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TABLE OF CONTENTS

• CITATION
• STATUS
• WHAT'S NEW
• ADOPTED TEXT

CITATION
Ins 6.77


STATUS
This regulation was assigned the status of Adopted Rule
 on 05/25/2007.

Agency: Office of the Commissioner of Insurance
StateNet Processing Date: 05/25/2007
StateNet Regulation ID: 2006 WI 20804


ADOPTED TEXT
             ORDER OF THE OFFICE OF THE COMMISSIONER OF INSURANCE
                  RENUMBERING, AMENDING AND CREATING A RULE
    To renumber Ins 6.77 (4) (b); To amend Ins 6.77 Title, (1) and (2) and
6.77 (4) (a); and To create Ins 6.77 (3) (ac), (ag), (am) and (bm), 6.77 (4)
(b) and (c) and 6.77 (6), Wis. Adm. Code, Relating to underinsured ("UM") and
uninsured motorist coverage ("UIM") in personal umbrella, personal excess,
commercial automobile liability and commercial liability policies and
affecting small business.

    ANALYSIS PREPARED BY THE OFFICE OF THE COMMISSIONER OF INSURANCE (OCI)

    1. Statutes interpreted:

    ss. 600.01, 631.36, 632.32, Stats.

    2. Statutory authority:

    ss. 600.01(2), 601.41(3), 628.34(12), 631.01(5), 631.36(1)(c), Stats.

    3. Explanation of the OCI's authority to promulgate the proposed rule
under these statutes:

    Under s. 631.01(5), the commissioner is given authority to exempt certain
classes of insurance from the requirements of ss. 631.36 or 632.32, Stats.
The commissioner has previously exercised this authority at various times in
adopting and amending Ins 6.77, Wisc. Admin. Code.

    4. Related Statutes or rules:

    Ins 6.77, Wisc. Admin. Code

    5. The plain language analysis and summary of the proposed rule:

    This rule attempts to clarify exactly which policies are subject to s.
632.32 (4) - Uninsured Motorist coverage ("UM") and (4m) - underinsured
motorist coverage ("UIM"), Stats., and what notices need to be provided

    For UM, the rule would not require that umbrella liability and excess
liability policies include UM. [This continues the current requirement for
umbrella liability policies to not have to include UM.] Commercial auto
policies and commercial liability policies that cover owned automobiles would
be required to include UM under s. 632.32 (4), Stats., for both owned and
non-owned `automobiles. Commercial liability policies that only cover non
owned motor vehicles would not be required to include UM

    For UIM, the rule would exempt commercial liability policies, commercial
auto policies, personal umbrella liability policies and personal excess
liability policies from the statutory provisions of s. 632.32(4m), Stats. As a
substitute, these policies would be required to give notice of whether or not
UIM is available from the insurer but does not require the insurer to write
such coverage. Lastly, the rule ensures that existing policyholders will
receive notice of the availability of UIM at their next renewal.

    The commissioner finds that the interests of Wisconsin insureds or
creditors or of the public do not require such regulation and that these
changes will adequately protect the public and clarify the responsibility of
insurers writing the coverage.

    These changes will modify the rule in light of the recent Supreme Court
decisions, including Rebernick v American Family Mutual Ins Company, 2006 WI
27 and Rocker v USAA Casualty Ins Company, 2006 WI 26. The interpretations
made by the court are inconsistent with current insurer practices and OCI's
expectation of what would be covered in these types of policies.

    The Rebernick court held, in pertinent part, that UIM in s. 632.32 (4m),
Stats., applies to personal umbrella policies that include automobile
liability coverage.  Section 632.32 (4m), Stats., specifies that an insurer
writing a policy for liability arising out of the ownership, maintenance, or
use of a motor vehicle must give the insured notice of the availability of
UIM.

    Although the issue in the Rocker court specifically related to the
provisions in s. 632.32 (6) (a), Stats., which deals with coverage for a motor
vehicle handler, the Rocker court broadly endorsed the applicability of s.
632.32, Stats., to commercial liability policies, including commercial
umbrella policies, that provide for loss or damage resulting from an accident
caused by a motor vehicle, except as otherwise provided.

    When s. 632.32, Stats., was modified in 1985, OCI believed that the new
provisions related to UM were meant to apply to personal auto policies and not
commercial policies. In 1987, OCI amended Ins 6.77, Wisc. Admin. Code, to
clearly exempt umbrella policies from the UM requirements. If OCI considered
commercial policies to be covered by s. 632.32, Stats., it would have included
those in the exemption. For about 20 years, this was the view of the agency.
In 1995, s. 632.32, Stats., was again modified to add paragraph (4m) dealing
with UIM. Consistent with OCI's prior view and the discussions at the time,
this new UIM section was not applied to commercial or umbrella policies. With
the recent supreme court cases, including Rebernick v American Family Mutual
Ins Company, 2006 WI 27 and Rocker v USAA Casualty Ins Company, 2006 WI 26,
this viewpoint has been examined again.

