Representations, Warranties & Policy Forms
Representations and Warranties
Words that come up constantly in this part of the law:
When a Statement Affects the Insurer’s Obligations
No statement, representation, or warranty made by a person other than the insurer or its agent in the negotiation for an insurance contract affects the insurer’s obligations under the policy unless it’s stated in one of these places:
- The policy itself.
- A written application signed by the person, provided that a copy of the written application is made part of the policy by attachment or endorsement.
- A written communication provided by the insurer to the insured within sixty days after the effective date of the policy.
Misrepresentation or Breach of Affirmative Warranty
No misrepresentation, and no breach of an affirmative warranty, made by someone other than the insurer or its agent in the negotiation for or procurement of an insurance contract — constitutes grounds for rescission, OR affects the insurer’s obligations under the policy — UNLESS the person knew or should have known the representation was false, AND either:
- The insurer relies on the misrepresentation or affirmative warranty AND it’s either material or made with intent to deceive, OR
- The fact misrepresented or falsely warranted contributes to the loss. So Wisconsin sets a fairly high bar before a misrepresentation lets the insurer walk away from a claim. There needs to be knowledge (or a should-have-known standard), AND either materiality (or intent to deceive) AND reliance, OR a causal link to the actual loss.
Effect of the Insurer’s Own Knowledge
No misrepresentation by or for a policyholder, and no breach of an affirmative warranty or failure of a condition, gives the insurer grounds for rescission or affects its obligations under the policy if at the time the policy was issued the insurer had either constructive knowledge of the facts (under s. 631.09(1)) or actual knowledge. If the application is in the applicant’s own handwriting, the insurer doesn’t have constructive knowledge merely because of the agent’s knowledge. And once the insurer acquires knowledge of facts that would constitute grounds for rescission or a general defense, it has sixty days to notify the insured of its intention to rescind or defend against a claim — or 120 days if additional medical information is needed. Miss that window and the insurer waives the defense.
Copy of the Application
Policyholders under a life or disability policy, and any person whose life or health is insured under the policy, may request a copy of the application in writing if they didn’t receive the policy or a copy. The request can also be made if the policy has been reinstated or renewed without attaching a copy of the original application. If the insurer doesn’t deliver or mail a copy within fifteen working days after the company or its agent receives the request, nothing in the application may affect the insurer’s obligations to the requesting person.
No Incorporation by Reference
An insurance contract may not contain any agreement, or incorporate any provision, unless the provision is fully set forth in the policy, application, or document attached to and made part of the policy at the time of delivery. There are limited exceptions for rates and complex contracts. But the general rule: what’s in the policy is what’s in the policy. You can’t bury terms by reference to some other document the insured never sees.
Use of Policy Forms
Filing Requirements
Unless specifically exempt, no policy form may be used in Wisconsin unless it has been filed with the Commissioner.
File and Use
Wisconsin uses a “file and use” process for most policy forms. The insurer files the form with OCI thirty days before use, and certifies that the form complies with Wisconsin insurance statutes and regulations. After the thirty days, the insurer can use the form.
Prior Approval Forms
File and use does NOT apply to these forms, which must be submitted in advance for review and approval:
- Health care liability.
- Workers’ compensation.
- Medicare supplement.
- Long-term care insurance (including nursing home and home health care).
- Service contracts and warranty contracts. Policy forms subject to prior approval are deemed approved if they’re not disapproved within thirty days of filing — or within a thirty-day extension ordered by the Commissioner before the first thirty days expire.
Subsequent Disapproval
Even after a form is filed, approved, or deemed approved, OCI can later disapprove it. After a hearing and a finding that a previously approved form would be disapproved if newly filed (for one of the reasons set out in s. 631.20(2)), the Commissioner may order the form’s use discontinued or the appropriate changes made.
The Interstate Insurance Product Regulation Compact (IIPRC)
The IIPRC is a contract between member states that established the Interstate Insurance Product Regulation Commission. The Commission provides insurers a single point of filing for the review and approval of certain insurance policy forms, instead of submitting forms separately to each state. Wisconsin was the 31st state to join, effective March 28, 2008. What forms can be submitted to the IIPRC? The Commission has developed uniform national standards for forms in:
- Life insurance.
- Annuities.
- Disability income.
- Long-term care insurance (and long-term care insurance advertisements). Insurers who submit policy forms to the IIPRC, intend to use them in Wisconsin, and receive approval from the IIPRC, can use the forms in Wisconsin — provided the insurer has a certificate of authority in Wisconsin for the appropriate line. Are the IIPRC’s uniform standards the same as Wisconsin’s laws? No. The uniform standards were developed by the IIPRC with input from state insurance departments, insurers, legislators, and consumer reps to ensure high-level standards. By joining the Compact, member states agreed to apply the Compact’s uniform standards to forms submitted to the IIPRC, even though certain standards may differ from a member state’s own laws.