10-C564 Edward E. Gillen Co. v. the Insurance Company of the State of Pennsylvania

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Insurance
Surplus lines insurers

Surplus lines insurers are subject to the requirements set forth in Chapter 631.

“Lexington concedes that the form used for Gillen’s policy was not filed for approval with the Wisconsin Insurance Commissioner. Lexington also does not dispute that Gillen’s policy was either ‘delivered or issued for delivery in this state’ or was ‘on business operations in this state.’ § 631.01(1). Lexington argues only that as a surplus lines insurer, it is not subject to any of the requirements set forth in ch. 631, including §§ 631.20 and 631.85, because the commissioner has not enacted any rules to that effect. Lexington relies on a provision in the surplus lines insurance section, § 618.41, which provides that the commissioner ‘may by rule subject policies written under this section to as much of the regulation provided by chs. 600 to 646 and 655 for comparable policies written by authorized insurers as the commissioner finds to be necessary to protect the interests of insureds and the public in this state.’ § 618.41(11). This interpretation directly conflicts with § 631.01(1), which provides that ch. 631 applies to all insurance policies delivered or issued for delivery in this state. Section 631.01(1) lists a number of exceptions, including those listed in § 600.01 and § 618.42 (Direct procurement of insurance), but surplus lines insurance, § 618.41, is nowhere to be found. Conversely, other statutory provisions expressly exempt surplus lines insurers. See, e.g., Wis. Stat. § 646.01(j). If, as Lexington argues, surplus lines insurers are not subject to chapters 600 to 646 unless the commissioner says so, then the language exempting surplus lines insurers from ch. 646 would be meaningless. Therefore, surplus lines insurance policies are subject to chapter 631, including §§ 631.20 and 631.85, and Lexington cannot enforce the arbitration provision because of its failure to gain approval for its form. At a minimum, Gillen is reasonably likely to succeed on its claim that the underlying dispute is not arbitrable.”

10-C564 Edward E. Gillen Co. v. the Insurance Company of the State of Pennsylvania

E.D.Wis., Randa, J.