to the amount by which the aggregate of the insured's claims that satisfy subs. (1)
plus the amount, if any, recovered from the insured under s. 646.325
exceeds 10 percent of the insured's net worth.
For purposes of determining residency in this section:
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.
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.
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.
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
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
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
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
Appeal and review. 646.32(1)(1)
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 board may appoint a committee of the board or a hearing examiner to decide any such appeal. The claimant may not pursue the claim in court except as provided in sub. (2)
Decisions of the board or its appointed committee or hearing examiner under sub. (1)
are subject to judicial review in the circuit court for Dane County. A petition for judicial review shall be filed within 60 days of the decision.
Recovery of amounts paid to 3rd parties. 646.325(1)(1)
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 other substantiated financial information acceptable to the fund in its sole discretion. “Net worth" includes the consolidated net worth of all of the corporate affiliates, subsidiaries, operating divisions, holding companies, parent entities, and, if the insured is privately owned, natural persons who have an ownership interest, 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.
(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:
The person on whose behalf the claim was defended or paid is any of the following:
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.
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)
but are not eligible for payment under s. 646.31 (12)
may not exceed 10 percent of the insured's net worth.
(4) Costs and fees.
In addition to recovery under sub. (2)
, the fund may recover reasonable attorney fees, disbursements, and all other actual costs expended in pursuing recovery under sub. (2)
, plus interest calculated at the legal rate under s. 138.04
, which shall begin to accrue on all amounts not paid within 30 days after the date of the fund's written notification to the insured of the amount due.
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.
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.
In addition to the rights specified in pars. (a)
, 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.
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.
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.
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.
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.
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.
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.
Continuation of coverage. 646.35(1)(1)
This section applies to the following contracts when subject to this chapter:
Life insurance and supplementary contracts providing for retained asset accounts.