    After reviewing the recent Supreme Court decisions, OCI found that the
interpretations made by the court are inconsistent with current insurer
practices and OCI's expectation of what should be covered in these types of
policies. Compliance with these broad interpretations would create
significant, if not impossible, compliance problems for many insurers. Some
insurers who write umbrella coverage or commercial liability policies do not
write, and are not even licensed to write, automobile coverage. Obtaining
reinsurance for UM and UIM is problematic or unavailable for some insurers.

    6. Summary of and preliminary comparison with any existing or proposed
federal regulation that is intended to address the activities to be regulated
by the proposed rule:

    None.

    7. Comparison of similar rules in adjacent states as found by OCI:

    Illinois: 215 ILCS 5/143a In Hartbarger v. Country Mut. Ins. Co., 107 Ill.
App. 3d 391, it was found that this section was enacted to insure a minimum
amount of uninsured motorist protection, but did not give the authority to
rewrite unambiguous provisions of an umbrella policy in order to expand the
maximum coverage afforded plaintiff.

    Iowa: Iowa Code Section 321A.21 Primary insurance is purchased to be the
first tier of insurance coverage while an umbrella policy is intended to cover
only catastrophic losses that exceed the insured's required primary insurance
limit. "Umbrella" policies are not included under Iowa Code Section 321A.21,
the financial responsibility statute. Jalas v. State Farm Fire & Cas. Co., 505
N.W.2d 811, 1993 Iowa Sup. LEXIS 211 (Iowa 1993).

    Michigan: Sec. 257.520 (a) Michigan is a no-fault state and thus is not
comparable to Wisconsin. Michigan defines a "motor vehicle liability policy"
as an owner's or an operator's policy of liability insurance which would
appear to not include an umbrella policy.

    Minnesota: 65B.49 Minnesota is a no-fault state and thus is not comparable
to Wisconsin. Uninsured and underinsured coverage is required in auto
policies.

    8. A summary of the factual data and analytical methodologies that OCI
used in support of the proposed rule and how any related findings support the
regulatory approach chosen for the proposed rule:

    OCI review of insurer's existing business practices, complaints and other
information 9. Any analysis and supporting documentation that OCI used in
support of OCI's determination of the rule's effect on small businesses under
s. 227.114:

    The change will clarify when insurers issuing personal umbrella, excess
liability, commercial auto or commercial liability policies must give notice
of the availability or UIM or include UM in the policy. As such, it will have
little impact.

    10. See the attached Private Sector Fiscal Analysis.

    11. A description of the Effect on Small Business:

    This rule will have little or no effect on small businesses.

    12. Agency contact person:

    A copy of the full text of the proposed rule changes, analysis and fiscal
estimate may be obtained from the OCI WEB sites at:
http://oci.wi.gov/ocirules.htm or by contacting Inger Williams, OCI Services
Section, at:

    Phone: (608) 264-8110

    EMAIL:Inger.Williams@OCI.State.WI.US

    Address: 125 South Webster St - 2nd Floor Madison WI 53702

    Mail: PO Box 7873, Madison WI 53707-7873

    13. Place where comments are to be submitted:

    Mailing address:

    Robert Luck, Legal Unit - OCI Rule Comment for Rule Ins 6

    Office of the Commissioner of Insurance

    PO Box 7873 Madison WI 53707-7873

    Street address: Robert Luck, Legal Unit - OCI Rule Comment for Rule Ins 6

    Office of the Commissioner of Insurance

    125 South Webster St - 2nd Floor

    Madison WI 53703-3474

    Email address: Robert Luck, Robert.Luck@oci.state.wi.us

    WEB Site: http://oci.wi.gov/ocirules.htm ____________________

    The rule changes are:
    SECTION 1. Section Ins 6.77 (Title), (1) and (2) are amended to read:

    Ins 6.77 Exemption from mid-term cancellation requirements and  from
 required uninsured motorist  , underinsured motorist  and medical
payment coverages.

    (1) PURPOSE. This section is intended to exempt certain classes of
insurance contracts from ss. 631.36 (2)  (a),  (b) and (c) and 632.32
(4)  and (4m),  Stats. This section implements the provisions of ss.
631.01 (5) and 631.36 (1) (c), Stats.

    (2) SCOPE. This section applies to all insurers authorized to write
umbrella or excess liability insurance policies in Wisconsin,  to all
insurers authorized to write commercial liability and commercial automobile
liability policies in Wisconsin  and to all insurers authorized to write
aircraft insurance policies in Wisconsin.

