Free Wisconsin Property practice questions

Answer: C. $300,000, the replacement value of the improvements

Wisconsin bars a lender from requiring a borrower, as a condition of a loan secured by real property, to insure the improvements for more than their replacement value or their market value, whichever is greater. Here the greater figure is the $300,000 replacement value, so that is the ceiling. The $250,000 market value is the lesser of the two values, and the statute uses the greater one. The $280,000 loan balance is not the measure the statute uses. Adding the two values together to reach $550,000 has no basis in the statute.

Answer: A. To the homeowner alone, as the insured mortgagor

Wisconsin allows a property policy to include a mortgage clause, or to add one by endorsement. When the insurance covers real property, however, a loss of $500 or less must be paid to the insured mortgagor despite that clause, unless the mortgagee is a named insured. The bank here is not a named insured and the loss is $400, so the insurer pays the homeowner. Paying the bank alone, paying the homeowner and bank jointly, or routing the money through the loan each conflicts with that $500 rule.

Answer: C. It can be a valid contract, and the insurer must issue a policy as soon as reasonably possible.

Wisconsin provides that nothing in its insurance code may be read to forbid an oral contract of insurance or the issuance of a written binder, so an oral agreement is not void for lack of writing. After a binder is issued or an oral contract is negotiated, the insurer must issue a policy as soon as reasonably possible, and that duty does not wait for a written request from the client. The section sets no 30-day life for an oral contract or binder.

Answer: D. The amount owed for fire damage to the insured building itself

For these escrow provisions, the final settlement is what the insurer owes the named insured and other interests named in the policy for fire or explosion loss to an insured building or other structure affixed to land. It is fixed by the insurer accepting a proof of loss, the named insured signing a release, both parties accepting an arbitration award, or a court judgment. The definition expressly leaves out amounts for contents and other personal property, for loss of use or business interruption, and under the policy's liability coverage, so each of the other choices falls outside it.

Answer: A. Keep the rate development record and the insured's signed application at least 1 year past expiration

Wis. Admin. Code Ins Sec. 6.78(3) says a consent-to-rate for a covered class is not filed with the commissioner, provided the insurer keeps, for at least 1 year after the policy's expiration date, a record of how the rate was developed and the written application signed by the insured giving the reason for the request, and provided the insurer told the commissioner beforehand that it intended to write such business. Filing within 10 days is what the exemption removes, and the rule calls for no approval of each individual rate. The 5-year retention measured from inception belongs to downward deviations from filed title insurance rates under Sec. 6.78(4), not to this commercial property risk.

Answer: B. Ten days

The authorized mortgagee clause in Ins 6.76 allows the insurer to cancel the interest of a designated mortgagee who is not named as the insured by giving that mortgagee ten days of written notice of cancellation. Sixty days appears in the same clause for a different purpose: it is the time a mortgagee has, after notice, to render proof of loss when the insured fails to. Neither five nor thirty days is the notice period the clause sets for canceling the mortgagee's interest.

Answer: D. A three-unit residential building in which the owner lives in one of the units

Under Ins 4.01, a policy covering a residential building of up to 4 dwelling units is subject to the total-loss provision when the owner occupies at least one unit, so a three-unit building with the owner in residence qualifies. The same rule takes outbuildings insured under the same policy as an owner-occupied dwelling outside the provision, treats mobile homes as defined by statute as not real property and outside it, and applies it to property under construction only once the property is completed and occupied by the owner as a dwelling.

Answer: D. A comparison of the group premium with premiums that authorized insurers would charge for the risk

Wisconsin's pre-application notice for group liability coverage from an unauthorized insurer must disclose the insurer's deficiencies (for example, being financially unsound, engaging in unfair practices or otherwise substandard), that the insurer has no Wisconsin certificate of authority and is not regulated in Wisconsin, that the risk is outside Wisconsin insurance security fund protection, and any further information the commissioner requires by rule. A premium comparison with authorized insurers is not among the items the statute lists.

Answer: C. Only if the commissioner affirmatively finds the insurer's capital and surplus acceptable

For a U.S.-domiciled unauthorized insurer, Wisconsin requires both authority in its home jurisdiction to write the type of insurance and capital and surplus equal to the greater of Wisconsin's minimum requirements or $15,000,000, unless the commissioner affirmatively finds the insurer's capital and surplus acceptable. Domiciliary authority alone is not enough. The $15,000,000 figure is not an absolute floor: the commissioner's finding can approve a smaller insurer, though never one below $4,500,000, and $9,000,000 is above that limit. The NAIC quarterly listing is the test for alien insurers, not for one domiciled in a U.S. state.

Answer: B. Only after it has been filed and 30 days have passed without the commissioner disapproving it

For one year after the effective date of a disapproval order, Wisconsin bars use of a rate replacing the disapproved one until the replacement has been filed with the commissioner and 30 days have gone by without a disapproval. Filing after the rate is already in use does not satisfy that requirement, because during this year the filing must come first and the 30-day period must run before use. The section does not call for a second hearing or an express written approval; silence for 30 days is enough. A 15-day waiting period with a possible extension is not the period this section sets for a replacement rate.