Ethical Claims Practices in Wisconsin | Insurance Casualty Wisconsin Ethics

A policy is a promise to pay, and the claim is where the promise is tested. Producers do not adjust claims, but they are usually the first call after a loss.

Unfair claim settlement practices (s. Ins 6.11)

Section Ins 6.11, Wis. Adm. Code, exists “to promote the fair and equitable treatment of policyholders, claimants and insurers.” It sorts unfair claim conduct into two tiers.

Tier one: conduct that becomes unfair as a pattern

The 13 acts in s. Ins 6.11 (3) (a) are unfair methods and practices when committed “without just cause and performed with such frequency as to indicate general business practice.” One slow letter is a mistake; the same delay across a claim department is a violation.

What goes wrong	The practices
Communication	Failing to promptly acknowledge claim communications; failing to promptly provide claim forms, instructions and reasonable assistance; failing, on the claimant’s request, to promptly explain the basis in the policy or law for a denial or a compromise offer; knowingly misrepresenting pertinent facts or policy provisions
Speed	Failing to start and finish an investigation with all reasonable dispatch; failing to affirm or deny coverage within a reasonable time after proof of loss is complete
Good faith settlement	Failing to attempt in good faith a fair settlement once liability is reasonably clear; holding back one part of a claim to gain leverage on another part; refusing to pay under first-party coverage because someone else should pay (unless the policy provides otherwise); forcing people to sue by offering substantially less than they later recover; refusing to pay a liability claim only because the insured asks, without an independent evaluation
Arbitration	Failing to use arbitration where appropriate; announcing a policy of appealing arbitration awards to pressure people into accepting less

Two examples: withholding payment for undisputed car damage until the owner accepts a low figure on a contested injury claim; and refusing to pay an injured neighbor because the embarrassed policyholder asked, instead of evaluating the neighbor’s claim on its merits.

Tier two: conduct that is unfair every time

Section Ins 6.11 (3) (b) lists acts that are unfair when committed “by any person,” with no pattern required: knowingly misrepresenting pertinent facts or policy provisions to claimants, failing to provide adequate claims staff, systems and procedures, failing to adopt reasonable standards for investigating claims, and, in health insurance, violating s. 632.85, Wis. Stat., which requires a plan that covers emergency services to cover emergency care without prior authorization.

“Any person” includes you. Telling a client “that’s not covered, don’t bother filing,” or “they’ll pay all of it,” when you know the policy says otherwise, misrepresents policy provisions to a claimant.

What “prompt” means

Wherever s. Ins 6.11 uses “prompt” or “promptly,” it means responsive action within 10 consecutive days from receipt of a communication about a claim, unless another statute or rule sets a different period or there is good cause (s. Ins 6.11 (4)). Any tier-one act, or a failure to provide adequate claims staff or investigation standards, exposes the person to license revocation as well as the forfeitures in s. 601.64 (s. Ins 6.11 (5)).

Paying on time (s. 628.46)

The core rule: a claim is overdue 30 days after the insurer receives written notice of the covered loss and its amount, and overdue payments bear simple interest at 7.5 percent per year. Three details make the rule work in practice:

Partial claims are paid in pieces. If written notice supports only part of a claim, that part is overdue if unpaid within 30 days. Each later part becomes overdue 30 days after it is supported. An insurer may not hold an undisputed amount hostage to a dispute over the rest.
The mailing date counts. Payment is made on the date a check or equivalent is mailed in a properly addressed, postpaid envelope, or otherwise on the date of delivery.
Payee problems pause the clock, with conditions. A payment is not overdue while no one can legally give a valid release or while the insurer cannot determine who is entitled, but only if the insurer promptly told the claimant and offered in good faith to pay as soon as that is settled (s. 628.46 (2)). A life claim with competing beneficiary claims is the classic case.

Interest is not the only consequence. Wisconsin courts recognize a separate tort action by an insured against an insurer that fails to exercise good faith in settling the insured’s claim (Anderson v. Continental Insurance Co., 85 Wis. 2d 675 (1978)).

The producer’s part

Fair claims start at the application

Many claim disputes begin with an application that left something out. For accident and sickness insurance, s. Ins 3.28 (4) requires the agent to review every application question with the applicant and record all material information the applicant discloses.

Helping without misleading

When a client calls about a loss, help the claim move: explain how to give notice, where the forms are, and what the adjuster will need. Speak to coverage only as far as you know it, and say so when the insurer will decide.

Never help pad a claim

A client may ask you to “round up” a theft list or backdate a loss into the policy period. Wisconsin treats this as fraud:

Knowingly presenting a false or fraudulent claim, or false information in an application, is a fraudulent insurance act under s. 601.41 (12), and the Commissioner may refer it to the Department of Justice or a district attorney.
Under s. 943.395, Wis. Stat., anyone who knowingly presents a false claim, or prepares or signs a false proof of loss or other document knowing it may support a claim, commits a crime: a Class A misdemeanor if the value of the claim does not exceed $2,500, and a Class I felony if it exceeds $2,500. Courts measure “value” by the entire claim, not just the inflated part, so a few invented items on a large, legitimate claim can make it a felony.