    SECTION 2. Section Ins 6.77(3)(ac), (ag), (am) and (bm) are created to
read: Ins 6.77 (3) (ac) Application form means a policy form that is
designated an application by the insurer and that is filed with the office of
the commissioner of insurance under s. 631.20, Stats.

    (ag) Commercial automobile liability policy means a liability insurance
policy intended principally to provide primary coverage for the insured's
liability arising out of the ownership, maintenance or use of an automobile or
other motor vehicle in the insured's business or for other commercial
activities.

    (am) Commercial liability policy means any form of liability insurance
policy, including a commercial or business package policy or a policy written
on farm and agriculture operations, that is intended principally to provide
primary coverage for the insured's general liability arising out of its
business or other commercial activities, and which includes coverage for the
insured's liability arising out of the ownership, maintenance or use of motor
vehicles as only one component of the policy or as coverage that is only
incidental to the principal purpose of the policy. For purposes of this
section, commercial liability policy excludes worker's compensation policies.

    (bm) Owned motor vehicle means a motor vehicle that is owned by the
insured or that is leased for a term of six months or longer.

    SECTION 3. Section Ins 6.77 (4) (b) is renumbered to Ins 6.77 (4) (d).

    SECTION 4. Section Ins 6.77 (4) (a) is amended to read:

    6.77 (4) EXEMPTION. (a) Any umbrella  liability  or excess liability
insurance policy  as defined in sub. (3)  is exempt from the
requirements of ss.  631.36 (2) (a) and 632.32 (4), Stats.

    SECTION 5. Section Ins 6.77 (4) (b) and (c) are created to read:

    6.77 (4) (b) Any commercial liability policy issued or renewed on or after
the effective date of this paragraph & [revisor inserts date] is exempt from
the requirements of s. 632.32 (4), Stats., if its coverage of the insured's
liability arising out of the maintenance or use of a motor vehicle is limited
to coverage for non-owned motor vehicles.

    (c) Any commercial liability, commercial automobile liability, umbrella
liability or excess liability insurance policy issued or renewed on or after
the effective date of this paragraph & [revisor inserts date] is exempt from
the requirements of s. 632.32 (4m), Stats.

    SECTION 6. Section Ins 6.77 (6) is created to read:

    6.77 (6) DISCLOSURE.  (a) An insurer shall disclose on each commercial
liability, commercial automobile liability, umbrella liability or excess
liability insurance policy application form whether or not underinsured
motorist coverage may be purchased from the insurer under the policy. If the
insurer writes a commercial liability, commercial automobile liability,
umbrella liability or excess liability policy without using an application
form, the insurer shall send with delivery of the policy a written disclosure
of whether or not underinsured motorist coverage may be purchased from the
insurer under the policy. The insured's signature on the application form or
on the disclosure sent with the policy is not required, and the disclosure on
the application form or with the delivery of the initial policy creates an
irrebuttable presumption that the disclosure was made in accordance with this
paragraph.  An insurer is only required to provide the disclosure under this
paragraph on any application form or with the delivery of the initial policy,
if no application form is used, and need not provide the disclosure in
connection with any subsequent renewal of or change to the policy. This
paragraph first applies to policies issued after 150 days after the effective
date of this paragraph & [revisor inserts date].

    (b) Each insurer that has a commercial liability, commercial automobile
liability, umbrella liability or excess liability insurance policy in effect
on the effective date of this paragraph & [revisor inserts date] shall
disclose in writing to one insured under each policy whether or not
underinsured motorist coverage may be purchased from the insurer under the
policy. An insurer is required to provide the disclosure only one time and in
conjunction with either the notice of, or the delivery of, the first renewal
of each policy occurring after 120 days after the effective date of this
paragraph & [revisor inserts date]

    (c) Nothing in this subsection shall be interpreted to require insurers to
provide underinsured motorist coverage in policies.

    SECTION 7. Effective date. This rule will take effect on the first day of
the month after publication, as provided in s. 227.22 (2) (intro.), Stats.

    Dated at Madison, Wisconsin, this  25th  day of May, 2007.

    ____________________

    Sean Dilweg

    Commissioner of Insurance

                   Office of the Commissioner of Insurance
                        Private Sector Fiscal Analysis

    for Rule Ins 6 relating to underinsured and uninsured motorist coverage in
umbrella and commercial policies

    This rule change will have no significant effect on the private sector
regulated by OCI.

    "NOTE: THIS SECTION CONTAINS A FORM.  THE STATE IS NOT MAKING IT AVAILABLE
IN A FORMAT THAT IS REPRODUCIBLE ELECTRONICALLY.  FOR A COPY OF THE MISSING
FORM PLEASE CALL HELPDESK AT 800-726-4566 or 916-444-0840."

WHAT'S NEW
Description of Changes
There are no recorded changes for this document.

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