2023 Wisconsin Statutes & Annotations › Chapter 645 - Insurers rehabilitation and liquidation. › 645.68 - Order of distribution.

645.68
Order of distribution.
The order of distribution of claims from the insurer's estate shall be as stated in this section. The first $50 of the amount allowed on each claim in the classes under subs. (3) to (6), except for claims of the federal government under subs. (3) and (3c), shall be deducted from the claim and included in the class under sub. (8). Claims may not be cumulated by assignment to avoid application of the $50 deductible provision. Subject to the $50 deductible provision, every claim in each class shall be paid in full or adequate funds retained for the payment before the members of the next class receive any payment. No subclasses shall be established within any class. That portion of any loss for which indemnification is provided by other benefits or advantages recovered or recoverable by the claimant shall not be included in the classes under subs. (3) and (3m), other than benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment made by an employer to an employee shall be treated as a gratuity. The claims described in s. 645.69 are among the claims not subject to subs. (3) and (3m).
(1)
Administration costs. The costs and expenses of administration, including but not limited to the following: the actual and necessary costs of preserving or recovering the assets of the insurer; compensation for all services rendered in the liquidation; any necessary filing fees; the fees and mileage payable to witnesses; and reasonable attorney fees.
(3)
Loss claims. All claims under policies for losses incurred, including 3rd-party claims and federal, state, and local government claims, except the first $200 of losses otherwise payable to any claimant under this subsection other than the federal government. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, shall be treated as loss claims. All amounts payable under funding agreements, as defined in s. 632.66 (2) (a), whether for principal or interest, shall be treated as loss claims. Claims may not be cumulated by assignment to avoid application of the $200 deductible provision.
(3c)
Federal government claims and interest. Claims of the federal government not included under sub. (3), and interest at the legal rate compounded annually on all claims in the class under this subsection, and on all claims of the federal government in the class under sub. (3), from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared.
(3m)
Certain injury claims. Claims against the insurer that are not under policies and that are for liability for bodily injury or for injury to or destruction of tangible property.
(3r)
Wages.
(a)
Debts due to employees for services performed, not to exceed $1,000 to each employee which have been earned within one year before the filing of the petition for liquidation. Officers shall not be entitled to the benefit of this priority.
(b)
Such priority shall be in lieu of any other similar priority authorized by law as to wages or compensation of employees.
(c)
Notwithstanding pars. (a) and (b) and subs. (3), (3c) and (3m), if there are no claims of the federal government, the claims in the class under this subsection shall have priority over all claims in the classes under subs. (3) to (11).
(4)
Unearned premiums and small loss claims. Claims under nonassessable policies for unearned premiums or other premium refunds and the first $200 of loss excepted by the deductible provision in sub. (3).
(5)
Residual classification. All other claims, including claims of any state or local government, not falling within other classes under this section and claims described in s. 645.69. Claims, including those of any state or local governmental body, for a penalty or forfeiture, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under sub. (8).
(6)
Judgments. Claims based solely on judgments. If a claimant files a claim and bases it both on the judgment and on the underlying facts, the claim shall be considered by the liquidator who shall give the judgment such weight as he or she deems appropriate. The claim as allowed shall receive the priority it would receive in the absence of the judgment. If the judgment is larger than the allowance on the underlying claim, the remaining portion of the judgment shall be treated as if it were a claim based solely on a judgment.
(7)
Interest on claims already paid. Interest at the legal rate compounded annually on all claims in the classes under subs. (1) to (6), except for claims of the federal government in the classes under subs. (3) and (3c), from the date of the petition for liquidation or the date on which the claim becomes due, whichever is later, until the date on which the dividend is declared. The liquidator, with the approval of the court, may make reasonable classifications of claims for purposes of computing interest, may make approximate computations and may ignore certain classifications and time periods that are trifling.
(8)
Miscellaneous subordinated claims. The remaining claims or portions of claims not already paid, with interest as in sub. (7):
(a)
Except for claims of the federal government under subs. (3) and (3c), the first $50 of each claim in the classes under subs. (3) to (6) subordinated under this section.
(b)
Claims under s. 645.63 (2).
(c)
Claims subordinated by s. 645.90.
(d)
Claims filed late.
(e)
Portions of claims subordinated under sub. (5).
(f)
Claims or portions of claims payment of which is provided by other benefits or advantages recovered or recoverable by the claimant.
(g)
Any indemnification recovered as a voidable preference under s. 645.54 (1) (c).
(9)
Bonds. The claims of the holders of bonds, under s. 611.33 (2) (a), 613.33 (1) or 614.33, including interest thereon.
(10)
Contribution notes. The claims of the holders of contribution notes under ss. 611.33 (2) (b), 613.33 (2) and 614.33, including interest thereon.
(11)
Proprietary claims. The claims of shareholders or other owners, including policyholders of a mutual insurance corporation within the limits of s. 645.72 (2).
History:  1971 c. 260; 1979 c. 93; 1979 c. 102 s. 236 (5); 1979 c. 110; 1989 a. 23, 359; 1993 a. 490; 1999 a. 30; 2005 a. 253; 2021 a. 114.
The priority system set forth in this section provides inflexible and cumbersome rules concerning the order of distribution of claims, and therefore, requiring its application to insurer rehabilitation would be contrary to the stated purpose of rehabilitation proceedings. Applying well-established principles of statutory construction, this section cannot be reasonably interpreted to apply to insurer rehabilitation proceedings. Nickel v. Wells Fargo Bank, 2013 WI App 129, 351 Wis. 2d 539, 841 N.W.2d 482, 10-2022.