Sidenote

The producer is on both sides of the line

Your loyalty to the client means helping them collect everything the policy owes. It never means helping them collect what it does not. Both duties are tested in the same phone call.

Claimant representatives

Some clients pay someone other than an attorney to negotiate a claim for them. Wisconsin regulates the conflicts that tempt such a claimant representative (s. Ins 6.08). Before performing any service, the representative must explain in writing how they are paid, and they may not require repairs by a particular repair facility or contractor, take referral payments from one, or act as one.

For a claim on the client’s own property, that person is a public adjuster under ch. 629, Wis. Stat. No adjusting service may begin without a written “Public Adjuster Contract” that discloses the fee, and the insured may void it within 5 business days after signing (s. 629.04).

Repair choice in auto claims

An insurer may not require, as a condition of motor vehicle coverage, that repairs be made by a particular contractor or repair facility, and may not slow its investigation based on where repairs will be made. The consumer has the right to select the repair facility of their choice (s. 632.375 (2)). Never tell a client the choice belongs to the insurer.

Lesson summary

Section Ins 6.11 (3) (a) lists 13 claim practices that are unfair when done without just cause often enough to indicate a general business practice.
Knowingly misrepresenting facts or policy provisions to a claimant is unfair every time, by any person, producers included.
“Prompt” in s. Ins 6.11 means within 10 consecutive days of receiving a claim communication; violations can cost a license.
Under s. 628.46, each supported part of a claim is overdue after 30 days, and payee uncertainty pauses the clock only if the insurer notifies the claimant and offers to pay.
Insureds may also sue an insurer in tort for bad faith in settling their claim.
Helping a client inflate a claim is a fraudulent insurance act and a crime, a felony when the entire claim exceeds $2,500.
Claimant representatives must disclose their pay in writing and may not steer or profit from repairs; a public adjuster’s contract may be voided within 5 business days; auto insureds choose their own repair facility.

Unfair claim practices — two tiers (s. Ins 6.11)

Purpose: fair/equitable treatment of policyholders, claimants, insurers
Tier one (s. Ins 6.11(3)(a)): 13 acts unfair only when done “without just cause” and frequently enough to show a general business practice (pattern required)
- Categories: communication delays, slow investigation/coverage decisions, failure to settle in good faith once liability is clear, withholding part of a claim for leverage, forcing lawsuits with lowball offers, misusing arbitration
Tier two (s. Ins 6.11(3)(b)): unfair every single time, by any person (including producers), no pattern needed
- Knowingly misrepresenting facts/policy provisions to claimants
- Inadequate claims staff/systems/procedures
- No reasonable investigation standards
- Violating emergency care pre-authorization rule (s. 632.85)
“Prompt”/“promptly” = within 10 consecutive days of receiving claim communication, absent other statute or good cause (s. Ins 6.11(4))
Violations can trigger license revocation plus forfeitures under s. 601.64

Timely payment rules (s. 628.46)

Claim overdue 30 days after insurer receives written notice of covered loss and amount; overdue amounts accrue 7.5% simple annual interest
Partial claims: each supported portion becomes overdue 30 days after it’s substantiated — insurer can’t withhold undisputed amounts over a dispute on the rest
Payment date = date mailed (properly addressed/postpaid) or date delivered
Clock pauses only when payee/entitlement is legitimately unclear and insurer promptly notifies claimant and offers in good faith to pay once resolved
Separate bad-faith tort claim available against insurers (Anderson v. Continental Insurance Co., 1978)

Producer’s role in claims

Accurate applications prevent disputes: agents must review all questions and record material info (s. Ins 3.28(4)) for accident/sickness policies
Producers may help clients understand notice/filing process but must not speak beyond their knowledge of coverage — defer final coverage decisions to insurer
Never help inflate, backdate, or falsify claims — this is fraud, not advocacy

Claim fraud consequences

Fraudulent insurance act under s. 601.41(12): knowingly presenting false claims/info; Commissioner can refer to DOJ/DA
Criminal exposure under s. 943.395: Class A misdemeanor if claim value ≤ $2,500; Class I felony if > $2,500
- “Value” = entire claim amount, not just the falsified portion — small padding on a large legitimate claim can still be a felony

Claimant representatives and repair choice

Claimant representatives (s. Ins 6.08): must disclose payment method in writing before service; cannot mandate specific repair facility, take referral kickbacks, or act as the repair facility
Public adjusters (ch. 629, Wis. Stat.) handling the client’s own property claims: must use written “Public Adjuster Contract” disclosing fees; client may void within 5 business days
Auto insurers cannot require specific repair facility as coverage condition or slow investigation based on repair choice — consumer always chooses their own repair shop (s. 632.375(2))