631.11 Representations, warranties and conditions.
(1) Effect of negotiations for contract.
(a) Statement or warranty. No statement, representation or warranty made by a person other than the insurer or an agent of the insurer in the negotiation for an insurance contract affects the insurer's obligations under the policy unless it is stated in any of the following:
1. The policy.
2. A written application signed by the person, provided that a copy of the written application is made a part of the policy by attachment or endorsement.
3. A written communication provided by the insurer to the insured within 60 days after the effective date of the policy.
(b) Misrepresentation or breach of affirmative warranty. No misrepresentation, and no breach of an affirmative warranty, that is made by a person other than the insurer or an agent of the insurer in the negotiation for or procurement of an insurance contract constitutes grounds for rescission of, or affects the insurer's obligations under, the policy unless, if a misrepresentation, the person knew or should have known that the representation was false, and unless any of the following applies:
1. The insurer relies on the misrepresentation or affirmative warranty and the misrepresentation or affirmative warranty is either material or made with intent to deceive.
2. The fact misrepresented or falsely warranted contributes to the loss.
(3) Effect of failure of condition or breach of promissory warranty. No failure of a condition prior to a loss and no breach of a promissory warranty constitutes grounds for rescission of, or affects an insurer's obligations under, an insurance policy unless it exists at the time of the loss and either increases the risk at the time of the loss or contributes to the loss. This subsection does not apply to failure to tender payment of premium.
(4) Effect of insurer's knowledge.
(a) Knowledge when policy issued. No misrepresentation made by or on behalf of a policyholder and no breach of an affirmative warranty or failure of a condition constitutes grounds for rescission of, or affects an insurer's obligations under, an insurance policy if at the time the policy is issued the insurer has either constructive knowledge of the facts under s. 631.09 (1) or actual knowledge. If the application is in the handwriting of the applicant, the insurer does not have constructive knowledge under s. 631.09 (1) merely because of the agent's knowledge.
(b) Knowledge acquired after policy issued. If after issuance of an insurance policy an insurer acquires knowledge of sufficient facts to constitute grounds for rescission of the policy under this section or a general defense to all claims under the policy, the insurer may not rescind the policy and the defense is not available unless the insurer notifies the insured within 60 days after acquiring such knowledge of its intention to either rescind the policy or defend against a claim if one should arise, or within 120 days if the insurer determines that it is necessary to secure additional medical information.
(4m) Life and disability contracts.
(a) Copy of application to be made available. The policyholder under a life or disability insurance policy and any person whose life or health is insured under the policy may request in writing a copy of the application if he or she did not receive the policy or a copy of it, or if the policy has been reinstated or renewed without attachment of a copy of the original application. If the insurer does not deliver or mail a copy as requested within 15 working days after receipt of the request by the insurer or its agent or, in the case of a group policy certificate holder, does not inform such person within the same period how he or she may inspect the policy and application during normal business hours at a place reasonably convenient to the certificate holder, nothing in the application affects the insurer's obligations under the policy to the person making the request. A person whose life or health is insured under a group life or disability insurance policy has the same right to request a copy of any document specified in par. (b), including the certificate.
(b) Statement or warranty. No statement, representation or warranty made by or on behalf of a particular certificate holder under a group life or disability insurance policy affects the insurer's obligations under the certificate unless it is stated in the certificate, or in a written document signed by the certificate holder, a copy of which is supplied to the certificate holder or the beneficiary whose rights would be affected.
(5) Fraternals. This section applies to fraternals, as defined in s. 614.01 (1) (a).
(6) Incontestability provisions. This section is subject to ss. 632.46 and 632.76.
History: 1975 c. 375, 421; 1977 c. 339 s. 44; Stats. 1977 s. 641.11; 1983 a. 189 s. 329 (25); 1995 a. 259.
If a question on a form calls for the applicant's judgment or opinion as a lay person, any ambiguity should be construed against the insurer. Nolden v. Mutual Benefit Life Ins. Co. 80 Wis. 2d 353, 259 N.W.2d 75 (1977).
An insured's contradictory statements constituted a breach of the contractual duties of notice and cooperation. Dietz v. Hardware Dealers Mut. Fire Ins. Co. 88 Wis. 2d 496, 276 N.W.2d 808 (1979).
Third parties may recover against an insurer even though the insured's fraudulent application voided the policy under s. 631.11. Rauch v. American Family Insurance Co. 115 Wis. 2d 257, 340 N.W.2d 478 (1983).
Sub. (2) [now sub. (1) (b)] applies a reliance test to misrepresentations made in the negotiation or application for insurance, and not to statements made in proof of loss forms. Tempelis v. Aetna Casualty & Surety Co. 164 Wis. 2d 17, 473 N.W.2d 549 (Ct. App. 1991).
In order to make a written application form a part of an insurance policy by endorsement, the insurer must specifically write across the application itself that it is an endorsement and part of the policy. Smith v. Dodgeville Mutual Insurance Co. 212 Wis. 2d 226, 568 N.W.2d 31 (Ct. App. 1997), 96-3352.
Sub. (3) only applies to conditions subsequent to a policy becoming effective, not conditions precedent. Conditions to the making of the contract, conditions precedent, cannot be implicated by the statute because the policy has not yet come into existence. Fox v. Catholic Knights Ins. Society, 2003 WI 87, 263 Wis. 2d 207, 665 N.W.2d 181, 01-1469.
This section does not supersede the known-loss doctrine. That doctrine may apply whether or not the requirements of subs. (1) (b) and (4) (b) are met. American Family Mutual Ins. Co. v. Bateman, 2006 WI App 251, 297 Wis. 2d 828, 726 N.W.2d 678, 05-2219.
Sub. (1) (b) establishes the elements necessary to entitle an insurance company to rescind an insurance contract. There must be an affirmative warranty or misrepresentation, which is a question of law. Whether the statement was false, and whether the person making the statement knew, or should have known, that the statement was false are questions of fact. The burden of proof on an insurer seeking to rescind an insurance contract is clear and convincing evidence as to each element of the statute. Pum v. Wisconsin Physicians Service Insurance Corporation, 2007 WI App 10, 298 Wis. 2d 497, 727 N.W.2d 346, 05-3049.