Eligible claims
Wis. Stat. § 646.31
in effect(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:
(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.
(b) Assessability of insurer.
1. The claim arises out of business not exempt from assessment under s. 646.01 (1).
2. The claim does not arise out of business against which assessments are prohibited under any federal or state law.
(c) Contact with state. The claim is a member of one of the classes of claims under sub. (2).
(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:
1. The policy expires, if the expiration date is less than 30 days after the order of liquidation is entered.
2. The insured replaces or cancels the policy, if either action is taken within 30 days after the order of liquidation is entered.
(d) Exceptions. The claim is not any of the following:
1. Based solely on a judgment.
2. Made for interest on any claim.
3. Made under s. 645.63 (2).
4. Subordinated under s. 645.90.
5. An indemnification recovered as a voidable preference under s. 645.54 (1) (c).
6. Made by an affiliate of an insurer in liquidation.
7. A retrospective premium rate adjustment.
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.
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.
10. Based on an obligation that does not arise under the express written terms of the policy or contract, including any of the following:
a. A claim based on marketing materials.
b. A claim based on misrepresentations regarding policy benefits.
c. An extra-contractual claim, including a claim for punitive or exemplary damages.
d. A claim for statutorily imposed multiple damages.
e. A claim for penalties or consequential or incidental damages.
f. A claim for bad faith damages.
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.
(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:
(a) Residents.
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).
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).
(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.
(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.
(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.
(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).
(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:
1. The person is a policyholder of, or a certificate holder under, the life or disability insurance policy or annuity contract.
2. The person is a resident of this state or could have made a claim under par. (b).
(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.
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:
a. The policyholder is a resident of this state.
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.
(4) Maximum claim.
(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.
(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.
(b) 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.
(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.
(b) 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.
(c) 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. Section 645.56 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:
(a) By any security fund with an obligation to pay all loss claims of the insurer.
(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.
(c) If it is a workers’ compensation claim, by the fund of the residence of the claimant.
(cm) If it is a liability claim, by the fund of the residence of the policyholder.
(d) In any other case, by the fund of the residence of the insured.
(e) Any other funds liable to pay.
(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:
(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.
(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.
(11) Subrogation claims.
(a) In this subsection:
1. “Health care costs” has the meaning given in s. 609.01 (1j).
2. “Insurance entity” means a reinsurer, an insurer, an insurance pool, or an underwriting association.
(b) 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.
(c) 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:
1. The insurance entity paid the claim for health care costs under a disability insurance policy issued by the insurance entity.
2. 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.
3. 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) to (7), (9) and (9m) plus the amount, if any, recovered from the insured under s. 646.325 exceeds 10 percent of the insured’s net worth.
(13) Residency. For purposes of determining residency in this section:
(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.
(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.
(c) A person’s residency may be in only one state.
(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.
Source: WI Statutes (Official Site)URL: https://docs.legis.wisconsin.gov/document/statutes/646.31Fetched: 10/7/2026